[Federal Register Volume 81, Number 219 (Monday, November 14, 2016)]
[Rules and Regulations]
[Pages 79562-79892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26515]



[[Page 79561]]

Vol. 81

Monday,

No. 219

November 14, 2016

Part II





Department of Health and Human Services





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 Centers for Medicare & Medicaid Services





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42 CFR Parts 414, 416, 419, et al.





 Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Organ Procurement Organization Reporting and Communication; 
Transplant Outcome Measures and Documentation Requirements; Electronic 
Health Record (EHR) Incentive Programs; Payment to Nonexcepted Off-
Campus Provider-Based Department of a Hospital; Hospital Value-Based 
Purchasing (VBP) Program; Establishment of Payment Rates Under the 
Medicare Physician Fee Schedule for Nonexcepted Items and Services 
Furnished by an Off-Campus Provider-Based Department of a Hospital; 
Final Rule

Federal Register / Vol. 81 , No. 219 / Monday, November 14, 2016 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 414, 416, 419, 482, 486, 488, and 495

[CMS-1656-FC and IFC]
RIN 0938-AS82


Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Organ Procurement Organization Reporting and Communication; 
Transplant Outcome Measures and Documentation Requirements; Electronic 
Health Record (EHR) Incentive Programs; Payment to Nonexcepted Off-
Campus Provider-Based Department of a Hospital; Hospital Value-Based 
Purchasing (VBP) Program; Establishment of Payment Rates Under the 
Medicare Physician Fee Schedule for Nonexcepted Items and Services 
Furnished by an Off-Campus Provider-Based Department of a Hospital

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

ACTION: Final rule with comment period and interim final rule with 
comment period.

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SUMMARY: This final rule with comment period revises the Medicare 
hospital outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for CY 2017 to 
implement applicable statutory requirements and changes arising from 
our continuing experience with these systems. In this final rule with 
comment period, we describe the changes to the amounts and factors used 
to determine the payment rates for Medicare services paid under the 
OPPS and those paid under the ASC payment system. In addition, this 
final rule with comment period updates and refines the requirements for 
the Hospital Outpatient Quality Reporting (OQR) Program and the ASC 
Quality Reporting (ASCQR) Program.
    Further, in this final rule with comment period, we are making 
changes to tolerance thresholds for clinical outcomes for solid organ 
transplant programs; to Organ Procurement Organizations (OPOs) 
definitions, outcome measures, and organ transport documentation; and 
to the Medicare and Medicaid Electronic Health Record Incentive 
Programs. We also are removing the HCAHPS Pain Management dimension 
from the Hospital Value-Based Purchasing (VBP) Program.
    In addition, we are implementing section 603 of the Bipartisan 
Budget Act of 2015 relating to payment for certain items and services 
furnished by certain off-campus provider-based departments of a 
provider. In this document, we also are issuing an interim final rule 
with comment period to establish the Medicare Physician Fee Schedule 
payment rates for the nonexcepted items and services billed by a 
nonexcepted off-campus provider-based department of a hospital in 
accordance with the provisions of section 603.

DATES: Effective date: This final rule with comment period and the 
interim final rule with comment period are effective on January 1, 
2017.
    Comment period: To be assured consideration, comments on: (1) The 
payment classifications assigned to new Level II HCPCS codes and 
recognition of new and revised Category I and III CPT codes in this 
final rule with comment period; (2) the 20-hour a week minimum 
requirement for partial hospitalization services in this final rule 
with comment period; (3) the potential limitation on clinical service 
line expansion or volume of services by nonexcepted off-campus PBDs in 
this final rule with comment period; and (4) the Medicare Physician Fee 
Schedule (MPFS) payment rates for nonexcepted items and services 
furnished and billed by nonexcepted off-campus provider-based 
departments of hospitals in the interim final rule with comment period 
must be received at one of the addresses provided in the ADDRESSES 
section no later than 5 p.m. EST on December 31, 2016.

ADDRESSES: In commenting, please refer to file code CMS-1656-FC when 
commenting on the issues in the final rule with comment period and CMS-
1656-IFC when commenting on issues in the interim final rule with 
comment period. 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-1656-FC or CMS-1656-IFC (as 
appropriate), 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-1656-FC or CMS-1656-IFC (as 
appropriate), Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, 
MD 21244-1850.

    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201.

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-7195 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact 
Katherine Eastridge at (410) 786-4474.
    Ambulatory Surgical Center (ASC) Payment System, contact Elisabeth 
Daniel at (410) 786-0237.

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    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Administration, Validation, and Reconsideration Issues, contact Anita 
Bhatia at (410) 786-7236.
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Measures, contact Vinitha Meyyur at (410) 786-8819.
    Blood and Blood Products, contact Lela Strong at (410) 786-3213.
    Cancer Hospital Payments, contact David Rice at (410) 786-6004.
    Chronic Care Management (CCM) Hospital Services, contact Twi 
Jackson at (410) 786-1159.
    CPT and Level II Alphanumeric HCPCS Codes--Process for Requesting 
Comments, contact Marjorie Baldo at (410) 786-4617.
    CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck 
Braver at (410) 786-9379.
    Composite APCs (Low Dose Brachytherapy and Multiple Imaging), 
contact Twi Jackson at (410) 786-1159.
    Comprehensive APCs, contact Lela Strong at (410) 786-3213.
    Hospital Observation Services, contact Twi Jackson at (410) 786-
1159.
    Hospital Outpatient Quality Reporting (OQR) Program Administration, 
Validation, and Reconsideration Issues, contact Elizabeth Bainger at 
(410) 786-0529.
    Hospital Outpatient Quality Reporting (OQR) Program Measures, 
contact Vinitha Meyyur at (410) 786-8819.
    Hospital Outpatient Visits (Emergency Department Visits and 
Critical Care Visits), contact Twi Jackson at (410) 786-1159.
    Hospital Value-Based Purchasing (VBP) Program, contact Grace Im at 
(410) 786-0700.
    Inpatient Only Procedures List, contact Lela Strong at (410) 786-
3213.
    Medicare Electronic Health Record (EHR) Incentive Program, contact 
Kathleen Johnson at (410) 786-3295 or Steven Johnson at (410) 786-3332.
    New Technology Intraocular Lenses (NTIOLs), contact Elisabeth 
Daniel at (410) 786-0237.
    No Cost/Full Credit and Partial Credit Devices, contact Twi Jackson 
at (410) 786-1159.
    OPPS Brachytherapy, contact Elisabeth Daniel at (410) 786-0237.
    OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-
Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier 
Payments, and Wage Index), contact David Rice at (410) 786-6004.
    OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar 
Products, contact Twi Jackson at (410) 786-1159.
    OPPS Exceptions to the 2 Times Rule, contact Marjorie Baldo at 
(410) 786-4617.
    OPPS Packaged Items/Services, contact Lela Strong at (410) 786-
3213.
    OPPS Pass-Through Devices and New Technology Procedures/Services, 
contact Lela Strong at (410) 786-3213.
    OPPS Status Indicators (SI) and Comment Indicators (CI), contact 
Marina Kushnirova at (410) 786-2682.
    Organ Procurement Organization (OPO) Reporting and Communication, 
contact Peggye Wilkerson at (410) 786-4857 or Melissa Rice at (410) 
786-3270.
    Partial Hospitalization Program (PHP) and Community Mental Health 
Center (CMHC) Issues, contact Marissa Kellam at (410) 786-3012 or 
Katherine Lucas at (410) 786-7723.
    Rural Hospital Payments, contact David Rice at (410) 786-6004.
    Section 603 of the Bipartisan Budget Act of 2015--Items and 
Services Furnished by Off-Campus Departments of a Provider, contact 
David Rice at (410) 786-6004 or Elisabeth Daniel at (410) 786-0237.
    Section 603 of the Bipartisan Budget Act of 2015--MPFS Payment 
Rates for Nonexcepted Off-Campus Provider-Based Departments of 
Hospitals, contact Geri Mondowney at (410) 786-1172, Patrick Sartini at 
(410) 786-9252, or Isadora Gil at (410) 786-4532.
    Transplant Enforcement, contact Paula DiStabile at (410) 786-3039 
or Caecilia Blondiaux at (410) 786-2190.
    All Other Issues Related to Hospital Outpatient and Ambulatory 
Surgical Center Payments Not Previously Identified, contact Lela Strong 
at (410) 786-3213.

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

Electronic Access

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

Addenda Available Only Through the Internet on the CMS Web Site

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

Alphabetical List of Acronyms Appearing in This Federal Register 
Document

ACOT Advisory Committee on Organ Transplantation
AHA American Hospital Association
AMA American Medical Association
AMI Acute myocardial infarction
APC Ambulatory Payment Classification
API Application programming interface
APU Annual payment update
ASC Ambulatory surgical center
ASCQR Ambulatory Surgical Center Quality Reporting
ASP Average sales price
AUC Appropriate use criteria
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
CAHPS Consumer Assessment of Healthcare Providers and Systems
CAP Competitive Acquisition Program
C-APC Comprehensive Ambulatory Payment Classification

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CASPER Certification and Survey Provider Enhanced Reporting
CAUTI Catheter-associated urinary tract infection
CBSA Core-Based Statistical Area
CCM Chronic care management
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDC Centers for Disease Control and Prevention
CED Coverage with Evidence Development
CERT Comprehensive Error Rate Testing
CfC Conditions of coverage
CFR Code of Federal Regulations
CI Comment indicator
CLABSI Central Line [Catheter] Associated Blood Stream Infection
CLFS Clinical Laboratory Fee Schedule
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP Condition of participation
CPI-U Consumer Price Index for All Urban Consumers
CPT Current Procedural Terminology (copyrighted by the American 
Medical Association)
CR Change request
CRC Colorectal cancer
CSAC Consensus Standards Approval Committee
CT Computed tomography
CV Coefficient of variation
CY Calendar year
DFO Designated Federal Official
DIR Direct or indirect remuneration
DME Durable medical equipment
DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and 
Supplies
DRA Deficit Reduction Act of 2005, Public Law 109-171
DSH Disproportionate share hospital
EACH Essential access community hospital
EAM Extended assessment and management
ECD Expanded criteria donor
EBRT External beam radiotherapy
ECG Electrocardiogram
ED Emergency department
EDTC Emergency department transfer communication
EHR Electronic health record
E/M Evaluation and management
ESRD End-stage renal disease
ESRD QIP End-Stage Renal Disease Quality Improvement Program
FACA Federal Advisory Committee Act, Public Law 92-463
FDA Food and Drug Administration
FFS [Medicare] Fee-for-service
FTE Full-time equivalent
FY Fiscal year
GAO Government Accountability Office
GI Gastrointestinal
GME Graduate medical education
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCERA Health Care and Education Reconciliation Act of 2010, Public 
Law 111-152
HCP Health care personnel
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HCUP Healthcare Cost and Utilization Project
HEU Highly enriched uranium
HH QRP Home Health Quality Reporting Program
HHS Department of Health and Human Services
HIE Health information exchange
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HOP Hospital Outpatient Payment [Panel]
HOPD Hospital outpatient department
HOP QDRP Hospital Outpatient Quality Data Reporting Program
HPMS Health Plan Management System
IBD Inflammatory bowel disease
ICC Interclass correlation coefficient
ICD Implantable cardioverter defibrillator
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD-10 International Classification of Diseases, Tenth Revision
ICH In-center hemodialysis
ICR Information collection requirement
IME Indirect medical education
IDTF Independent diagnostic testing facility
IGI IHS Global Insight, Inc.
IHS Indian Health Service
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IORT Intraoperative radiation treatment
IPFQR Inpatient Psychiatric Facility Quality Reporting
IPPS [Hospital] Inpatient Prospective Payment System
IQR [Hospital] Inpatient Quality Reporting
IRF Inpatient rehabilitation facility
IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program
IT Information technology
LCD Local coverage determination
LDR Low dose rate
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MAC Medicare Administrative Contractor
MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public 
Law 114-10
MAP Measure Application Partnership
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MEG Magnetoencephalography
MFP Multifactor productivity
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act under Division B, 
Title I of the Tax Relief Health Care Act of 2006, Public Law 109-
432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MLR Medical loss ratio
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
MR Medical review
MRA Magnetic resonance angiography
MRgFUS Magnetic Resonance Image Guided Focused Ultrasound
MRI Magnetic resonance imaging
MRSA Methicillin-Resistant Staphylococcus Aures
MS-DRG Medicare severity diagnosis-related group
MSIS Medicaid Statistical Information System
MUC Measure under consideration
NCCI National Correct Coding Initiative
NEMA National Electrical Manufacturers Association
NHSN National Healthcare Safety Network
NOTA National Organ and Transplantation Act
NOS Not otherwise specified
NPI National Provider Identifier
NPWT Negative Pressure Wound Therapy
NQF National Quality Forum
NQS National Quality Strategy
NTIOL New technology intraocular lens
NUBC National Uniform Billing Committee
OACT [CMS] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act of 1996, Public Law 99-509
O/E Observed to expected event
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
ONC Office of the National Coordinator for Health Information 
Technology
OPD [Hospital] Outpatient Department
OPO Organ Procurement Organization
OPPS [Hospital] Outpatient Prospective Payment System
OPSF Outpatient Provider-Specific File
OPTN Organ Procurement and Transplantation Network
OQR [Hospital] Outpatient Quality Reporting
OT Occupational therapy
PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93
PBD Provider-based department
PCHQR PPS-Exempt Cancer Hospital Quality Reporting
PCR Payment-to-cost ratio
PDC Per day cost
PDE Prescription Drug Event
PE Practice expense
PEPPER Program Evaluation Payment Patterns Electronic Report
PHP Partial hospitalization program
PHSA Public Health Service Act, Public Law 96-88
PN Pneumonia
POS Place of service
PPI Producer Price Index
PPS Prospective payment system
PQRI Physician Quality Reporting Initiative
PQRS Physician Quality Reporting System
QDC Quality data code
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RHQDAPU Reporting Hospital Quality Data for Annual Payment Update
RTI Research Triangle Institute, International
RVU Relative value unit
SAD Self-administered drug
SAMS Secure Access Management Services
SCH Sole community hospital
SCOD Specified covered outpatient drugs
SES Socioeconomic status

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SI Status indicator
SIA Systems Improvement Agreement
SIR Standardized infection ratio
SNF Skilled nursing facility
SRS Stereotactic radiosurgery
SRTR Scientific Registry of Transplant Recipients
SSA Social Security Administration
SSI Surgical site infection
TEP Technical Expert Panel
TIP Transprostatic implant procedure
TOPs Transitional Outpatient Payments
USPSTF United States Preventive Services Task Force
VBP Value-based purchasing
WAC Wholesale acquisition cost

Table of Contents

I. Summary and Background
    A. Executive Summary of This Document
    1. Purpose
    2. Summary of the Major Provisions
    3. Summary of Costs and Benefits
    B. Legislative and Regulatory Authority for the Hospital OPPS
    C. Excluded OPPS Services and Hospitals
    D. Prior Rulemaking
    E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel 
or the Panel)
    1. Authority of the Panel
    2. Establishment of the Panel
    3. Panel Meetings and Organizational Structure
    F. Public Comments Received in Response to CY 2016 OPPS/ASC 
Final Rule With Comment Period
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Payment Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    2. Data Development Process and Calculation of Costs Used for 
Ratesetting
    a. Recommendations of the Advisory Panel on Hospital Outpatient 
Payment (the Panel) Regarding Data Development
    b. Calculation of Single Procedure APC Criteria-Based Costs
    (1) Blood and Blood Products
    (a) Methodology
    (b) Solicitation of Public Comments
    (c) Rapid Bacterial Testing for Platelets
    (2) Brachytherapy Sources
    c. Comprehensive APCs (C-APCs) for CY 2017
    (1) Background
    (2) C-APCs for CY 2017
    (a) Additional C-APCs for CY 2017
    (b) New Allogeneic Hematopoietic Stem Cell Transplantation 
(HSCT) C-APC
    d. Calculation of Composite APC Criteria-Based Costs
    (1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
    (2) Mental Health Services Composite APC
    (3) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    3. Changes to Packaged Items and Services
    a. Background and Rationale for Packaging in the OPPS
    b. Clinical Diagnostic Laboratory Test Packaging Policy
    (1) Background
    (2) ``Unrelated'' Laboratory Test Exception
    (3) Molecular Pathology Test Exception
    c. Conditional Packaging Status Indicators ``Q1'' and ``Q2''
    (1) Background
    (2) Change in Conditional Packaging Status Indicators Logic
    4. Calculation of OPPS Scaled Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. Adjustment for Rural SCHs and EACHs Under Section 
1833(t)(13)(B) of the Act
    1. Background
    2. Proposed and Finalized Policy for CY 2017
    F. OPPS Payment to Certain Cancer Hospitals Described by Section 
1886(d)(1)(B)(v) of the Act
    1. Background
    2. Payment Adjustment for Certain Cancer Hospitals for CY 2017
    G. Hospital Outpatient Outlier Payments
    1. Background
    2. Outlier Calculation
    H. Calculation of an Adjusted Medicare Payment From the National 
Unadjusted Medicare Payment
    I. Beneficiary Copayments
    1. Background
    2. OPPS Copayment Policy
    3. Calculation of an Adjusted Copayment Amount for an APC Group
III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Treatment of New Level II HCPCS Codes Effective April 1, 2016 
for Which We Solicited Public Comments in the CY 2017 OPPS/ASC 
Proposed Rule
    2. Treatment of New CPT and Level II HCPCS Codes Effective July 
1, 2016 for Which We Solicited Public Comments in the CY 2017 OPPS/
ASC Proposed Rule
    3. Process for New Level II HCPCS Codes That Became Effective 
October 1, 2016 and New Level II HCPCS Codes That Will Be Effective 
January 1, 2017 for Which Are Soliciting Public Comments in This CY 
2017 OPPS/ASC Final Rule With Comment Period
    4. Treatment of New and Revised CY 2017 Category I and III CPT 
Codes That Will Be Effective January 1, 2017 for Which We Solicited 
Public Comments in the CY 2017 OPPS/ASC Proposed Rule
    B. OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. APC Exceptions to the 2 Times Rule
    C. New Technology APCs
    1. Background
    2. Additional New Technology APC Groups
    3. Procedures Assigned to New Technology APC Groups for CY 2017
    a. Overall Proposal
    b. Retinal Prosthesis Implant Procedure
    D. OPPS APC-Specific Policies
    1. Cardiovascular Procedures and Services
    a. Cardiac Event Recorder (APC 5071)
    b. Cardiac Telemetry
    2. Eye-Related Services
    3. Gastrointestinal Procedures and Services
    a. Esophageal Sphincter Augmentation (APC 5362)
    b. Esophagogastroduodenoscopy: Transmural Drainage of Pseudocyst 
(APC 5303)
    4. Musculoskeletal Procedures/Services
    a. Auditory Osseointegrated Implants/Bone Anchored Hearing 
Systems (APCs 5114, 5115, 1nd 5116)
    b. Bunion Correction/Foot Fusion (APC 5114)
    c. Intervertebral Biomechanical Devices
    d. Percutaneous Vertebral Augmentation/Kyphoplasty (APC 5114)
    e. Strapping and Casting Applications (APCs 5101 and 5102)
    5. Nervous System Procedures/Services
    a. Transcranial Magnetic Stimulation Therapy (TMS) (APCs 5721 
and 5722)
    b. Percutaneous Epidural Adhesiolysis (APC 5443)
    c. Neurostimulator (APC 5463)
    6. Radiologic Procedures and Services
    a. Imaging APCs
    b. Radiation Oncology (APCs 5092, 5611, and 5627)
    7. Skin Substitutes (APCs 5053 Through 5055)
    8. Urology System Procedures and Services
    a. Chemodenervation of the Bladder (APC 5373)
    b. Temporary Prostatic Urethral Stent (APC 5372)
    c. Transprostatic Urethral Implant Procedure (TUIP) (APCs 5375 
and 5376)
    9. Other Procedures and Services
    a. Cryoablation Procedures (APCs 5114, 5361, 5362, and 5432)
    b. Comprehensive Dialysis Circuit Procedures (APCs 5181, 5192, 
and 5193)
    c. Blood Product Exchange and Related Services (APCs 5241 and 
5242)
    d. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS) 
(APCs 1537, 5114, and 5414)
    e. Neulasta[supreg] On-Body Injector
    f. Smoking and Tobacco Use Cessation Counseling (APC 5821)
    g. Radiofrequency Ablation of Uterine Fibroids (APC 5362)
    h. Intrapulmonary Surfactant Administration (APC 5791)
    i. Non-Contact Low Frequency Ultrasound (NLFU) Therapy (APC 
5051)
    j. Pulmonary Rehabilitation Services
IV. OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through for Certain Devices
    a. Background
    b. CY 2017 Pass-Through Devices
    2. New Device Pass-Through Applications
    a. Background
    b. Applications Received for Device Pass-Through Payment for CY 
2017
    (1) BioBag[supreg] (Larval Debridement Therapy in a Contained 
Dressing)
    (2) ENCORETM Suspension System
    (3) Endophys Pressure Sensing System (Endophys PSS) or Endophys 
Pressure Sensing Kit
    3. Beginning Eligibility Date for Device Pass-Through Payment 
Status
    4. Policy To Make the Transitional Pass-Through Payment Period 3 
Years for All Pass-Through Devices and Expire Pass-Through Status on 
a Quarterly Rather Than Annual Basis

[[Page 79566]]

    a. Background
    b. CY 2017 Policy
    5. Changes to Cost-to-Charge Ratios (CCRs) That Are Used To 
Determine Device Pass-Through Payment
    a. Background
    b. CY 2017 Policy
    6. Provisions for Reducing Transitional Pass-Through Payments To 
Offset Costs Packaged Into APC Groups
    a. Background
    b. CY 2017 Policy
    B. Device-Intensive Procedures
    1. Background
    2. HCPCS Code-Level Device-Intensive Determination
    3. Changes to the Device Edit Policy
    4. Adjustment to OPPS Payment for No Cost/Full Credit and 
Partial Credit Devices
    a. Background
    b. Policy for CY 2017
    5. Payment Policy for Low-Volume Device-Intensive Procedures
V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Policy To Make the Transitional Pass-Through Payment Period 3 
Years for All Pass-Through Drugs, Biologicals, and 
Radiopharmaceuticals and Expire Pass-Through Status on a Quarterly 
Rather Than Annual Basis
    3. Drugs and Biologicals With Expiring Pass-Through Payment 
Status in CY 2016
    4. Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2017
    5. Provisions for Reducing Transitional Pass-Through Payments 
for Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals To 
Offset Costs Packaged Into APC Groups
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Payment Status
    1. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
    a. Packaging Threshold
    b. Packaging of Payment for HCPCS Codes That Describe Certain 
Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals 
Under the Cost Threshold (``Threshold-Packaged Policy'')
    c. Policy Packaged Drugs, Biologicals, and Radiopharmaceuticals
    d. High Cost/Low Cost Threshold for Packaged Skin Substitutes
    e. Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological But Different Dosages
    2. 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 2017 Payment Policy
    c. Biosimilar Biological Products
    3. Payment Policy for Therapeutic Radiopharmaceuticals
    4. Payment Adjustment Policy for Radioisotopes Derived From Non-
Highly Enriched Uranium Sources
    5. Payment for Blood Clotting Factors
    6. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital 
Claims Data
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits and Critical Care 
Services
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2017
    1. PHP APC Changes and Effects on Geometric Mean Per Diem Costs
    a. Changes to PHP APCs
    b. Rationale for Changes in PHP APCs
    c. Alternatives Considered
    2. Development of the PHP APC Geometric Mean Per Diem Costs and 
Payment Rates
    a. CMHC Data Preparation: Data Trims, Exclusions, and CCR 
Adjustments
    b. Hospital-Based PHP Data Preparation: Data Trims and 
Exclusions
    3. PHP Ratesetting Process
    C. Outlier Policy for CMHCs
    1. Estimated Outlier Threshold
    2. CMHC Outlier Cap
    a. Summary of Proposal
    b. CY 2017 Final Rule Update and Policy
    3. Implementation Strategy for the 8-Percent Cap on CMHC Outlier 
Payments
    4. Summary of Policies
IX. Procedures That Will Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient Only (IPO) List
    C. Response to Solicitation of Public Comments on the Possible 
Removal of Total Knee Arthroplasty (TKA) Procedures From the IPO 
List
    1. Background
    2. Discussion of TKA and the IPO List
    3. Topics and Questions for Public Comment
X. Nonrecurring Policy Changes
    A. Implementation of Section 603 of the Bipartisan Budget Act of 
2015 Relating to Payment for Certain Items and Services Furnished by 
Off-Campus Provider-Based Departments of a Hospital
    1. Background
    2. Defining Applicable Items and Services and Off-Campus 
Outpatient Department of a Provider as Set Forth in Sections 
1833(t)(21)(A) and (B) of the Act
    a. Background on the Provider-Based Status Rules
    b. Exemption of Items and Services Furnished in a Dedicated 
Emergency Department or an On-Campus PBD as Defined at Sections 
1833(t)(21)(B)(i)(I) and (II) of the Act (Excepted Off-Campus PBD)
    (1) Dedicated Emergency Departments (EDs)
    (2) On-Campus Locations
    (3) Within the Distance From Remote Locations
    c. Applicability of Exception at Section 1833(t)(21)(B)(ii) of 
the Act
    (1) Relocation of Off-Campus PBDs Excepted Under Section 
1833(t)(21)(B)(ii) of the Act
    (2) Expansion of Clinical Family of Services at an Off-Campus 
PBD Excepted Under Section 1833(t)(21)(B)(ii) of the Act
    d. Change of Ownership and Excepted Status
    e. Public Comments Received in Response to Solicitation on Data 
Collection Under Section 1833(t)(21)(D) of the Act
    3. Payment for Items and Services Furnished in Off-Campus PBDs 
to Which Sections 1833(t)(1)(B)(v) and 1833(t)(21) of the Act Apply 
(Nonexcepted Items and Services Furnished by Nonexcepted Off-Campus 
PBDs)
    a. Background on Medicare Payment for Services Furnished in an 
Off-Campus PBD
    b. Payment for Items and Services Furnished in Off-Campus PBD 
That Are Subject to Sections 1833(t)(1)(B)(v) and (t)(21)(C) of the 
Act
    (1) Definition of ``Applicable Payment System'' for Nonexcepted 
Items and Services
    (2) Definition of Applicable Items and Services and Section 603 
Amendments to Section 1833(t)(1)(B) of the Act and Payment for 
Nonexcepted Items and Services for CY 2017
    (3) Public Comments Received in Response to Solicitation on 
Allowing Direct Billing and Payment for Nonexcepted Items and 
Services in CY 2018
    4. Beneficiary Cost-Sharing
    5. Summary of Proposals
    6. Final Changes to Regulations
    B. Interim Final Rule With Comment Period: Establishment of 
Payment Rates Under the Medicare Physician Fee Schedule for 
Nonexcepted Items and Services Furnished by an Off-Campus Provider-
Based Department of a Hospital
    1. Background
    2. Payment Mechanisms
    a. Relevance of the MPFS for Payment for Nonexcepted Items and 
Services
    b. Operational Considerations
    c. General MPFS Coding and Billing Mechanisms
    3. Establishment of Payment Rates
    a. Methodology
    b. MPFS Relativity Adjuster
    c. Geographic Adjustments
    d. Coding Consistency
    4. OPPS Payment Adjustments
    5. Partial Hospitalization Services
    6. Supervision Rules
    7. Beneficiary Cost-Sharing
    8. CY 2018, CY 2019, and Future Years
    9. Waiver of Proposed Rulemaking
    10. Collection of Information Requirements
    11. Response to Comments
    12. Regulatory Impact Statement
    C. Changes for Payment for Film X-Ray
    D. Changes to Certain Scope of Service Elements for Chronic Care 
Management (CCM) Services

[[Page 79567]]

    E. Appropriate Use Criteria for Advanced Diagnostic Imaging 
Services
XI. CY 2017 OPPS Payment Status and Comment Indicators
    A. CY 2017 OPPS Payment Status Indicator Definitions
    B. CY 2017 Comment Indicator Definitions
XII. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    1. Legislative History, Statutory Authority, and Prior 
Rulemaking for the ASC Payment System
    2. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC Covered Surgical Procedures and Covered Ancillary 
Services
    B. Treatment of New and Revised Codes
    1. Background on Current Process for Recognizing New and Revised 
Category I and Category III CPT Codes and Level II HCPCS Codes
    2. Treatment of New and Revised Level II HCPCS Codes and 
Category III CPT Codes Implemented in April 2016 and July 2016 for 
Which We Solicited Public Comments in the CY 2017 OPPS/ASC Proposed 
Rule
    3. Process for Recognizing New and Revised Category I and 
Category III CPT Codes That Will Be Effective January 1, 2017 for 
Which We Are Responding to Public Comments in This CY 2017 OPPS/ASC 
Final Rule With Comment Period
    4. Process for New and Revised Level II HCPCS Codes That Will Be 
Effective October 1, 2016 and January 1, 2017 for Which We Are 
Soliciting Public Comments in This CY 2017 OPPS/ASC Final Rule with 
Comment Period
    C. Update to the List of ASC Covered Surgical Procedures and 
Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Covered Surgical Procedures Designated as Office-Based
    (1) Background
    (2) Changes for CY 2017 to Covered Surgical Procedures 
Designated as Office-Based
    b. ASC Covered Surgical Procedures Designated as Device-
Intensive--Finalized Policy for CY 2016 and Final Policy for CY 2017
    (1) Background
    (2) ASC Device-Intensive Designation by HCPCS Code
    (3) Changes to List of ASC Covered Surgical Procedures 
Designated as Device-Intensive for CY 2017
    c. Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    d. Additions to the List of ASC Covered Surgical Procedures
    2. Covered Ancillary Services
    D. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    1. ASC Payment for Covered Surgical Procedures
    a. Background
    b. Update to ASC Covered Surgical Procedure Payment Rates for CY 
2017
    2. Payment for Covered Ancillary Services
    a. Background
    b. Payment for Covered Ancillary Services for CY 2017
    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Application Cycle
    2. Requests To Establish New NTIOL Classes for CY 2017
    3. Payment Adjustment
    F. ASC Payment and Comment Indicators
    1. Background
    2. ASC Payment and Comment Indicators
    G. Calculation of the ASC Conversion Factor and the ASC Payment 
Rates
    1. Background
    2. Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2017 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of CY 2017 ASC Payment Rates
XIII. Requirements for the Hospital Outpatient Quality Reporting 
(OQR) Program
    A. Background
    1. Overview
    2. Statutory History of the Hospital OQR Program
    B. Hospital OQR Program Quality Measures
    1. Considerations in the Selection of Hospital OQR Program 
Quality Measures
    2. Retention of Hospital OQR Program Measures Adopted in 
Previous Payment Determinations
    3. Removal of Quality Measures From the Hospital OQR Program 
Measure Set
    a. Considerations in Removing Quality Measures From the Hospital 
OQR Program
    b. Criteria for Removal of ``Topped-Out'' Measures
    4. Hospital OQR Program Quality Measures Adopted in Previous 
Rulemaking
    5. New Hospital OQR Program Quality Measures for the CY 2020 
Payment Determinations and Subsequent Years
    a. OP-35: Admissions and Emergency Department (ED) Visits for 
Patients Receiving Outpatient Chemotherapy Measure
    (1) Background
    (2) Overview of Measure
    (3) Data Sources
    (4) Measure Calculation
    (5) Cohort
    (6) Risk Adjustment
    b. OP-36: Hospital Visits After Hospital Outpatient Surgery 
Measure (NQF #2687)
    (1) Background
    (2) Overview of Measure
    (3) Data Sources
    (4) Measure Calculation
    (5) Cohort
    (6) Risk Adjustment
    c. OP-37a-e: Outpatient and Ambulatory Surgery Consumer 
Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey 
Measures
    (1) Background
    (2) Overview of Measures
    (3) Data Sources
    (4) Measure Calculations
    (5) Cohort
    (6) Exemption
    (7) Risk Adjustment
    (8) Public Reporting
    d. Summary of Previously Adopted and Newly Adopted Hospital OQR 
Program Measures for the CY 2020 Payment Determinations and 
Subsequent Years
    6. Hospital OQR Program Measures and Topics for Future 
Consideration
    a. Future Measure Topics
    b. Electronic Clinical Quality Measures
    c. Possible Future eCQM: Safe Use of Opioids-Concurrent 
Prescribing
    7. Maintenance of Technical Specifications for Quality Measures
    8. Public Display of Quality Measures
    C. Administrative Requirements
    1. QualityNet Account and Security Administrator
    2. Requirements Regarding Participation Status
    D. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program
    1. Hospital OQR Program Annual Payment Determinations
    2. Requirements for Chart-Abstracted Measures Where Patient-
Level Data Are Submitted Directly to CMS for the CY 2019 Payment 
Determination and Subsequent Years
    3. Claims-Based Measure Data Requirements for the CY 2019 
Payment Determination and Subsequent Years and CY 2020 Payment 
Determination and Subsequent Years
    4. Data Submission Requirements for the OP-37a-e: Outpatient and 
Ambulatory Surgery Consumer Assessment of Healthcare Providers and 
Systems (OAS CAHPS) Survey-Based Measures for the CY 2020 Payment 
Determination and Subsequent Years
    a. Survey Requirements
    b. Vendor Requirements
    5. Data Submission Requirements for Previously Finalized 
Measures for Data Submitted via a Web-Based Tool for the CY 2019 
Payment Determination and Subsequent Years
    6. Population and Sampling Data Requirements for the CY 2019 
Payment Determination and Subsequent Years
    7. Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2019 
Payment Determination and Subsequent Years
    8. Extension or Exemption Process for the CY 2019 Payment 
Determination and Subsequent Years
    9. Hospital OQR Program Reconsideration and Appeals Procedures 
for the CY 2019 Payment Determination and Subsequent Years--
Clarification
    E. Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2017 Payment 
Determination
    1. Background
    2. Reporting Ratio Application and Associated Adjustment Policy 
for CY 2017
XIV. Requirements for the Ambulatory Surgical Center Quality 
Reporting (ASCQR) Program
    A. Background
    1. Overview
    2. Statutory History of the ASCQR Program

[[Page 79568]]

    3. Regulatory History of the ASCQR Program
    B. ASCQR Program Quality Measures
    1. Considerations in the Selection of ASCQR Program Quality 
Measures
    2. Policies for Retention and Removal of Quality Measures From 
the ASCQR Program
    3. ASCQR Program Quality Measures Adopted in Previous Rulemaking
    4. ASCQR Program Quality Measures for the CY 2020 Payment 
Determination and Subsequent Years
    a. ASC-13: Normothermia Outcome
    (1) Background
    (2) Overview of Measure
    (3) Data Sources
    (4) Measure Calculation
    (5) Cohort
    (6) Risk Adjustment
    b. ASC-14: Unplanned Anterior Vitrectomy
    (1) Background
    (2) Overview of Measure
    (3) Data Sources
    (4) Measure Calculation
    (5) Cohort
    (6) Risk Adjustment
    c. ASC-15a-e: Outpatient and Ambulatory Surgery Consumer 
Assessment of Healthcare Providers and Systems (OAS CAHPS) Survey 
Measures
    (1) Background
    (2) Overview of Measures
    (3) Data Sources
    (4) Measure Calculations
    (5) Cohort
    (6) Exemption
    (7) Risk Adjustment
    (8) Public Reporting
    5. ASCQR Program Measure for Future Consideration
    6. Maintenance of Technical Specifications for Quality Measures
    7. Public Reporting of ASCQR Program Data
    C. Administrative Requirements
    1. Requirements Regarding QualityNet Account and Security 
Administrator
    2. Requirements Regarding Participation Status
    D. Form, Manner, and Timing of Data Submitted for the ASCQR 
Program
    1. Requirements Regarding Data Processing and Collection Periods 
for Claims-Based Measures Using Quality Data Codes (QDCs)
    2. Minimum Threshold, Minimum Case Volume, and Data Completeness 
for Claims-Based Measures Using QDCs
    3. Requirements for Data Submitted via an Online Data Submission 
Tool
    a. Requirements for Data Submitted via a Non-CMS Online Data 
Submission Tool
    b. Requirements for Data Submitted via a CMS Online Data 
Submission Tool
    4. Claims-Based Measure Data Requirements for the CY 2019 
Payment Determination and Subsequent Years
    5. Data Submission Requirements for ASC-15a-e: Outpatient and 
Ambulatory Surgery Consumer Assessment of Healthcare Providers and 
Systems (OAS CAHPS) Survey-Based Measures for the CY 2020 Payment 
Determination and Subsequent Years
    a. Survey Requirements
    b. Vendor Requirements
    6. Extraordinary Circumstances Extensions or Exemptions for the 
CY 2019 Payment Determination and Subsequent Years
    7. ASCQR Program Reconsideration Procedures
    E. Payment Reduction for ASCs That Fail To Meet the ASCQR 
Program Requirements
    1. Statutory Background
    2. Reduction to the ASC Payment Rates for ASCs That Fail To Meet 
the ASCQR Program Requirements for a Payment Determination Year
XV. Transplant Outcomes: Restoring the Tolerance Range for Patient 
and Graft Survival
    A. Background
    B. Revisions to Performance Thresholds
XVI. Organ Procurement Organizations (OPOs): Changes to Definitions; 
Outcome Measures; and Documentation Requirements
    A. Background
    1. Organ Procurement Organizations (OPOs)
    2. Statutory Provisions
    3. HHS Initiatives Related to OPO Services
    4. Requirements for OPOs
    B. Proposed and Finalized Provisions
    1. Definition of ``Eligible Death''
    2. Aggregate Donor Yield for OPO Outcome Performance Measures
    3. Organ Preparation and Transport-Documentation With the Organ
XVII. Transplant Enforcement Technical Corrections and Other 
Revisions to 42 CFR 488.61
    A. Technical Correction to Transplant Enforcement Regulatory 
References
    B. Other Revisions to 42 CFR 488.61
XVIII. Changes to the Medicare and Medicaid Electronic Health Record 
(EHR) Incentive Programs
    A. Background
    B. Summary of Final Policies Included in This Final Rule With 
Comment Period
    C. Revisions to Objectives and Measures for Eligible Hospitals 
and CAHs
    1. Removal of the Clinical Decision Support (CDS) and 
Computerized Provider Order Entry (CPOE) Objectives and Measures for 
Eligible Hospitals and CAHs
    2. Reduction of Measure Thresholds for Eligible Hospitals and 
CAHs for 2017 and 2018
    a. Changes to the Objectives and Measures for Modified Stage 2 
(42 CFR 495.22) in 2017
    b. Changes to the Objectives and Measures for Stage 3 (42 CFR 
495.24) in 2017 and 2018
    (1) Objective: Patient Electronic Access to Health Information 
(42 CFR 495.24(c)(5))
    (2) Objective: Coordination of Care Through Patient Engagement 
(42 CFR 495.24(c)(6))
    (3) Objective: Health Information Exchange (HIE) (42 CFR 
495.24(c)(7))
    (4) Objective: Public Health and Clinical Data Registry 
Reporting (42 CFR 495.24(c)(8))
    D. Revisions to the EHR Reporting Period in 2016 for EPs, 
Eligible Hospitals and CAHs
    1. Definition of ``EHR Reporting Period'' and ``EHR Reporting 
Period for a Payment Adjustment Year''
    2. Clinical Quality Measurement
    E. Policy To Require Modified Stage 2 for New Participants in 
2017
    F. Significant Hardship Exception for New Participants 
Transitioning to MIPS in 2017
    G. Modifications To Measure Calculations for Actions Outside the 
EHR Reporting Period
XIX. Additional Hospital Value-Based Purchasing (VBP) Program 
Policies
    A. Background
    B. Removal of the HCAHPS Pain Management Dimension From the 
Hospital VBP Program
    1. Background of the HCAHPS Survey in the Hospital VBP Program
    2. Background of the Patient- and Caregiver-Centered Experience 
of Care/Care Coordination Domain Performance Scoring Methodology
    3. Removal of the HCAHPS Pain Management Dimension From the 
Hospital VBP Program Beginning With the FY 2018 Program Year
XX. Files Available to the Public via the Internet
XXI. Collection of Information Requirements
    A. Statutory Requirement for Solicitation of Comments
    B. ICRs for the Hospital OQR Program
    C. ICRs for the ASCQR Program
    D. ICRs Relating to Changes in Transplant Enforcement 
Performance Thresholds
    E. ICRs for Changes Relating to Organ Procurement Organizations 
(OPOs)
    F. ICRs Relating to Changes to the Electronic Health Record 
(EHR) Incentive Program
    G. ICRs Relating to Additional Hospital VBP Program Policies
    H. ICRs for Payment for Off-Campus Provider-Based Departments 
Policy Changes for CY 2017
XXII. Waiver of Proposed Rulemaking and Response to Comments
    A. Waiver of Proposed Rulemaking
    B. Response to Comments
XXIII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for the OPPS and ASC Payment Provisions
    4. Detailed Economic Analyses
    a. Estimated Effects of OPPS Changes in This Final Rule With 
Comment Period
    (1) Limitations of Our Analysis
    (2) Estimated Effects of OPPS Changes on Hospitals
    (3) Estimated Effects of OPPS Changes on CMHCs
    (4) Estimated Effects of OPPS Changes on Beneficiaries
    (5) Estimated Effects of OPPS Changes on Other Providers
    (6) Estimated Effects of OPPS Changes on the Medicare and 
Medicaid Programs
    (7) Alternative OPPS Policies Considered
    b. Estimated Effects of CY 2017 ASC Payment System Policies
    (1) Limitations of Our Analysis
    (2) Estimated Effects of CY 2017 ASC Payment System Policies on 
ASCs

[[Page 79569]]

    (3) Estimated Effects of ASC Payment System Policies on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered
    c. Accounting Statements and Tables
    d. Effects of Requirements for the Hospital OQR Program
    e. Effects of Requirements for the ASCQR Program
    f. Effects of the Changes to Transplant Performance Thresholds
    g. Effects of the Changes Relating to Organ Procurement 
Organizations (OPOs)
    h. Effects of the Changes to the Medicare and Medicaid 
Electronic Health Record (EHR) Incentive Programs
    i. Effects of Requirements for the Hospital VBP Program
    j. Effects of Implementation of Section 603 of the Bipartisan 
Budget Act of 2015 Relating to Payment for Nonexcepted Items and 
Services Furnished by Nonexcepted Off-Campus Departments of a 
Provider
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXIV. Federalism Analysis
Regulation Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this document, we are updating the payment policies and payment 
rates for services furnished to Medicare beneficiaries in hospital 
outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) 
beginning January 1, 2017. Section 1833(t) of the Social Security Act 
(the Act) requires us to annually review and update the payment rates 
for services payable under the Hospital Outpatient Prospective Payment 
System (OPPS). Specifically, section 1833(t)(9)(A) of the Act requires 
the Secretary to review certain components of the OPPS not less often 
than annually, and to revise the groups, relative payment weights, and 
other adjustments that take into account changes in medical practices, 
changes in technologies, and the addition of new services, new cost 
data, and other relevant information and factors. In addition, under 
section 1833(i) of the Act, we annually review and update the ASC 
payment rates. We describe these and various other statutory 
authorities in the relevant sections of this final rule with comment 
period. In addition, this final rule with comment period updates and 
refines the requirements for the Hospital Outpatient Quality Reporting 
(OQR) Program and the ASC Quality Reporting (ASCQR) Program.
    In addition, we are making changes to the conditions for coverage 
(CfCs) for organ procurement organizations (OPOs); revisions to the 
outcome requirements for solid organ transplant programs, transplant 
enforcement, and for transplant documentation requirements; a technical 
correction to enforcement provisions for organ transplant centers; 
modifications to the Medicare and Medicaid Electronic Health Record 
(EHR) Incentive Programs to reduce hospital administrative burden and 
to allow hospitals to focus more on patient care; and the removal of 
the HCAHPS Pain Management dimension from the Hospital Value-Based 
Purchasing (VBP) Program.
    Further, we are implementing section 603 of the Bipartisan Budget 
Act of 2015 relating to payment for nonexcepted items and services 
furnished by nonexcepted off-campus provider-based departments (PBDs) 
of a hospital. In conjunction with implementation of section 603 in 
this final rule with comment period, we are issuing in this Federal 
Register document an interim final rule with comment period that 
establishes payment rates under the MPFS for nonexcepted items and 
services furnished by nonexcepted off-campus PBDs of hospitals.
2. Summary of the Major Provisions
     OPPS Update: For CY 2017, we are increasing the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 1.65 percent. This increase factor is based 
on the hospital inpatient market basket percentage increase of 2.7 
percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS), minus the multifactor productivity 
(MFP) adjustment of 0.3 percentage point, and minus a 0.75 percentage 
point adjustment required by the Affordable Care Act. Based on this 
update, we estimate that total payments to OPPS providers (including 
beneficiary cost-sharing and estimated changes in enrollment, 
utilization, and case-mix), for CY 2017 will be approximately $773 
million, an increase of approximately $5.0 billion compared to 
estimated CY 2016 OPPS payments.
    We are continuing to implement the statutory 2.0 percentage point 
reduction in payments for hospitals failing to meet the hospital 
outpatient quality reporting requirements, by applying a reporting 
factor of 0.980 to the OPPS payments and copayments for all applicable 
services.
     Rural Adjustment: We are continuing the adjustment of 7.1 
percent to the OPPS payments to certain rural sole community hospitals 
(SCHs), including essential access community hospitals (EACHs). This 
adjustment applies to all services paid under the OPPS, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to cost.
     Cancer Hospital Payment Adjustment: For CY 2017, we are 
continuing to provide additional payments to cancer hospitals so that 
the cancer hospital's payment-to-cost ratio (PCR) after the additional 
payments is equal to the weighted average PCR for the other OPPS 
hospitals using the most recently submitted or settled cost report 
data. Based on those data, a target PCR of 0.91 will be used to 
determine the CY 2017 cancer hospital payment adjustment to be paid at 
cost report settlement. That is, the payment adjustments will be the 
additional payments needed to result in a PCR equal to 0.91 for each 
cancer hospital.
     Comprehensive APCs: For CY 2017, we are not making 
extensive changes to the already established methodology used for C-
APCs. However, we are creating 25 new C-APCs that meet the previously 
established criteria, which, when combined with the existing 37 C-APCs, 
will bring the total number to 62 C-APCs as of January 1, 2017.
     Chronic Care Management (CCM): For CY 2017, we are making 
some minor changes to certain CCM scope-of-service elements. We refer 
readers to the CY 2017 MPFS final rule with comment period for a 
detailed discussion of these changes to the scope of service elements 
for CCM. We are applying these changes to CCM furnished to hospital 
outpatients.
     Device-Intensive Procedures: For CY 2017, we are 
finalizing our policy of determining the payment rate for any device-
intensive procedure that is assigned to an APC with fewer than 100 
total claims for all procedures in the APC to be based on the median 
cost instead of the geometric mean cost. We believe that this approach 
will mitigate significant year-to-year payment rate fluctuations while 
preserving accurate claims-data-based payment rates for low volume 
device-intensive procedures. In addition, we are revising the device 
intensive calculation methodology and calculating the device offset 
amount at the HCPCS code level rather than at the APC level to ensure 
that device intensive status is properly assigned to all device-
intensive procedures.
     Outpatient Laboratory Tests: For CY 2017, we are 
discontinuing the use of the ``L1'' modifier to identify unrelated 
laboratory tests on claims. In addition, we are expanding the 
laboratory packaging exclusion that currently

[[Page 79570]]

applies to Molecular Pathology tests to all laboratory tests designated 
as advanced diagnostic laboratory tests (ADLTs) that meet the criteria 
of section 1834A(d)(5)(A) of the Act.
     Packaging Policies: The OPPS currently packages many 
categories of items and services that are typically provided as part of 
the outpatient hospital service (for example, operating and recovery 
room, anesthesia, among others). Packaging encourages hospital 
efficiency, flexibility, and long-term cost containment, and it also 
promotes the stability of payment for services over time. In CY 2014 
and 2015, we added several new categories of packaged items and 
services. Among these were laboratory tests, ancillary services, 
services described by add-on codes, and drugs used in a diagnostic test 
or surgical procedure. For CY 2017, we are aligning the packaging logic 
for all of the conditional packaging status indicators so that 
packaging would occur at the claim level (instead of based on the date 
of service) to promote consistency and ensure that items and services 
that are provided during a hospital stay that may span more than one 
day are appropriately packaged according to OPPS packaging policies.
     Payment Modifier for X-Ray Films: Section 502(b) of 
Division O, Title V of the Consolidated Appropriations Act, 2016 (Pub. 
L. 114-113) amended section 1833(t)(16) of the Act by adding new 
subparagraph (F). New section 1833(t)(16)(F)(i) of the Act provides 
that, effective for services furnished during 2017 or any subsequent 
year, the payment under the OPPS for imaging services that are X-rays 
taken using film (including the X-ray component of a packaged service) 
that would otherwise be made under the OPPS (without application of 
this paragraph and before application of any other adjustment) shall be 
reduced by 20 percent. We are requiring that, effective for services 
furnished on or after January 1, 2017, hospitals are required to use a 
modifier on claims for X-rays that are taken using film. The use of 
this modifier will result in a 20-percent payment reduction for the X-
ray service, as specified under section 1833(t)(16)(F)(i) of the Act, 
of the determined OPPS payment amount (without application of paragraph 
(F) and before any other adjustments under section 1833(t)).
     Payment for Nonexcepted Items and Services Furnished by 
Nonexcepted Off-Campus Departments of a Provider: We are implementing 
section 603 of the Bipartisan Budget Act of 2015 (Pub. L. 114-74). This 
provision requires that certain items and services furnished in certain 
off-campus PBDs shall not be considered covered OPD services for 
purposes of OPPS payment and those nonexcepted items and services will 
instead be paid ``under the applicable payment system'' beginning 
January 1, 2017. We are finalizing, with modification, the policies we 
proposed relating to which off-campus PBDs and which items and services 
furnished by such off-campus PBDs may be excepted from application of 
payment changes under this provision.
    In addition, we are establishing that the Medicare Physician Fee 
Schedule (MPFS) will be the ``applicable payment system'' for the 
majority of the nonexcepted items and services furnished by nonexcepted 
off-campus PBDs. We are establishing new site-of-service payment rates 
under the MPFS to pay nonexcepted off-campus PBDs for the furnishing of 
nonexcepted items and services. These nonexcepted items and services 
must be reported on the institutional claim form and identified with a 
newly established claims processing modifier.
     Ambulatory Surgical Center Payment Update: For CY 2017, we 
are increasing payment rates under the ASC payment system by 1.9 
percent for ASCs that meet the quality reporting requirements under the 
ASCQR Program. This increase is based on a projected CPI-U update of 
2.2 percent minus a multifactor productivity adjustment required by the 
Affordable Care Act of 0.3 percentage point. Based on this update, we 
estimate that total payments to ASCs (including beneficiary cost-
sharing and estimated changes in enrollment, utilization, and case-
mix), for CY 2017 will be approximately $4,478 million, an increase of 
approximately $177 million compared to estimated CY 2016 Medicare 
payments.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are establishing measures and policies for 
the CY 2018 payment determination, the CY 2019 payment determination 
and the CY 2020 payment determination and subsequent years. For the CY 
2018 payment determination and subsequent years, we are finalizing, as 
proposed, that we will publicly display data on the Hospital Compare 
Web site, or other CMS Web site, as soon as possible after measure data 
have been submitted to CMS. In addition, we are finalizing, as 
proposed, that hospitals will generally have approximately 30 days to 
preview their data. Lastly, we are finalizing, as proposed, that we 
also will announce the timeframes for the preview period on a CMS Web 
site and/or on our applicable listservs. For the CY 2019 payment 
determination and subsequent years, we are finalizing, as proposed, an 
extension of the time for filing extraordinary circumstances extensions 
or exemptions (ECE) requests from 45 days to 90 days from the date that 
the extraordinary circumstance occurred. For the CY 2020 payment 
determination and subsequent years, we are finalizing, as proposed, a 
total of seven measures: Two claims-based measures and five Outpatient 
and Ambulatory Surgery Consumer Assessment of Healthcare Providers and 
Systems (OAS CAHPS) Survey-based measures. The two claims-based 
measures are: (1) OP-35: Admissions and Emergency Department Visits for 
Patients Receiving Outpatient Chemotherapy and (2) OP-36: Hospital 
Visits after Hospital Outpatient Surgery (NQF #2687). The five survey-
based measures are: (1) OP-37a: OAS CAHPS--About Facilities and Staff; 
(2) OP-37b: OAS CAHPS--Communication About Procedure; (3) OP-37c: OAS 
CAHPS--Preparation for Discharge and Recovery; (4) OP-37d: OAS CAHPS--
Overall Rating of Facility; and (5) OP-37e: OAS CAHPS--Recommendation 
of Facility.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are finalizing our proposals for the 
CY 2018 payment determination, the CY 2019 payment determination, and 
the CY 2020 payment determination and subsequent years. For the CY 2018 
payment determination and subsequent years, we are finalizing, as 
proposed, that we will publicly display data on the Hospital Compare 
Web site, or other CMS Web site, as soon as possible after measure data 
have been submitted to CMS. In addition, we are finalizing, as 
proposed, that ASCs will generally have approximately 30 days to 
preview their data. Lastly, we are finalizing, as proposed, that we 
will announce the timeframes for the preview period on a CMS Web site 
and/or on our applicable listservs. For the CY 2019 payment 
determination and subsequent years, we are finalizing our proposal to 
change the submission deadline to May 15 for all data submitted via a 
CMS Web-based tool. We also are finalizing, as proposed, the extension 
of the submission deadline for filing extraordinary circumstances 
extensions or exemptions (ECE) requests from 45 days to 90 days. For 
the CY 2020 payment determination and subsequent years, we are 
finalizing, as proposed, a total of seven measures: Two measures 
collected via a CMS Web-based tool and five Outpatient and Ambulatory 
Surgery Consumer Assessment of Healthcare Providers and

[[Page 79571]]

Systems (OAS CAHPS) Survey-based measures. The two measures that 
require data to be submitted directly to CMS via a CMS Web-based tool 
are: (1) ASC-13: Normothermia Outcome and (2) ASC-14: Unplanned 
Anterior Vitrectomy. The five survey-based measures are: (1) ASC-15a: 
OAS CAHPS--About Facilities and Staff; (2) ASC-15b: OAS CAHPS--
Communication About Procedure; (3) ASC-15c: OAS CAHPS--Preparation for 
Discharge and Recovery; (4) ASC-15d: OAS CAHPS--Overall Rating of 
Facility; and (5) ASC-15e: OAS CAHPS--Recommendation of Facility.
     Hospital Value-Based Purchasing (VBP) Program Update: 
Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which value-based incentive payments are 
made in a fiscal year to hospitals based on their performance on 
measures established for a performance period for such fiscal year. In 
this final rule with comment period, we are removing the HCAHPS Pain 
Management dimension from the Hospital VBP Program, beginning with the 
FY 2018 program year.
     Medicare and Medicaid Electronic Health Record (EHR) 
Incentive Programs: In this final rule, we are making changes to the 
objectives and measures of meaningful use for Modified Stage 2 and 
Stage 3 starting with the EHR reporting periods in CY 2017. Under both 
Modified Stage 2 in 2017 and Stage 3 in 2017 and 2018, for eligible 
hospitals and CAHs attesting to CMS, we are eliminating the Clinical 
Decision Support (CDS) and Computerized Provider Order Entry (CPOE) 
objectives and measures, and lowering the reporting thresholds for a 
subset of the remaining objectives and measures, generally to the 
Modified Stage 2 thresholds. The reduction of measure thresholds is 
intended to respond to input we have received from hospitals, hospital 
associations, health systems, and vendors expressing concerns about the 
established measures. The revised requirements focus on reducing 
hospital administrative burden, allowing eligible hospitals and CAHs 
attesting to CMS to focus more on providing quality patient care, as 
well as focus on updating and optimizing CEHRT functionalities to 
sufficiently meet the requirements of the EHR Incentive Program and 
prepare for Stage 3 of meaningful use. Based on the public comments we 
received, we are finalizing a policy that these changes to the 
objectives and measures apply for all eligible hospitals and CAHs that 
attest to CMS, including eligible hospitals and CAHs that are eligible 
to participate in both the Medicare and Medicaid EHR Incentive 
Programs.
    In addition, we are changing the EHR reporting period in CY 2016 
and 2017 for eligible professionals, eligible hospitals, and CAHs; 
reporting requirements for eligible professionals, eligible hospitals, 
and CAHs that are new participants in 2017; and the policy on measure 
calculations for actions outside the EHR reporting period. Finally, we 
are making a one-time significant hardship exception from the 2018 
payment adjustment for certain eligible professionals who are new 
participants in the EHR Incentive Program in 2017 and are transitioning 
to the Merit-Based Incentive Payment System in 2017. We believe these 
changes are responsive to additional stakeholder feedback received 
through both correspondence and in-person meetings and will result in 
continued advancement of certified EHR technology utilization, 
particularly among those eligible professionals, eligible hospitals and 
CAHs that have not previously achieved meaningful use, and result in a 
program more focused on supporting interoperability and data sharing 
for all participants under the Medicare and Medicaid EHR Incentive 
Programs.
     Transplant Performance Thresholds: With respect to solid 
organ transplant programs, we are restoring the effective tolerance 
range for clinical outcomes that was allowed in our original 2007 rule. 
These outcome requirements in the Medicare Conditions of Participation 
(CoPs) have been affected by the nationwide improvement in transplant 
outcomes, making it now more difficult for transplant programs to 
maintain compliance with, in effect, increasingly stringent Medicare 
standards for patient and graft survival. We expect that our policies 
will increase access to organ transplants while continuing to protect 
Medicare beneficiaries.
     Organ Procurement Organizations (OPOs) Changes: In this 
final rule with comment period, we are: Changing the current ``eligible 
death'' definition to be consistent with the OPTN definition; modifying 
CMS current outcome measures to be consistent with yield calculations 
currently utilized by the SRTR; and modifying current requirements for 
documentation of donor information which is sent to the transplant 
center along with the organ.
3. Summary of Costs and Benefits
    In sections XXIII. and XXIV. of this final rule with comment 
period, we set forth a detailed analysis of the regulatory and 
Federalism impacts that these changes will have on affected entities 
and beneficiaries. Key estimated impacts are described below.
a. Impacts of the OPPS Update
(1) Impacts of All OPPS Changes
    Table 52 in section XXIII. of this final rule with comment period 
displays the distributional impact of all the OPPS changes on various 
groups of hospitals and CMHCs for CY 2017 compared to all estimated 
OPPS payments in CY 2016. We estimate that the policies in this final 
rule with comment period will result in a 1.7 percent overall increase 
in OPPS payments to providers. We estimate that total OPPS payments for 
CY 2017, including beneficiary cost-sharing, to the approximate 3,906 
facilities paid under the OPPS (including general acute care hospitals, 
children's hospitals, cancer hospitals, and CMHCs) will increase by 
approximately $773 million compared to CY 2016 payments, excluding our 
estimated changes in enrollment, utilization, and case-mix.
    We estimated the isolated impact of our OPPS policies on CMHCs 
because CMHCs are only paid for partial hospitalization services under 
the OPPS. Continuing the provider-specific structure that we adopted 
beginning in CY 2011 and basing payment fully on the type of provider 
furnishing the service, we estimate a 15.0 percent decrease in CY 2017 
payments to CMHCs relative to their CY 2016 payments.
(2) Impacts of the Updated Wage Indexes
    We estimate that our update of the wage indexes based on the FY 
2017 IPPS final rule wage indexes results in no change for urban 
hospitals and a 0.3 percent increase for rural hospitals under the 
OPPS. These wage indexes include the continued implementation of the 
OMB labor market area delineations based on 2010 Decennial Census data.
(3) Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 2017 payment policies 
for hospitals that are eligible for the rural adjustment or for the 
cancer hospital payment adjustment. We are not making any change in 
policies for determining the rural and cancer hospital payment 
adjustments, and the adjustment amounts do not significantly impact the 
budget neutrality adjustments for these policies.

[[Page 79572]]

(4) Impacts of the Proposed OPD Fee Schedule Increase Factor
    We estimate that, for most hospitals, the application of the OPD 
fee schedule increase factor of 1.65 percent to the conversion factor 
for CY 2017 will mitigate the impacts of the budget neutrality 
adjustments. As a result of the OPD fee schedule increase factor and 
other budget neutrality adjustments, we estimate that rural and urban 
hospitals will experience increases of approximately 1.7 percent for 
urban hospitals and 2.2 percent for rural hospitals. Classifying 
hospitals by teaching status or type of ownership suggests that these 
hospitals will receive similar increases.
b. Impacts of the ASC Payment Update
    For impact purposes, the surgical procedures on the ASC list of 
covered procedures are aggregated into surgical specialty groups using 
CPT and HCPCS code range definitions. The percentage change in 
estimated total payments by specialty groups under the CY 2017 payment 
rates compared to estimated CY 2016 payment rates ranges between 12 
percent for cardiovascular system procedures and -15 percent for hemic 
and lymphatic system procedures.
c. Impacts of the Hospital OQR Program
    We do not expect our CY 2017 policies to significantly affect the 
number of hospitals that do not receive a full annual payment update.
d. Impacts of the ASCQR Program
    We do not expect our CY 2017 policies to significantly affect the 
number of ASCs that do not receive a full annual payment update.
e. Impacts for Implementation of Section 603 of the Bipartisan Budget 
Act of 2015
    We estimate that implementation of section 603 of Public Law 114-74 
in this interim final rule with comment period will reduce Medicare 
Part B expenditures by approximately $50 million in CY 2017, relative 
to a baseline where section 603 was not implemented in CY 2017. This 
estimate is a significantly lower impact than the $330 million 
reduction estimated for the CY 2017 OPPS proposed rule. This lower 
impact estimate is primarily a result of changes in technical 
assumptions regarding the impact of this provision, not a result of the 
change in payment policy.

B. Legislative and Regulatory Authority for the Hospital OPPS

    When Title XVIII of the Social Security Act was enacted, Medicare 
payment for hospital outpatient services was based on hospital-specific 
costs. In an effort to ensure that Medicare and its beneficiaries pay 
appropriately for services and to encourage more efficient delivery of 
care, the Congress mandated replacement of the reasonable cost-based 
payment methodology with a prospective payment system (PPS). The 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 
1833(t) to the Act authorizing implementation of a PPS for hospital 
outpatient services. The OPPS was first implemented for services 
furnished on or after August 1, 2000. Implementing regulations for the 
OPPS are located at 42 CFR parts 410 and 419.
    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. 
The following Acts made additional changes to the OPPS: The Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit 
Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 
2006; the Medicare Improvements and Extension Act under Division B of 
Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) 
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare, 
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), 
enacted on December 29, 2007; the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 
15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-
148), enacted on March 23, 2010, as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on 
March 30, 2010 (these two public laws are collectively known as the 
Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 
(MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act 
of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; the 
Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 
112-96), enacted on February 22, 2012; the American Taxpayer Relief Act 
of 2012 (Pub. L. 112-240), enacted January 2, 2013; the Pathway for SGR 
Reform Act of 2013 (Pub. L. 113-67) enacted on December 26, 2013; the 
Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93), 
enacted on March 27, 2014; the Medicare Access and CHIP Reauthorization 
Act (MACRA) of 2015 (Pub. L. 114-10), enacted April 16, 2015; the 
Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted November 2, 
2015; and the Consolidated Appropriations Act, 2016 (Pub. L. 114-113), 
enacted on December 18, 2015.
    Under the OPPS, we pay for hospital Part B services on a rate-per-
service basis that varies according to the APC group to which the 
service is assigned. We use the Healthcare Common Procedure Coding 
System (HCPCS) (which includes certain Current Procedural Terminology 
(CPT) codes) to identify and group the services within each APC. The 
OPPS includes payment for most hospital outpatient services, except 
those identified in section I.C. of this final rule with comment 
period. Section 1833(t)(1)(B) of the Act provides for payment under the 
OPPS for hospital outpatient services designated by the Secretary 
(which includes partial hospitalization services furnished by CMHCs), 
and certain inpatient hospital services that are paid under Medicare 
Part B.
    The OPPS rate is an unadjusted national payment amount that 
includes the Medicare payment and the beneficiary copayment. This rate 
is divided into a labor-related amount and a nonlabor-related amount. 
The labor-related amount is adjusted for area wage differences using 
the hospital inpatient wage index value for the locality in which the 
hospital or CMHC is located.
    All services and items within an APC group are comparable 
clinically and with respect to resource use (section 1833(t)(2)(B) of 
the Act). In accordance with section 1833(t)(2) of the Act, subject to 
certain exceptions, items and services within an APC group cannot be 
considered comparable with respect to the use of resources if the 
highest median cost (or mean cost, if elected by the Secretary) for an 
item or service in the APC group is more than 2 times greater than the 
lowest median cost (or mean cost, if elected by the Secretary) for an 
item or service within the same APC group (referred to as the ``2 times 
rule''). In implementing this provision, we generally use the cost of 
the item or service assigned to an APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional pass-through payments,'' for at least 2 but not more 
than 3 years for certain drugs, biological agents, brachytherapy 
devices used for the treatment of cancer, and categories of other 
medical devices. For new technology services that are not

[[Page 79573]]

eligible for transitional pass-through payments, and for which we lack 
sufficient clinical information and cost data to appropriately assign 
them to a clinical APC group, we have established special APC groups 
based on costs, which we refer to as New Technology APCs. These New 
Technology APCs are designated by cost bands which allow us to provide 
appropriate and consistent payment for designated new procedures that 
are not yet reflected in our claims data. Similar to pass-through 
payments, an assignment to a New Technology APC is temporary; that is, 
we retain a service within a New Technology APC until we acquire 
sufficient data to assign it to a clinically appropriate APC group.

C. Excluded OPPS Services and Hospitals

    Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to 
designate the hospital outpatient services that are paid under the 
OPPS. While most hospital outpatient services are payable under the 
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for 
ambulance, physical and occupational therapy, and speech-language 
pathology services, for which payment is made under a fee schedule. It 
also excludes screening mammography, diagnostic mammography, and 
effective January 1, 2011, an annual wellness visit providing 
personalized prevention plan services. The Secretary exercises the 
authority granted under the statute to also exclude from the OPPS 
certain services that are paid under fee schedules or other payment 
systems. Such excluded services include, for example, the professional 
services of physicians and nonphysician practitioners paid under the 
Medicare Physician Fee Schedule (MPFS); certain laboratory services 
paid under the Clinical Laboratory Fee Schedule (CLFS); services for 
beneficiaries with end-stage renal disease (ESRD) that are paid under 
the ESRD prospective payment system; and services and procedures that 
require an inpatient stay that are paid under the hospital IPPS. In 
addition, section 1833(t)(1)(B)(v) of the Act authorizes that 
applicable items and services furnished by nonexcepted off-campus 
provider-based departments of a hospital on or after January 1, 2017, 
will not be considered covered outpatient department services as 
defined under section 1833(t)(1)(B) of the Act for purposes of payment 
under the OPPS. We set forth the services that are excluded from 
payment under the OPPS in regulations at 42 CFR 419.22, which was 
amended by adding paragraph (v) to implement exclusion of items and 
services furnished by nonexcepted off-campus provider-based departments 
from the definition of covered outpatient department services.
    Under Sec.  419.20(b) of the regulations, we specify the types of 
hospitals that are excluded from payment under the OPPS. These excluded 
hospitals include: Critical access hospitals (CAHs); hospitals located 
in Maryland and paid under the Maryland All-Payer Model; hospitals 
located outside of the 50 States, the District of Columbia, and Puerto 
Rico; and Indian Health Service (IHS) hospitals.

D. Prior Rulemaking

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

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

1. Authority of the Panel
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 
106-113, requires that we consult with an external advisory panel of 
experts to annually review the clinical integrity of the payment groups 
and their weights under the OPPS. In CY 2000, based on section 
1833(t)(9)(A) of the Act, the Secretary established the Advisory Panel 
on Ambulatory Payment Classification Groups (APC Panel) to fulfill this 
requirement. In CY 2011, based on section 222 of the PHS Act which 
gives discretionary authority to the Secretary to convene advisory 
councils and committees, the Secretary expanded the panel's scope to 
include the supervision of hospital outpatient therapeutic services in 
addition to the APC groups and weights. To reflect this new role of the 
panel, the Secretary changed the panel's name to the Advisory Panel on 
Hospital Outpatient Payment (the HOP Panel, or the Panel). The Panel is 
not restricted to using data compiled by CMS, and in conducting its 
review, it may use data collected or developed by organizations outside 
the Department.
2. Establishment of the Panel
    On November 21, 2000, the Secretary signed the initial charter 
establishing the HOP Panel, and at that time named the APC Panel. This 
expert panel is composed of appropriate representatives of providers 
(currently employed full-time, not as consultants, in their respective 
areas of expertise), reviews clinical data, and advises CMS about the 
clinical integrity of the APC groups and their payment weights. Since 
CY 2012, the Panel also is charged with advising the Secretary on the 
appropriate level of supervision for individual hospital outpatient 
therapeutic services. The Panel is technical in nature, and it is 
governed by the provisions of the Federal Advisory Committee Act 
(FACA). The current charter specifies, among other requirements, that: 
The Panel continues to be technical in nature; is governed by the 
provisions of the FACA; may convene up to three meetings per year; has 
a Designated Federal Official (DFO); and is chaired by a Federal 
Official designated by the Secretary. The Panel's charter was amended 
on November 15, 2011, renaming the Panel and expanding the Panel's 
authority to include supervision of hospital outpatient therapeutic 
services and to add Critical Access Hospital (CAH) representation to 
its membership. The current charter was renewed on November 6, 2014 (80 
FR 23009) and the number of panel members was revised from up to 19 to 
up to 15 members.
    The current Panel membership and other information pertaining to 
the Panel, including its charter, Federal Register notices, membership, 
meeting dates, agenda topics, and meeting reports, can be viewed on the 
CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.
3. Panel Meetings and Organizational Structure
    The Panel has held multiple meetings, with the last meeting taking 
place on August 22, 2016. Prior to each meeting,

[[Page 79574]]

we publish a notice in the Federal Register to announce the meeting 
and, when necessary, to solicit nominations for Panel membership, to 
announce new members and to announce any other changes that the public 
should be aware of. Beginning in CY 2017, we will transition to one 
meeting per year, which will be scheduled in the summer (81 FR 31941).
    The Panel has established an operational structure that, in part, 
currently includes the use of three subcommittees to facilitate its 
required review process. The three current subcommittees are the Data 
Subcommittee, the Visits and Observation Subcommittee, and the 
Subcommittee for APC Groups and Status Indicator (SI) Assignments. The 
Data Subcommittee is responsible for studying the data issues 
confronting the Panel and for recommending options for resolving them. 
The Visits and Observation Subcommittee reviews and makes 
recommendations to the Panel on all technical issues pertaining to 
observation services and hospital outpatient visits paid under the OPPS 
(for example, APC configurations and APC relative payment weights). The 
Subcommittee for APC Groups and SI Assignments advises the Panel on the 
following issues: The appropriate status indicators to be assigned to 
HCPCS codes, including but not limited to whether a HCPCS code or a 
category of codes should be packaged or separately paid; and the 
appropriate APC assignment of HCPCS codes regarding services for which 
separate payment is made.
    Each of these subcommittees was established by a majority vote from 
the full Panel during a scheduled Panel meeting, and the Panel 
recommended at the August 22, 2016 meeting that the subcommittees 
continue. We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
March 14, 2016 and August 22, 2016 Panel meetings are included in the 
sections of this final rule with comment period that are specific to 
each recommendation. For discussions of earlier Panel meetings and 
recommendations, we refer readers to previously published OPPS/ASC 
proposed and final rules, the CMS Web site mentioned earlier in this 
section, and the FACA database at: http://facadatabase.gov/.

F. Public Comments Received on the CY 2016 OPPS/ASC Final Rule With 
Comment Period

    We received 25 timely pieces of correspondence on the CY 2016 OPPS/
ASC final rule with comment period that appeared in the Federal 
Register on November 13, 2015 (80 FR 70298), some of which contained 
comments on the interim APC assignments and/or status indicators of new 
or replacement Level II HCPCS codes (identified with comment indicator 
``NI'' in OPPS Addendum B, ASC Addendum AA, and ASC Addendum BB to that 
final rule). Summaries of the public comments on new or replacement 
Level II HCPCS codes are set forth in this CY 2017 final rule with 
comment period under the appropriate subject matter headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
not less often than annually and revise the relative payment weights 
for APCs. In the April 7, 2000 OPPS final rule with comment period (65 
FR 18482), we explained in detail how we calculated the relative 
payment weights that were implemented on August 1, 2000 for each APC 
group.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45615), for CY 2017, 
we proposed to recalibrate the APC relative payment weights for 
services furnished on or after January 1, 2017, and before January 1, 
2018 (CY 2017), using the same basic methodology that we described in 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70309 
through 70321). 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.
    For the purpose of recalibrating the proposed APC relative payment 
weights for CY 2017, we used approximately 163 million final action 
claims (claims for which all disputes and adjustments have been 
resolved and payment has been made) for HOPD services furnished on or 
after January 1, 2015, and before January 1, 2016.
    Addendum N to the proposed rule included the proposed list of 
bypass codes for CY 2017. The proposed list of bypass codes contains 
codes that were reported on claims for services in CY 2015 and, 
therefore, includes codes that were in effect in CY 2015 and used for 
billing, but were deleted for CY 2016. We retained these deleted bypass 
codes on the proposed CY 2017 bypass list because these codes existed 
in CY 2015 and were covered OPD services in that period, and CY 2015 
claims data are used to calculate CY 2017 payment rates. Keeping these 
deleted bypass codes on the bypass list potentially allows us to create 
more ``pseudo'' single procedure claims for ratesetting purposes. 
``Overlap bypass codes'' that are 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 2017 were identified by asterisks (*) in the fourth 
column of Addendum N.
    We did not receive any public comments on our general proposal to 
recalibrate the relative payment weights for each APC based on claims 
and cost report data for HOPD services or on our proposed bypass code 
process. Therefore, we are adopting as final the proposed ``pseudo'' 
single claims process and the final CY 2017 bypass list of 194 HCPCS 
codes, as displayed in Addendum N to this final rule with comment 
period (which is available via the Internet on the CMS Web site). For 
this final rule with comment period, for the purpose of recalibrating 
the final APC relative payment weights for CY 2017, we used 
approximately 86 million final action claims (claims for which all 
disputes and adjustments have been resolved and payment has been made) 
for HOPD services furnished on or after January 1, 2015, and before 
January 1, 2016. For exact numbers of claims used and additional 
details on the claims accounting process, we refer readers to the 
claims accounting narrative under supporting documentation for this CY 
2017 OPPS/ASC final rule with comment period on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Table 1 below contains the list of codes that we are removing from 
the CY 2017 bypass list.

        Table 1--HCPCS Codes Removed From the CY 2017 Bypass List
------------------------------------------------------------------------
             HCPCS code                     HCPCS short descriptor
------------------------------------------------------------------------
95925...............................  Somatosensory testing.
95808...............................  Polysom any age 1-3> param.
90845...............................  Psychoanalysis.
96151...............................  Assess hlth/behave subseq.
31505...............................  Diagnostic laryngoscopy.
95872...............................  Muscle test one fiber.
------------------------------------------------------------------------

b. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45616), 
we

[[Page 79575]]

proposed to continue to use the hospital-specific overall ancillary and 
departmental cost-to-charge ratios (CCRs) to convert charges to 
estimated costs through application of a revenue code-to-cost center 
crosswalk. To calculate the APC costs on which the CY 2017 APC payment 
rates are based, we calculated hospital-specific overall ancillary CCRs 
and hospital-specific departmental CCRs for each hospital for which we 
had CY 2015 claims data by comparing these claims data to the most 
recently available hospital cost reports, which, in most cases, are 
from CY 2014. For the proposed CY 2017 OPPS payment rates, we used the 
set of claims processed during CY 2015. We applied the hospital-
specific CCR to the hospital's charges at the most detailed level 
possible, based on a revenue code-to-cost center crosswalk that 
contains a hierarchy of CCRs used to estimate costs from charges for 
each revenue code. That crosswalk is available for review and 
continuous comment on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    To ensure the completeness of the revenue code-to-cost center 
crosswalk, we reviewed changes to the list of revenue codes for CY 2015 
(the year of claims data we used to calculate the proposed CY 2017 OPPS 
payment rates) and found that the National Uniform Billing Committee 
(NUBC) did not add any new revenue codes to the NUBC 2015 Data 
Specifications Manual.
    In accordance with our longstanding policy, we calculated CCRs for 
the standard and nonstandard cost centers accepted by the electronic 
cost report database. In general, the most detailed level at which we 
calculated CCRs was the hospital-specific departmental level. For a 
discussion of the hospital-specific overall ancillary CCR calculation, 
we refer readers to the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 67983 through 67985). The calculation of blood costs is a 
longstanding exception (since the CY 2005 OPPS) to this general 
methodology for calculation of CCRs used for converting charges to 
costs on each claim. This exception is discussed in detail in the CY 
2007 OPPS/ASC final rule with comment period and discussed further in 
section II.A.2.b.(1) of the proposed rule (81 FR 45617) and of this 
final rule with comment period.
    Comment: One commenter supported the CY 2014 final rule 
transitional policy of excluding providers that use a ``square foot'' 
methodology to calculate CCRs used to estimate costs associated with 
the CT and MRI APCs for CYs 2014-2017, as discussed in the CY 2017 OPPS 
proposed rule claims accounting narrative on pages 33 through 37, that 
was made available under supporting documentation for the CY 2017 OPPS/
ASC proposed rule on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. 
However, the commenter opposed the provision of the CY 2014 final rule 
policy that was discussed in the CY 2017 OPPS proposed rule claims 
accounting narrative that sunsets this transitional policy after CY 
2017.
    Response: We thank the commenter for its support of our proposed CY 
2017 policy. In response to the commenter's concern about the sunset of 
the transitional policy after CY 2017, while CY 2018 payment policies 
will be addressed in the CY 2018 OPPS/ASC proposed rule, we note that 
the sunset of this transitional policy for CY 2018 was discussed in the 
CY 2014 OPPS/ASC final rule with comment period. We believe that 4 
years is sufficient time for hospitals that have not done so to 
transition to a more accurate cost allocation method and for the 
related data to be available for ratesetting purposes. After 
consideration of the public comment we received on the general CCR 
process, we are finalizing using the hospital-specific overall 
ancillary and departmental CCRs to convert charges to estimated costs 
through application of a revenue code-to-cost center crosswalk and the 
established methodology for CY 2017.
2. Data Development Process and Calculation of Costs Used for 
Ratesetting
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate the OPPS payment rates for CY 2017. The 
Hospital OPPS page on the CMS Web site on which this final rule with 
comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an 
accounting of claims used in the development of the final payment 
rates. That accounting provides additional detail regarding the number 
of claims derived at each stage of the process. In addition, below in 
this section we discuss the file of claims that comprises the data set 
that is available for purchase under a CMS data use agreement. The CMS 
Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about purchasing 
the ``OPPS Limited Data Set,'' which now includes the additional 
variables previously available only in the OPPS Identifiable Data Set, 
including ICD-9-CM diagnosis codes and revenue code payment amounts. 
This file is derived from the CY 2015 claims that were used to 
calculate the payment rates for the CY 2017 OPPS.
    In the history of the OPPS, we have traditionally established the 
scaled relative weights on which payments are based using APC median 
costs, which is a process described in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74188). However, as discussed in more detail 
in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68259 through 68271), we finalized the use of geometric 
mean costs to calculate the relative weights on which the CY 2013 OPPS 
payment rates were based. While this policy changed the cost metric on 
which the relative payments are based, the data process in general 
remained the same, under the methodologies that we used to obtain 
appropriate claims data and accurate cost information in determining 
estimated service cost. For CY 2017, in the CY 2017 OPPS/ASC proposed 
rule (81 FR 45616), we proposed to continue to use geometric mean costs 
to calculate the relative weights on which the CY 2017 OPPS payment 
rates are based.
    We did not receive any public comments on this proposed process and 
are finalizing our proposed methodology for calculating geometric mean 
costs for purposes of creating relative payment weights and subsequent 
APC payment rates for the CY 2017 OPPS. We used the methodology 
described in sections II.A.2.a. through II.A.2.d. of this final rule 
with comment period to calculate the costs we used to establish the 
relative payment weights used in calculating the final OPPS payment 
rates for CY 2017 shown in Addenda A and B to this final rule with 
comment period (which are available via the Internet on the CMS Web 
site). We refer readers to section II.A.4. of this final rule with 
comment period for a discussion of the conversion of APC costs to 
scaled payment weights.
    For details of the claims process used in this final rule with 
comment period, we refer readers to the claims accounting narrative 
under supporting documentation for this CY 2017 OPPS/ASC final rule 
with comment period on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

[[Page 79576]]

a. Recommendations of the Advisory Panel on Hospital Outpatient Payment 
(the Panel) Regarding Data Development
    As we discussed in the CY 2017 OPPS/ASC proposed rule (81 FR 45616 
through 45617), at the March 14, 2016 meeting of the Panel, we 
presented our standard analysis of APCs, specifically those APCs for 
which geometric mean costs in the CY 2015 claims data through September 
2015 varied significantly from the CY 2014 claims data used for the CY 
2016 OPPS/ASC final rule with comment period. At the March 14, 2016 
Panel meeting, the Panel made three recommendations related to the data 
process. The Panel's data-related recommendations and our responses 
follow.
    Recommendation: The Panel recommends that CMS provide the Data 
Subcommittee a list of APCs fluctuating significantly in costs prior to 
each Panel meeting.
    CMS Response: We accepted this recommendation.
    Recommendation: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response: We accepted this recommendation.
    Recommendation: The Panel recommends that Michael Schroyer continue 
serving as subcommittee Chair for the August 2016 HOP Panel.
    CMS Response: We accepted this recommendation.
    At the August 22, 2016 meeting of the Panel, we provided the Data 
Committee a list of APCs for CY 2017 for which geometric mean costs in 
the CY 2015 claims data varied significantly from the CY 2014 claims 
data used for the CY 2016 OPPS/ASC final rule with comment period. At 
the August 22, 2016 Panel meeting, the Panel made four recommendations 
related to the data process. The Panel's data-related recommendations 
and our responses follow.
    Recommendation: The Panel recommends that CMS provide the Data 
Subcommittee a list of APCs fluctuating significantly in costs prior to 
each Panel meeting.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that CMS provide the Data 
Subcommittee a presentation on the claims accounting process prior to 
each HOP Panel meeting.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that the work of the data 
subcommittee continue.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that Michael Schroyer continue 
serving as Chair of the Data Subcommittee.
    CMS Response: We are accepting this recommendation.
b. Calculation of Single Procedure APC Criteria-Based Costs
(1) Blood and Blood Products
(a) Methodology
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as for the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    For CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45617), 
we proposed to continue to establish payment rates for blood and blood 
products using our blood-specific CCR methodology, which utilizes 
actual or simulated CCRs from the most recently available hospital cost 
reports to convert hospital charges for blood and blood products to 
costs. This methodology has been our standard ratesetting methodology 
for blood and blood products since CY 2005. It was developed in 
response to data analysis indicating that there was a significant 
difference in CCRs for those hospitals with and without blood-specific 
cost centers, and past public comments indicating that the former OPPS 
policy of defaulting to the overall hospital CCR for hospitals not 
reporting a blood-specific cost center often resulted in an 
underestimation of the true hospital costs for blood and blood 
products. Specifically, in order to address the differences in CCRs and 
to better reflect hospitals' costs, we proposed to continue to simulate 
blood CCRs for each hospital that does not report a blood cost center 
by calculating the ratio of the blood-specific CCRs to hospitals' 
overall CCRs for those hospitals that do report costs and charges for 
blood cost centers. We also proposed to apply this mean ratio to the 
overall CCRs of hospitals not reporting costs and charges for blood 
cost centers on their cost reports in order to simulate blood-specific 
CCRs for those hospitals. We proposed to calculate the costs upon which 
the CY 2017 payment rates for blood and blood products are based using 
the actual blood-specific CCR for hospitals that reported costs and 
charges for a blood cost center and a hospital-specific, simulated 
blood-specific CCR for hospitals that did not report costs and charges 
for a blood cost center.
    We continue to believe that the hospital-specific, simulated blood-
specific CCR methodology better responds to the absence of a blood-
specific CCR for a hospital than alternative methodologies, such as 
defaulting to the overall hospital CCR or applying an average blood-
specific CCR across hospitals. Because this methodology takes into 
account the unique charging and cost accounting structure of each 
hospital, we believe that it yields more accurate estimated costs for 
these products. We continue to believe that this methodology in CY 2017 
would result in costs for blood and blood products that appropriately 
reflect the relative estimated costs of these products for hospitals 
without blood cost centers and, therefore, for these blood products in 
general.
    We note that, as discussed in section II.A.2.e. of the CY 2014 
OPPS/ASC final rule with comment period (78 FR 74861 through 74910), 
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66798 
through 66810), and the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70325 through 70339), we defined a comprehensive APC (C-APC) as 
a classification for the provision of a primary service and all 
adjunctive services provided to support the delivery of the primary 
service. Under this policy, we include the costs of blood and blood 
products when calculating the overall costs of these C-APCs. We 
proposed to continue to apply the blood-specific CCR methodology 
described in this section when calculating the costs of the blood and 
blood products that appear on claims with services assigned to the C-
APCs. Because the costs of blood and blood products will be reflected 
in the overall costs of the C-APCs (and, as a result, in the payment 
rates of the C-APCs), we proposed to not make separate payments for 
blood and blood products when they appear on the same claims as 
services assigned to the C-APCs (we refer readers to the CY 2015 OPPS/
ASC final rule with comment period (79 FR 66796)).
    We invited public comments on these proposals. We also referred 
readers to Addendum B to the proposed rule (which was available via the 
Internet on the CMS Web site) for the proposed CY 2017 payment rates 
for blood and blood products (which were 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

[[Page 79577]]

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).
    Comment: Commenters supported the proposal to continue to 
separately pay for blood and blood products using a blood-specific CCR 
methodology.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our CY 2017 proposal to continue to establish payment rates 
for blood and blood products using our blood-specific CCR methodology. 
The final CY 2017 payment rates for blood and blood products (which are 
identified with status indicator ``R'') are reflective of the use of 
the hospital-specific simulated blood-specific CCR methodology and can 
be found in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site).
(b) Solicitation of Public Comments
    As discussed in the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70323), we are in the process of examining the current set of 
HCPCS P-codes for blood products, which became effective many years 
ago. Because these HCPCS P-codes were created many years ago, we are 
considering whether this code set could benefit from some code 
descriptor revisions, updating, and/or consolidation to make these 
codes properly reflect current product descriptions and utilization 
while minimizing redundancy and potentially outdated descriptors. In 
the CY 2017 OPPS/ASC proposed rule (81 FR 45617 through 45618), we 
requested public comments regarding the adequacy and necessity (in 
terms of the existing granularity) of the current descriptors for the 
HCPCS P-codes describing blood products. Specifically, there are three 
main categories of blood products: Red blood cells; platelets; and 
plasma. In each of these categories, there are terms that describe 
various treatments or preparations of the blood products, with each, in 
several cases, represented individually and in combination. For 
example, for pheresis platelets, there are codes for ``leukocyte 
reduced,'' ``irradiated,'' ``leukocyte reduced + irradiated,'' and 
``leukocyte reduced + irradiated + CMV-negative,'' among others. We 
asked the blood product stakeholder community whether the current blood 
product HCPCS P-code descriptors with the associated granularity best 
describe the state of the current technology for blood products that 
hospitals currently provide to hospital outpatients. In several cases, 
the hospital costs as calculated from the CMS claims data are similar 
for blood products of the same type (for example, pheresis platelets) 
that have different code descriptors, which indicates to us that there 
is not a significant difference in the resources needed to produce the 
similar products. Again, we invited public comments on the current set 
of active HCPCS P-codes that describe blood products regarding how the 
code descriptors could be revised and updated (if necessary) to reflect 
the current blood products provided to hospital outpatients. The 
current set of active HCPCS P-codes that describe blood products can be 
found in Addendum B to the proposed rule and this final rule with 
comment period (which is available via the Internet on the CMS Web 
site).
    Comment: Several commenters responded to the solicitation for 
public comments and supported a thorough examination of the current set 
of HCPCS P-codes for blood products as a necessary undertaking because 
the HCPCS P-codes were created several years ago. Several commenters 
recommended that CMS convene a stakeholder group that includes 
representatives of hospitals, blood banks, the American Red Cross, and 
others to discuss a framework to systematically review and revise the 
HCPCS P-codes for blood products. Commenters also encouraged CMS to 
retain individual HCPCS P-codes for unique blood products with 
significant therapeutic distinctions, as opposed to creating modifiers 
to be applied to the existing HCPCS P-codes. Commenters also suggested 
that CMS establish a ``not otherwise classified (NOC)'' code for blood 
products, which would allow hospitals to begin immediately billing for 
a new blood product that is not described by a specific HCPCS P-code. 
One commenter supported the use of broader descriptions for HCPCS P-
codes when more granular language is no longer meaningful for 
differentiating between different types of blood and blood products, 
and where the costs and volume of the HCPCS P-codes are similar. Other 
commenters suggested specific modifications to the order, 
classification, and code descriptors of the blood and blood product 
HCPCS P-codes.
    Response: We appreciate the commenters' detailed responses. These 
comments will be taken into consideration in the development of 
proposals to update the HCPCS P-codes that describe blood products.
(c) Rapid Bacterial Testing for Platelets
    In March 2016, the Food and Drug Administration (FDA) issued draft 
guidance for the health care industry entitled, ``Bacterial Risk 
Control Strategies for Blood Collection Establishments and Transfusion 
Services to Enhance the Safety and Availability of Platelets for 
Transfusion'' (available at: http://www.fda.gov/BiologicsBloodVaccines/GuidanceComplianceRegulatoryInformation/Guidances/default.htm). This 
guidance encourages the use of rapid bacterial testing devices or 
pathogen-reduction technology for platelets to adequately control the 
risk of bacterial contamination of platelets.
    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 
70322), CMS established three HCPCS P-codes for pathogen-reduced blood 
products, which became effective January 1, 2016. These codes included: 
HCPCS code P9070 (Plasma, pooled multiple donor, pathogen reduced, 
frozen, each unit); HCPCS code P9071 (Plasma (single donor), pathogen 
reduced, frozen, each unit); and HCPCS code P9072 (Platelets, pheresis, 
pathogen reduced, each unit).
    The HCPCS Workgroup has decided to revise the HCPCS code 
established in CY 2016 for pathogen-reduced platelets (HCPCS code 
P9072) to include the use of pathogen-reduction technology or rapid 
bacterial testing. Specifically, the descriptor for this code will be 
revised, effective January 1, 2017, to read as follows: HCPCS code 
P9072 (Platelets, pheresis, pathogen reduced or rapid bacterial tested, 
each unit). The payment rate for HCPCS code P9072 is based on a 
crosswalk to HCPCS code P9037 (Platelets, pheresis, leukocyte reduced, 
irradiated, each unit). We refer readers to the CY 2016 OPPS/ASC final 
rule with comment period for a further discussion of crosswalks for 
pathogen-reduced blood products (80 FR 70323). When claims data become 
available for HCPCS code P9072, we will establish a payment rate for 
this code using that data and our blood-specific CCR methodology. The 
revised HCPCS code descriptor and final payment rate for this service 
can be found in Addendum B of this final rule with comment period 
(which is available via the Internet on the CMS Web site).
(2) Brachytherapy Sources
    Section 1833(t)(2)(H) of the Act mandates the creation of 
additional groups of covered OPD services that classify devices of 
brachytherapy consisting of a seed or seeds (or radioactive source) 
(``brachytherapy sources'') separately from other services

[[Page 79578]]

or groups of services. The statute provides certain criteria for the 
additional groups. For the history of OPPS payment for brachytherapy 
sources, we refer readers to prior OPPS final rules, such as the CY 
2012 OPPS/ASC final rule with comment period (77 FR 68240 through 
68241). As we have stated in prior OPPS updates, we believe that 
adopting the general OPPS prospective payment methodology for 
brachytherapy sources is appropriate for a number of reasons (77 FR 
68240). The general OPPS methodology uses costs based on claims data to 
set the relative payment weights for hospital outpatient services. This 
payment methodology results in more consistent, predictable, and 
equitable payment amounts per source across hospitals by averaging the 
extremely high and low values, in contrast to payment based on 
hospitals' charges adjusted to costs. We believe that the OPPS 
methodology, as opposed to payment based on hospitals' charges adjusted 
to cost, also would provide hospitals with incentives for efficiency in 
the provision of brachytherapy services to Medicare beneficiaries. 
Moreover, this approach is consistent with our payment methodology for 
the vast majority of items and services paid under the OPPS. We refer 
readers to the CY 2016 OPPS/ASC final rule with comment period (80 FR 
70323 through 70325) for further discussion of the history of OPPS 
payment for brachytherapy sources.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45618), for CY 2017, 
we proposed to use the costs derived from CY 2015 claims data to set 
the CY 2017 payment rates for brachytherapy sources because CY 2015 is 
the same year of data we proposed to use to set the proposed payment 
rates for most other items and services that would be paid under the CY 
2017 OPPS. We proposed to base the payment rates for brachytherapy 
sources on the geometric mean unit costs for each source, consistent 
with the methodology that we proposed for other items and services paid 
under the OPPS, as discussed in section II.A.2. of the proposed rule. 
We also proposed to continue the other payment policies for 
brachytherapy sources that we finalized and first implemented in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60537). We proposed 
to pay for the stranded and nonstranded not otherwise specified (NOS) 
codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest 
stranded or nonstranded prospective payment rate for such sources, 
respectively, on a per source basis (as opposed to, for example, a per 
mCi), which is based on the policy we established in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66785). For CY 2017 and 
subsequent years, we also proposed to continue the policy we first 
implemented in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60537) regarding payment for new brachytherapy sources for which we 
have no claims data, based on the same reasons we discussed in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66786; which was 
delayed until January 1, 2010 by section 142 of Pub. L. 110-275). 
Specifically, this policy is intended to enable us to assign new HCPCS 
codes for new brachytherapy sources to their own APCs, with prospective 
payment rates set based on our consideration of external data and other 
relevant information regarding the expected costs of the sources to 
hospitals.
    The proposed CY 2017 payment rates for brachytherapy sources were 
included in Addendum B to the proposed rule (which is available via the 
Internet on the CMS Web site) and were identified with status indicator 
``U''. We note that, for CY 2017, we proposed to assign new proposed 
status indicator ``E2'' (Items and Services for Which Pricing 
Information and Claims Data Are Not Available) to HCPCS code C2644 
(Brachytherapy cesium-131 chloride) because this code was not reported 
on CY 2015 claims. Therefore, we are unable to calculate a payment rate 
based on the general OPPS ratesetting methodology described earlier. 
Although HCPCS code C2644 became effective July 1, 2014, and although 
we would expect that if a hospital furnished a brachytherapy source 
described by this code in CY 2015, HCPCS code C2644 should appear on 
the CY 2015 claims, there are no CY 2015 claims reporting this code. In 
addition, unlike new brachytherapy sources HCPCS codes, we will not 
consider external data to determine a proposed payment rate for HCPCS 
code C2644 for CY 2017.
    Therefore, we proposed to assign new proposed status indicator 
``E2'' to HCPCS code C2644.
    We invited public comments on this proposed policy. We also 
requested recommendations for new HCPCS codes to describe new 
brachytherapy sources consisting of a radioactive isotope, including a 
detailed rationale to support recommended new sources.
    Comment: One commenter requested that CMS establish a new HCPCS 
code to specifically describe the use of CivaString[supreg], a linear, 
low dose rate polymer encapsulated palladium-103 brachytherapy source. 
The commenter stated that CivaString[supreg] became commercially 
available in CY 2013, and providers began reporting charges for the 
brachytherapy source using HCPCS code C2636 (Brachytherapy linear, non-
stranded, palladium-103). However, the commenter believed that 
providers experienced confusion regarding the appropriate reporting of 
HCPCS code C2636. The commenter stated that six hospitals reported 
charges using HCPCS code C2636 over the past 6 years, without 
purchasing a linear, non-stranded palladium-103 brachytherapy source. 
Moreover, the commenter believed that providers may have 
inappropriately reported charges using HCPCS code C2636, including 
instances where providers reported charges for the use of HCPCS code 
2636 although acquisition of CivaString[supreg] had not been obtained 
when it became commercially available in CY 2013. In addition, the 
commenter stated that the National Correct Coding Initiative (NCCI) 
established a medically unlikely edit (MUE) for HCPCS code C2636 in the 
outpatient hospital setting for 150 mm, effective April 1, 2010. 
Subsequently, in November 2015, the manufacturer of CivaString[supreg] 
requested that the MUE be increased to 900 mm based on the recommended 
clinical usage of CivaString[supreg]. In response to that request, the 
NCCI increased the MUE to 600 mm, effective April 1, 2016. However, the 
commenter further stated that claims for the use of CivaString[supreg] 
with the appropriate number of units continued to be denied based on 
the MUE. Because of these concerns, the commenter requested that CMS 
establish a new HCPCS code to specifically describe the use of 
CivaString[supreg], as well as an increase in the payment rate proposed 
to adequately pay for the costs of this brachytherapy source.
    Response: Section 1833(t)(2)(h) of the Act requires that the 
Secretary create additional groups of covered outpatient department 
services that classify brachytherapy sources separately from other 
services in a manner reflecting the number, isotope, and radioactive 
intensity of such sources. As such, we believe that HCPCS code C2636 
adequately describes the clinical properties of CivaString[supreg]. 
Therefore, it is not necessary and would be duplicative to create a 
separate group for another linear, non-stranded palladium-103 source.
    HCPCS code C2636 has been active since January 1, 2005. In response 
to the commenter's concerns regarding hospitals that may have 
inappropriately reported charges using HCPCS code C2636 although 
acquisition of

[[Page 79579]]

CivaString[supreg] had not been obtained, as a matter of general 
policy, we rely on hospitals to report all HCPCS codes on claims 
accurately in accordance with their code descriptors and CPT and CMS 
instructions, as applicable, and to report charges on claims and 
charges and costs on their Medicare hospital cost reports 
appropriately. We stated in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71838) that the quality and accuracy of reported 
units and charges significantly influence the geometric mean costs that 
are the basis for our payment rates, especially for low-volume items 
and services. Beyond our standard OPPS trimming methodology that we 
apply to those claims that have passed various types of claims 
processing edits, it is not our general policy to judge the accuracy of 
hospital coding and charging for purposes of ratesetting.
    With regard to the MUE value, we note that the MUE for HCPCS code 
C2636 is a date-of-service edit. This means if billed units of service 
(UOS) for HCPCS code C2636 are denied based on the MUE value, the 
provider may appeal the denial. Medicare Administrative Contractors 
(MACs) may pay UOS in excess of the MUE value if medical record 
documentation supports medically reasonable and necessary UOS in excess 
of the MUE value. Therefore, we are not establishing a new HCPCS code 
for the use of CivaString[supreg] because we believe that HCPCS code 
C2636 adequately describes the clinical properties of 
CivaString[supreg]. We refer readers to the facility outpatient 
services MUE table, which is available on the CMS Web site at: https://www.cms.gov/Medicare/Coding/NationalCorrectCodInitEd/MUE.html.
    Comment: One commenter acknowledged the proposed increased CY 2017 
payment rate for brachytherapy sources described by HCPCS code C2616 
(Brachytx, non-str, yttrium-90) in comparison to the CY 2016 payment 
rate, but continued to believe that the proposed CY 2017 payment rate 
would not adequately pay a hospital's true cost for purchasing the 
device. The commenter supported the proposed CY 2017 increase in the 
payment rate for HCPCS code C2616, but remained concerned that the 
limited increase in payment would not adequately pay for all costs 
incurred by the hospital such as storage, handling, and disposal costs. 
In addition, based on the commenter's analysis of Medicare Provider 
Analysis and Review (MedPAR) data, which contain data from claims for 
services provided to beneficiaries admitted to Medicare certified 
inpatient hospitals and skilled nursing facilities, the commenter noted 
that a few hospitals inconsistently or incorrectly reported revenue 
code assignments with incorrect facility charge data. As a result of 
the erroneous and/or inaccurate coding, the commenter believed that the 
claims data used for CY 2017 ratesetting are adversely affected, which 
resulted in the inadequate proposed payment rate for HCPCS code C2616. 
Based on these concerns, the commenter requested that CMS eliminate 
outlier data that is out of range of other accurately reporting 
facilities. Specifically, the commenter requested that CMS eliminate 
claims from facilities that report a purchase price of $1.00 or other 
costs dramatically less than the $16,000 selling price.
    Response: As previously discussed, under the OPPS, we use cost-
based weights to determine relative costliness for outpatient items and 
services. The relativity of weights is used to set APC payment rates 
for brachytherapy sources, not the invoice cost or list price. 
Therefore, under a prospective payment system based on relative 
weights, items and services may not be paid at 100 percent of the 
reported costs.
    With regard to the commenter's analysis of MedPAR data on claims 
that reported HCPCS code C2616, we note that MedPAR data consolidate 
inpatient hospital or skilled nursing facility (SNF) claims data from 
the National Claims History (NCH) files into stay level records. 
Because MedPAR data do not include OPPS claims, it is incorrect for the 
commenter to conclude that the CY 2017 OPPS proposed payment rate is 
inadequate as a result of erroneous and/or inaccurate coding on 
inpatient hospital or SNF claims. We have no reason to believe that 
prospective payment rates based on outpatient claims data from those 
providers furnishing a brachytherapy source described by HCPCS code 
C2616 do not appropriately reflect the cost of that source to 
hospitals. Therefore, we are not excluding or eliminating any claims 
with paid lines for HCPCS code C2616 in ratesetting for CY 2017.
    Comment: A few commenters expressed concern regarding the 
outpatient hospital claims data that CMS used to set the prospective 
payment rates for brachytherapy sources. The commenters stated that 
high dose rate (HDR) brachytherapy devices are renewable because the 
devices have a 90-day use span and are used in the treatment of 
multiple patients during this 90-day span. According to the commenters, 
the true cost of treatment involving brachytherapy sources depends on 
the number of patients treated by a hospital within a 90-day period, as 
well as the number of treatments required and the intensity of the 
treatments. For this reason, the commenters believed that it is 
difficult to establish fair and adequate prospective payment rates for 
brachytherapy sources. The commenters also noted that the brachytherapy 
source payment data continue to show huge variation in per unit cost 
across hospitals.
    In addition, the commenters believed that CMS' claims data contain 
rank order anomalies, causing the usual cost relationship between the 
high activity palladium-103 source (HCPCS code C2635, Brachytherapy 
source, non-stranded, high activity, palladium-103, greater than 2.2 
mci (NIST) per source) and the low activity palladium-103 sources 
(HCPCS code C2640, Brachytherapy source, stranded, palladium-103, per 
source and HCPCS code C2641, Brachytherapy source, non-stranded, 
palladium-103, per source) to be reversed. The commenters noted that 
the proposed geometric mean costs of the brachytherapy source HCPCS 
codes are approximately $26, $77, and $70, respectively. The commenters 
stated that, based on their experience, stranded palladium-103 sources 
(HCPCS code C2640) always cost more than non-stranded palladium-103 
sources (HCPCS code C2641), which was not reflected in the proposed 
rule claims data that CMS used.
    In addition, the commenters expressed concern that payment for 
several brachytherapy sources are unstable and fluctuate significantly 
since CMS implemented the prospective payment methodology based on 
source-specific median cost in CY 2010 and geometric mean unit cost in 
CY 2013.
    As a result of these concerns, the commenters requested that CMS 
adopt policies that more accurately account for the costs associated 
with HDR brachytherapy treatment delivery and to limit the overall 
fluctuation in payment for brachytherapy devices.
    Response: We have received similar public comments regarding 
payment rates for HDR brachytherapy sources, payment rates for low and 
high activity palladium sources, and the year-to-year variation in 
payment rates for most brachytherapy sources in response to prior 
proposed rules and have addressed these public comments in prior final 
rules with comment period. We refer readers to 72 FR 66782; 74 FR 
60534; 75 FR 71979; 76 FR 74161; 77 FR 68241; 78 FR 74861; 79 FR 66796; 
and 80 FR 70324 for our past responses to these similar comments. In 
these rules, we explain the characteristics of a

[[Page 79580]]

prospective payment system and how low-volume services are more 
susceptible to payment volatility compared to high-volume services. We 
also describe our expectation for how hospitals should treat HDR 
brachytherapy sources that can be used on multiple patients during its 
use span. In addition, we address concerns on varied cost distributions 
and their impact on the observed relationship in geometric mean cost 
between the different types of sources.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue to set the payment rates for 
brachytherapy sources using our established prospective payment 
methodology, which is based on geometric mean costs. In addition, we 
are finalizing our proposal to assign new status indicator ``E2'' to 
HCPCS code C2644 because there are no CY 2015 claims reporting use of 
this code and, therefore, we are unable to determine a payment rate for 
CY 2017.
    The final CY 2017 payment rates for brachytherapy sources are 
included in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site) and are identified with 
status indicator ``U''.
    We continue to invite hospitals and other parties to submit 
recommendations to us for new codes to describe new brachytherapy 
sources. Such recommendations should be directed to the Division of 
Outpatient Care, Mail Stop C4-01-26, 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.
c. Comprehensive APCs (C-APCs) for CY 2017
(1) Background
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 
through 74910), we finalized a comprehensive payment policy that 
packages payment for adjunctive and secondary items, services, and 
procedures into the most costly primary procedure under the OPPS at the 
claim level. The policy was finalized in CY 2014, but the effective 
date was delayed until January 1, 2015, to allow additional time for 
further analysis, opportunity for public comment, and systems 
preparation. The comprehensive APC (C-APC) policy was implemented 
effective January 1, 2015, with modifications and clarifications in 
response to public comments received regarding specific provisions of 
the C-APC policy (79 FR 66798 through 66810).
    A C-APC is defined as a classification for the provision of a 
primary service and all adjunctive services provided to support the 
delivery of the primary service. We established C-APCs as a category 
broadly for OPPS payment and implemented 25 C-APCs beginning in CY 2015 
(79 FR 66809 through 66810). In the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70332), we finalized 10 additional C-APCs to be 
paid under the existing C-APC payment policy.
    Under this policy, we designated a service described by a HCPCS 
code assigned to a C-APC as the primary service when the service is 
identified by OPPS status indicator ``J1''. When such a primary service 
is reported on a hospital outpatient claim, taking into consideration 
the few exceptions that are discussed below, we make payment for all 
other items and services reported on the hospital outpatient claim as 
being integral, ancillary, supportive, dependent, and adjunctive to the 
primary service (hereinafter collectively referred to as ``adjunctive 
services'') and representing components of a complete comprehensive 
service (78 FR 74865 and 79 FR 66799). Payments for adjunctive services 
are packaged into the payments for the primary services. This results 
in a single prospective payment for each of the primary, comprehensive 
services based on the costs of all reported services at the claim 
level.
    Services excluded from the C-APC policy include services that are 
not covered OPD services, services that cannot by statute be paid for 
under the OPPS, and services that are required by statute to be 
separately paid. This includes certain mammography and ambulance 
services that are not covered OPD services in accordance with section 
1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which also are 
required by statute to receive separate payment under section 
1833(t)(2)(H) of the Act; pass-through drugs and devices, which also 
require separate payment under section 1833(t)(6) of the Act; self-
administered drugs (SADs) that are not otherwise packaged as supplies 
because they are not covered under Medicare Part B under section 
1861(s)(2)(B) of the Act; and certain preventive services (78 FR 74865 
and 79 FR 66800 through 66801). A list of services excluded from the C-
APC policy is included in Addendum J to this final rule with comment 
period (which is available via the Internet on the CMS Web site).
    The C-APC policy payment methodology set forth in the CY 2014 OPPS/
ASC final rule with comment period for the C-APCs and modified and 
implemented beginning in CY 2015 is summarized as follows (78 FR 74887 
and 79 FR 66800):
    Basic Methodology. As stated in the CY 2015 OPPS/ASC final rule 
with comment period, we define the C-APC payment policy as including 
all covered OPD services on a hospital outpatient claim reporting a 
primary service that is assigned to status indicator ``J1,'' excluding 
services that are not covered OPD services or that cannot by statute be 
paid for under the OPPS. Services and procedures described by HCPCS 
codes assigned to status indicator ``J1'' are assigned to C-APCs based 
on our usual APC assignment methodology by evaluating the geometric 
mean costs of the primary service claims to establish resource 
similarity and the clinical characteristics of each procedure to 
establish clinical similarity within each APC. In the CY 2016 OPPS/ASC 
final rule with comment period, we expanded the C-APC payment 
methodology with the establishment of status indicator ``J2''. The 
assignment of status indicator ``J2'' to a specific combination of 
services performed in combination with each other, as opposed to a 
single, primary service, allows for all other OPPS payable services and 
items reported on the claim (excluding services that are not covered 
OPD services or that cannot by statute be paid for under the OPPS) to 
be deemed adjunctive services representing components of a 
comprehensive service and resulting in a single prospective payment for 
the comprehensive service based on the costs of all reported services 
on the claim (80 FR 70333 through 70336).
    Services included under the C-APC payment packaging policy, that 
is, services that are typically adjunctive to the primary service and 
provided during the delivery of the comprehensive service, include 
diagnostic procedures, laboratory tests, and other diagnostic tests and 
treatments that assist in the delivery of the primary procedure; visits 
and evaluations performed in association with the procedure; uncoded 
services and supplies used during the service; durable medical 
equipment as well as prosthetic and orthotic items and supplies when 
provided as part of the outpatient service; and any other components 
reported by HCPCS codes that represent services that are provided 
during the complete comprehensive service (78 FR 74865 and 79 FR 
66800).

[[Page 79581]]

    In addition, payment for outpatient department services that are 
similar to therapy services and delivered either by therapists or non-
therapists is included as part of the payment for the packaged complete 
comprehensive service. These services that are provided during the 
perioperative period are adjunctive services and are deemed to be not 
therapy services as described in section 1834(k) of the Act, regardless 
of whether the services are delivered by therapists or other 
nontherapist health care workers. We have previously noted that therapy 
services are those provided by therapists under a plan of care in 
accordance with section 1835(a)(2)(C) and section 1835(a)(2)(D) of the 
Act and are paid for under section 1834(k) of the Act, subject to 
annual therapy caps as applicable (78 FR 74867 and 79 FR 66800). 
However, certain other services similar to therapy services are 
considered and paid for as outpatient department services. Payment for 
these non-therapy outpatient department services that are reported with 
therapy codes and provided with a comprehensive service is included in 
the payment for the packaged complete comprehensive service. We note 
that these services, even though they are reported with therapy codes, 
are outpatient department services and not therapy services.
    Therefore, the requirement for functional reporting under the 
regulations at 42 CFR 410.59(a)(4) and 42 CFR 410.60(a)(4) does not 
apply. We refer readers to the July 2016 OPPS Change Request 9658 
(Transmittal 3523) for further instructions on reporting these services 
in the context of a C-APC service.
    Items included in the packaged payment provided in conjunction with 
the primary service also include all drugs, biologicals, and 
radiopharmaceuticals, regardless of cost, except those drugs with pass-
through payment status and SADs, unless they function as packaged 
supplies (78 FR 74868 through 74869 and 74909 and 79 FR 66800). We 
refer readers to Section 50.2M, Chapter 15, of the Medicare Benefit 
Policy Manual for a description of our policy on SADs treated as 
hospital outpatient supplies, including lists of SADs that function as 
supplies and those that do not function as supplies.
    We define each hospital outpatient claim reporting a single unit of 
a single primary service assigned to status indicator ``J1'' as a 
single ``J1'' unit procedure claim (78 FR 74871 and 79 FR 66801). We 
sum all line item charges for services included on the C-APC claim, 
convert the charges to costs, and calculate the comprehensive geometric 
mean cost of one unit of each service assigned to status indicator 
``J1.'' (We note that we use the term ``comprehensive'' to describe the 
geometric mean cost of a claim reporting ``J1'' service(s) or the 
geometric mean cost of a C-APC, inclusive of all of the items and 
services included in the C-APC service payment bundle.) Charges for 
services that would otherwise be separately payable are added to the 
charges for the primary service. This process differs from our 
traditional cost accounting methodology only in that all such services 
on the claim are packaged (except certain services as described above). 
We apply our standard data trims, excluding claims with extremely high 
primary units or extreme costs.
    The comprehensive geometric mean costs are used to establish 
resource similarity and, along with clinical similarity, dictate the 
assignment of the primary services to the C-APCs. We establish a 
ranking of each primary service (single unit only) to be assigned to 
status indicator ``J1'' according to their comprehensive geometric mean 
costs. For the minority of claims reporting more than one primary 
service assigned to status indicator ``J1'' or units thereof, we 
identify one ``J1'' service as the primary service for the claim based 
on our cost-based ranking of primary services. We then assign these 
multiple ``J1'' procedure claims to the C-APC to which the service 
designated as the primary service is assigned. If the reported ``J1'' 
services reported on a claim map to different C-APCs, we designate the 
``J1'' service assigned to the C-APC with the highest comprehensive 
geometric mean cost as the primary service for that claim. If the 
reported multiple ``J1'' services on a claim map to the same C-APC, we 
designate the most costly service (at the HCPCS code level) as the 
primary service for that claim. This process results in initial 
assignments of claims for the primary services assigned to status 
indicator ``J1'' to the most appropriate C-APCs based on both single 
and multiple procedure claims reporting these services and clinical and 
resource homogeneity.
    Complexity Adjustments. We use complexity adjustments to provide 
increased payment for certain comprehensive services. We apply a 
complexity adjustment by promoting qualifying ``J1'' service code 
combinations or code combinations of ``J1'' services and certain add-on 
codes (as described further below) from the originating C-APC (the C-
APC to which the designated primary service is first assigned) to the 
next higher paying C-APC in the same clinical family of C-APCs. We 
implement this type of complexity adjustment when the code combination 
represents a complex, costly form or version of the primary service 
according to the following criteria:
     Frequency of 25 or more claims reporting the code 
combination (frequency threshold); and
     Violation of the 2 times rule in the originating C-APC 
(cost threshold). After designating a single primary service for a 
claim, we evaluate that service in combination with each of the other 
procedure codes reported on the claim assigned to status indicator 
``J1'' (or certain add-on codes) to determine if they meet the 
complexity adjustment criteria. For new HCPCS codes, we determine 
initial C-APC assignments and complexity adjustments using the best 
available information, crosswalking the new HCPCS codes to predecessor 
codes when appropriate.
    Once we have determined that a particular code combination of 
``J1'' services (or combinations of ``J1'' services reported in 
conjunction with certain add-on codes) represents a complex version of 
the primary service because it is sufficiently costly, frequent, and a 
subset of the primary comprehensive service overall according to the 
criteria described above, we promote the complex version of the primary 
service as described by the code combination to the next higher cost C-
APC within the clinical family unless the primary service is already 
assigned to the highest cost APC within the C-APC clinical family or 
assigned to the only C-APC in a clinical family. We do not create new 
APCs with a comprehensive geometric mean cost that is higher than the 
highest geometric mean cost (or only) C-APC in a clinical family just 
to accommodate potential complexity adjustments. Therefore, the highest 
payment for any code combination for services assigned to a C-APC would 
be the highest paying C-APC in the clinical family (79 FR 66802).
    We package payment for all add-on codes into the payment for the C-
APC. However, certain primary service-add-on combinations may qualify 
for a complexity adjustment. As noted in the CY 2016 OPPS/ASC final 
rule with comment period (80 FR 70331), all add-on codes that can be 
appropriately reported in combination with a base code that describes a 
primary ``J1''service are evaluated for a complexity adjustment.
    To determine which combinations of primary service codes reported 
in conjunction with an add-on code may

[[Page 79582]]

qualify for a complexity adjustment for CY 2017, in the CY 2017 OPPS/
ASC proposed rule (81 FR 45620), we proposed to apply the frequency and 
cost criteria thresholds discussed above, testing claims reporting one 
unit of a single primary service assigned to status indicator ``J1'' 
and any number of units of a single add-on code. If the frequency and 
cost criteria thresholds for a complexity adjustment are met, and 
reassignment to the next higher cost APC in the clinical family is 
appropriate, we make a complexity adjustment for the code combination; 
that is, we reassign the primary service code reported in conjunction 
with the add-on code combination to a higher cost C-APC within the same 
clinical family of C-APCs. If any add-on code combination reported in 
conjunction with the primary service code does not qualify for a 
complexity adjustment, payment for these services is packaged within 
the payment for the complete comprehensive service. We listed the 
complexity adjustments proposed for add-on code combinations for CY 
2017, along with all of the other proposed complexity adjustments, in 
Addendum J to the proposed rule (which is available via the Internet on 
the CMS Web site). For CY 2017, we proposed to discontinue the 
requirement that a code combination (that qualifies for a complexity 
adjustment by satisfying the frequency and cost criteria thresholds 
described earlier) also not create a 2 times rule violation in the 
higher level or receiving APC (80 FR 70328). We believe that this 
requirement is not useful because most code combinations fall below our 
established frequency threshold for considering 2 times rule 
violations, which is described in section III.B. of this final rule 
with comment period. Therefore, because the 2 times rule would not 
typically apply to complexity-adjusted code combinations, we proposed 
to discontinue this requirement.
    We provided in Addendum J to the proposed rule a breakdown of cost 
statistics for each code combination that would qualify for a 
complexity adjustment (including primary code and add-on code 
combinations). Addendum J to the proposed rule also contained summary 
cost statistics for each of the code combinations that describe a 
complex code combination that would qualify for a complexity adjustment 
and are proposed to be reassigned to the next higher cost C-APC within 
the clinical family. The combined statistics for all proposed 
reassigned complex code combinations are represented by an alphanumeric 
code with the first 4 digits of the designated primary service followed 
by a letter. For example, the proposed geometric mean cost listed in 
Addendum J for the code combination described by complexity adjustment 
assignment 3320R, which is assigned to C-APC 5224 (Level 4 Pacemaker 
and Similar Procedures), includes all code combinations that are 
proposed to be reassigned to C-APC 5224 when CPT code 33208 is the 
primary code. Providing the information contained in Addendum J to the 
proposed rule allowed stakeholders the opportunity to better assess the 
impact associated with the proposed reassignment of each of the code 
combinations eligible for a complexity adjustment.
    Comment: Commenters generally supported the proposal to no longer 
require that a code combination (that qualifies for a complexity 
adjustment by satisfying the frequency and cost criteria thresholds) be 
evaluated for a 2 times rule violation in the higher level or receiving 
APC. One commenter requested that CMS allow the complexity-adjusted 
pair to move up an additional level in the clinical family if the code 
combination creates a 2 times rule violation in the receiving APC. 
Several other commenters requested that CMS review and modify the 
established C-APC complexity adjustment criteria to allow for 
complexity adjustments for specific ``J1'' service code combinations or 
code combinations of ``J1'' services and certain add-on codes that do 
not qualify under the current criteria.
    Response: We appreciate the commenters' support. We continue to 
believe that the complexity adjustment criteria, which require a 
frequency of 25 or more claims reporting a code combination and a 
violation of the 2 times rule in the originating C-APC in order to 
receive payment in the next higher cost C-APC within the clinical 
family, is adequate to determine if a combination of procedures 
represents a complex, costly subset of the primary service. If a code 
combination meets these criteria, the combination receives payment at 
the next higher cost C-APC. Code combinations that do not meet these 
criteria receive the C-APC payment rate associated with the primary 
``J1'' service. A minimum of 25 claims is already very low for a 
national payment system. Lowering the minimum of 25 claims further 
could lead to unnecessary complexity adjustments for service 
combinations that are rarely performed. The complexity adjustment cost 
threshold compares the code combinations to the lowest cost significant 
procedure assigned to the APC. If the cost of the code combination does 
not exceed twice the cost of the lowest cost significant procedure 
within the APC, no complexity adjustment is made. Lowering this 
threshold also could remove too many claims from the accounting for the 
primary J1 service, which would undermine the C-APC policy. We are 
finalizing the policy proposal to discontinue the requirement that a 
code combination (that qualifies for a complexity adjustment by 
satisfying the frequency and cost criteria thresholds) also not create 
a 2 times rule violation in the higher level or receiving APC as 
proposed. We are not otherwise changing the complexity adjustment 
criteria.
    Comment: Other commenters requested that CMS ensure that claims for 
bilateral C-APC procedures that are correctly reported with modifier 
``50'' (a modifier used to report bilateral procedures that are 
performed at the same operative session as a single line item) are 
accounted for in the evaluation of complexity adjustments, as well as 
the C-APC claims accounting. The commenters believed that these claims 
should be recognized as reporting two units of the service in the 
evaluation of the frequency of the code combination and the payment of 
the complexity-adjusted C-APC rate.
    Response: The issue of complexity adjustments for bilateral, status 
indicator ``J1'' procedures reported with modifier ``50'' was addressed 
in the April 2016 Integrated OCE Specifications Quarterly Release Files 
(Attachment A--Integrated OCE Specs, Appendix L: Comprehensive APC 
Assignment Logic). In that document, the C-APC assignment logic was 
updated to specify the following: Once the highest ranked comprehensive 
procedure is determined, if there are multiple comprehensive procedures 
present with status indicator ``J1'' or there are qualifying add-on 
procedure codes present (status indicator ``N''), determine if there 
are any pairings that may qualify for a complexity adjustment. Multiple 
occurrences or service units of the same comprehensive procedure, or 
the reporting of modifier ``50,'' may qualify for a complexity 
adjustment. If there is a qualifying pair present associated with the 
highest ranked comprehensive procedure, assign the complexity-adjusted 
comprehensive APC. This change was made retroactive to January 2015. As 
of January 1, 2015, status indicator ``J1'' procedure claims with 
modifier ``50'' also will be included in the C-APC claims accounting 
and the complexity adjustment evaluations.

[[Page 79583]]

    Comment: One commenter requested that CMS eliminate one of the 
criterion for assignment to status indicator ``J2'' and C-APC 8011 
(Comprehensive Observation Services). Specifically, the commenter 
stated that claims that otherwise would qualify for payment through C-
APC 8011, but contain a procedure described by a HCPCS code assigned to 
status indicator ``T'' that is reported with a date of service on the 
same day or 1 day earlier than the date of service associated with 
services described by HCPCS code G0378, should not be excluded from 
receiving payment through C-APC 8011.
    Response: Services that would otherwise qualify for the observation 
C-APC (C-APC 8011) are not considered to be observation services when 
they are associated with a surgical procedure (assigned to status 
indicator ``T''). Instead, they are considered to be perioperative 
recovery, which is always packaged in with the surgical procedure.
    Comment: Some commenters submitted comments regarding C-APC 5627 
(Level 7 Radiation Therapy) and the treatment planning and preparation 
services involved with stereotactic radiosurgery (SRS) treatment. 
Commenters urged CMS to continue the policy finalized in the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70337) that pays 
separately for certain SRS planning and preparation services (a policy 
that is a temporary special exception for APC 5627 to the C-APC 
packaging policy that packages all adjunctive services (with a few 
exceptions listed in Addendum J)). Commenters believed that CMS should 
not package treatment planning and preparation into the C-APC payment 
rate for Level 7 Radiation Therapy in the future as discussed in the CY 
2016 OPPS/ASC final rule with comment period because SRS claims may 
include other unrelated radiation therapy services.
    Response: For CY 2017, we will continue the policy for the payment 
of SRS treatment as described in the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70337). This policy removes claims reporting 
certain planning and preparation services for SRS treatment from our 
geometric mean cost calculation for the CY 2017 payment rate for C-APC 
5627 and pays separately for these planning and preparation services. 
For 2018, we will again examine the claims for cranial single session 
SRS patients and evaluate the services reported with modifier ``CT'' 
(Adjunctive service related to a procedure assigned to a comprehensive 
ambulatory payment classification [C-APC] procedure). We will consider 
in the future whether repackaging all adjunctive services (planning, 
preparation, and imaging, among others) back into cranial single 
session SRS is appropriate in order to preserve the integrity of the C-
APC policy and the OPPS as a prospective payment system.
    Comment: Commenters noted that claims that included several 
insertion codes for brachytherapy devices (namely CPT codes 57155, 
20555, 31643, 41019, 43241, 55920, and 58346) often did not also 
contain a brachytherapy treatment delivery code. The commenters 
concluded that brachytherapy delivery charges are being 
underrepresented in ratesetting under the C-APC methodology because a 
correctly coded claim should always include an insertion and treatment 
delivery code combination. One commenter suggested that CMS adopt a 
composite APC methodology for CPT code 57155 similar to the composite 
methodology for LDR prostate brachytherapy services.
    Response: The calculation of OPPS relative payment weights that 
reflect the relative resources required for HOPD services is the 
foundation of the OPPS. We rely on hospitals to bill all HCPCS codes 
accurately in accordance with their code descriptors and CPT and CMS 
instructions, as applicable, and to report charges on claims and 
charges and costs on their Medicare hospital cost reports appropriately 
(77 FR 68324). Moreover, we generally do not remove claims from the 
claims accounting when stakeholders believe that hospitals included 
incorrect information on some claims. Therefore, we are not excluding 
claims from the ratesetting calculation that include procedures 
described by CPT codes 57155, 20555, 31643, 41019, 43241, 55920, and 
58346. In the future, we will examine the claims for these 
brachytherapy insertion codes and determine if any future adjustment to 
the methodology (or possibly code edits) would be appropriate.
(2) C-APCs for CY 2017
(a) Additional C-APCs for CY 2017
    For CY 2017 and subsequent years, in the CY 2017 OPPS/ASC proposed 
rule (81 FR 45620), we proposed to continue to apply the C-APC payment 
policy methodology made effective in CY 2015, as described in detail 
below. We proposed to continue to define the services assigned to C-
APCs as primary services or a specific combination of services 
performed in combination with each other. We also proposed to define a 
C-APC as a classification for the provision of a primary service or 
specific combination of services and all adjunctive services and 
supplies provided to support the delivery of the primary or specific 
combination of services. We also proposed to continue to follow the C-
APC payment policy methodology of packaging all covered OPD services on 
a hospital outpatient claim reporting a primary service that is 
assigned to status indicator ``J1'' or reporting the specific 
combination of services assigned to status indicator ``J2,'' excluding 
services that are not covered OPD services or that cannot by statute be 
paid under the OPPS.
    As a result of our annual review of the services and APC 
assignments under the OPPS, we proposed 25 additional C-APCs to be paid 
under the existing C-APC payment policy beginning in CY 2017. The 
proposed additional CY 2017 C-APCs were listed in Table 2 of the 
proposed rule. All C-APCs, including those effective in CY 2016 and 
those being proposed for CY 2017, also were displayed in Addendum J to 
this proposed rule. Addendum J to this proposed rule (which is 
available via the Internet on the CMS Web site) also contained all of 
the data related to the C-APC payment policy methodology, including the 
list of proposed complexity adjustments and other information.
    Comment: Many commenters supported the proposal to expand the C-APC 
policy to include new C-APCs. However, several commenters requested 
that CMS delay the expansion of the C-APC policy and expressed concerns 
that the costs of procedures and services paid through a C-APC are not 
being accurately captured and C-APC payment rates do not adequately 
cover the costs associated with the primary and adjunctive services. 
Commenters also requested more information regarding the rationale for 
the assignment of services to a C-APC and stated that more time is 
needed to analyze and assess the financial impact of the proposed C-APC 
policy changes. One commenter expressed concerns that CMS may not be 
fully considering the impact of adding relatively low cost (below 
$2,227) procedures to C-APCs and suggested the establishment of a 
minimum cost threshold for a procedure to be assigned to a C-APC. Other 
commenters requested a delay in the assignment of new codes, including 
add-on codes, to C-APCs unless a crosswalk exists from the old code to 
the new code.
    Response: We appreciate the commenters' support. With regard to the 
comments relating to delaying the expansion of the C-APC policy, we do

[[Page 79584]]

not believe that we should delay implementation of the proposed CY 2017 
C-APCs. C-APCs were introduced in 2015, and, like all of the payment 
polices contained in the OPPS, are reviewed annually, as provided at 
section 1833(t)(9)(A) of the Act. We communicate with various 
stakeholders on an ongoing basis as a part of our mutual efforts to 
further improve the OPPS. We believe that sufficient information is 
available for stakeholders to evaluate how C-APCs affect payment for 
services, and that there is sufficient time for the public to review 
and analyze our proposed payment policies. This is evidenced by the 
many stakeholders that submit public comments, including, for example, 
analyses of the C-APC payment policy. Regarding the comment about 
creating a cost threshold for assignment of a procedure to a C-APC, we 
do not believe that this is necessary. Procedures assigned to C-APCs 
are primary services (mostly major surgical procedures) that are 
typically the focus of the hospital outpatient stay. We do not believe 
that a cost threshold would help to differentiate primary from 
secondary or adjunctive services. Lastly, we assign new codes to APCs 
(including C-APCs) based on predecessor code APC assignments, 
comparisons to similar codes, clinical comparability, and estimates of 
the resource intensity, as well as other relevant information. If we 
failed to assign new codes to C-APCs, this could result in significant 
underpayment for some new codes if a C-APC is the most appropriate APC 
for the new procedure.
    Comment: A few commenters requested that CMS not convert APCs 5153 
through 5155 (Levels 3 through 5 Airway Endoscopy) into C-APCs. The 
commenters expressed concerns regarding reduced payments for sinus 
surgeries when a patient has multiple surgeries during a single 
operative session. The major concern focused on the loss of additional 
payments for multiple procedures under the C-APC methodology. 
Commenters stated that multiple procedures (coded either as a bilateral 
case or with multiple different CPT codes) are common for the treatment 
of sinus diseases. One commenter noted that the AMA CPT Editorial Panel 
is in the process of revising some of the sinus surgery codes and 
bundling some of these codes. Another commenter believed that payment 
reductions for sinus surgery could negatively affect opportunities for 
resident training on these procedures.
    Response: The commenters concerns are not unique to sinus surgery. 
The C-APC methodology relies on the average cost of the range of cases 
included in the claims accounting for the primary service code. We 
believe that this approach is better suited to a prospective payment 
system like the OPPS that relies on average cost payments that 
sometimes exceed the cost of a given case and other times are less than 
the cost of a given case. If, as the commenters suggest, bilateral 
surgery and/or multiple procedures are common in sinus surgery, the 
costs of this approach would be reflected in the geometric mean cost of 
the primary procedure under the C-APC methodology. It also seems that, 
according to one commenter, the AMA is preparing to address what might 
be fragmented codes in this clinical area. We are finalizing as 
proposed the conversion of the three highest level airway endoscopy 
APCs to C-APCs as a part of our continuing effort to direct the OPPS 
more towards a prospective payment system and away from a per service 
or per code fee schedule in which every coded item or service results 
in additional payment. We also do not agree that this payment policy 
raises concerns regarding the training of otolaryngology residents in 
sinus surgery, but we will monitor these APCs as we do with all others 
as a part of our annual OPPS/ASC rulemaking.
    Comment: One commenter stated that while APC 5153 (Level 3 Airway 
Endoscopy Procedures) is a proposed C-APC for CY 2017, one of the codes 
assigned to APC 5153, namely CPT code 31649 (Bronchoscopy, rigid or 
flexible, including fluoroscopic guidance, when performed; with removal 
of bronchial valve(s), each additional lobe (List separately in 
addition to code for primary procedure)), is assigned a status 
indicator of ``Q2'' and not ``J1.'' The commenter requested that this 
procedure be assigned to status indicator ``J1.''
    Response: This procedure is assigned status indicator ``Q2'' 
because it describes the removal of a device, specifically a bronchial 
valve. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
74926), we finalized a proposal to conditionally package device removal 
procedures. This procedure is separately paid unless it is billed on 
the same date of service as a surgical procedure assigned to status 
indicator ``J1'' or ``T'' that involves repair or replacement of the 
device. The procedure was placed in a C-APC on the basis of resource 
and clinical homogeneity. For these reasons, we do not agree with the 
commenters, and are not assigning CPT code 31649 to status indicator 
``J1.''
    After consideration of the public comments we received, we are 
finalizing the proposal for 25 additional C-APCs to be paid under the 
existing C-APC payment policy beginning in CY 2017.
    Table 2 below lists the final additional C-APCs for CY 2017, 
including the C-APCs currently effective for CY 2016. All C-APCs, 
including those effective in CY 2016 and those finalized for CY 2017, 
also are displayed in Addendum J to this final rule with comment 
period. Addendum J to this final rule with comment period (which is 
available via the Internet on the CMS Web site) also contains all of 
the data related to the C-APC payment policy methodology, including the 
list of complexity adjustments and other information.

                                             Table 1--CY 2017 C-APCs
----------------------------------------------------------------------------------------------------------------
                  C-APC                          CY 2017 APC title           Clinical family        New C-APC
----------------------------------------------------------------------------------------------------------------
5072.....................................  Level 2 Excision/Biopsy/      EBIDX                                *
                                            Incision and Drainage.
5073.....................................  Level 3 Excision/Biopsy/      EBIDX                                *
                                            Incision and Drainage.
5091.....................................  Level 1 Breast/Lymphatic      BREAS                                *
                                            Surgery and Related
                                            Procedures.
5092.....................................  Level 2 Breast/Lymphatic      BREAS                                *
                                            Surgery and Related
                                            Procedures.
5093.....................................  Level 3 Breast/Lymphatic      BREAS                   ...............
                                            Surgery & Related
                                            Procedures.
5094.....................................  Level 4 Breast/Lymphatic      BREAS                   ...............
                                            Surgery & Related
                                            Procedures.
5112.....................................  Level 2 Musculoskeletal       ORTHO                                *
                                            Procedures.
5113.....................................  Level 3 Musculoskeletal       ORTHO                                *
                                            Procedures.
5114.....................................  Level 4 Musculoskeletal       ORTHO                   ...............
                                            Procedures.
5115.....................................  Level 5 Musculoskeletal       ORTHO                   ...............
                                            Procedures.
5116.....................................  Level 6 Musculoskeletal       ORTHO                   ...............
                                            Procedures.

[[Page 79585]]

 
5153.....................................  Level 3 Airway Endoscopy....  AENDO                                *
5154.....................................  Level 4 Airway Endoscopy....  AENDO                                *
5155.....................................  Level 5 Airway Endoscopy....  AENDO                                *
5164.....................................  Level 4 ENT Procedures......  ENTXX                                *
5165.....................................  Level 5 ENT Procedures......  ENTXX                   ...............
5166.....................................  Cochlear Implant Procedure..  COCHL                   ...............
5191.....................................  Level 1 Endovascular          VASCX                                *
                                            Procedures.
5192.....................................  Level 2 Endovascular          VASCX                   ...............
                                            Procedures.
5193.....................................  Level 3 Endovascular          VASCX                   ...............
                                            Procedures.
5194.....................................  Level 4 Endovascular          VASCX                   ...............
                                            Procedures.
5200.....................................  Implantation Wireless PA      WPMXX                                *
                                            Pressure Monitor.
5211.....................................  Level 1 Electrophysiologic    EPHYS                   ...............
                                            Procedures.
5212.....................................  Level 2 Electrophysiologic    EPHYS                   ...............
                                            Procedures.
5213.....................................  Level 3 Electrophysiologic    EPHYS                   ...............
                                            Procedures.
5222.....................................  Level 2 Pacemaker and         AICDP                   ...............
                                            Similar Procedures.
5223.....................................  Level 3 Pacemaker and         AICDP                   ...............
                                            Similar Procedures.
5224.....................................  Level 4 Pacemaker and         AICDP                   ...............
                                            Similar Procedures.
5231.....................................  Level 1 ICD and Similar       AICDP                   ...............
                                            Procedures.
5232.....................................  Level 2 ICD and Similar       AICDP                   ...............
                                            Procedures.
5244.....................................  Level 4 Blood Product         SCTXX                                *
                                            Exchange and Related
                                            Services.
5302.....................................  Level 2 Upper GI Procedures.  GIXXX                                *
5303.....................................  Level 3 Upper GI Procedures.  GIXXX                                *
5313.....................................  Level 3 Lower GI Procedures.  GIXXX                                *
5331.....................................  Complex GI Procedures.......  GIXXX                   ...............
5341.....................................  Abdominal/Peritoneal/Biliary  GIXXX                                *
                                            and Related Procedures.
5361.....................................  Level 1 Laparoscopy &         LAPXX                   ...............
                                            Related Services.
5362.....................................  Level 2 Laparoscopy &         LAPXX                   ...............
                                            Related Services.
5373.....................................  Level 3 Urology & Related     UROXX                                *
                                            Services.
5374.....................................  Level 4 Urology & Related     UROXX                                *
                                            Services.
5375.....................................  Level 5 Urology & Related     UROXX                   ...............
                                            Services.
5376.....................................  Level 6 Urology & Related     UROXX                   ...............
                                            Services.
5377.....................................  Level 7 Urology & Related     UROXX                   ...............
                                            Services.
5414.....................................  Level 4 Gynecologic           GYNXX                                *
                                            Procedures.
5415.....................................  Level 5 Gynecologic           GYNXX                   ...............
                                            Procedures.
5416.....................................  Level 6 Gynecologic           GYNXX                   ...............
                                            Procedures.
5431.....................................  Level 1 Nerve Procedures....  NERVE                                *
5432.....................................  Level 2 Nerve Procedures....  NERVE                                *
5462.....................................  Level 2 Neurostimulator &     NSTIM                   ...............
                                            Related Procedures.
5463.....................................  Level 3 Neurostimulator &     NSTIM                   ...............
                                            Related Procedures.
5464.....................................  Level 4 Neurostimulator &     NSTIM                   ...............
                                            Related Procedures.
5471.....................................  Implantation of Drug          PUMPS                   ...............
                                            Infusion Device.
5491.....................................  Level 1 Intraocular           INEYE                                *
                                            Procedures.
5492.....................................  Level 2 Intraocular           INEYE                   ...............
                                            Procedures.
5493.....................................  Level 3 Intraocular           INEYE                   ...............
                                            Procedures.
5494.....................................  Level 4 Intraocular           INEYE                   ...............
                                            Procedures.
5495.....................................  Level 5 Intraocular           INEYE                   ...............
                                            Procedures.
5503.....................................  Level 3 Extraocular, Repair,  EXEYE                                *
                                            and Plastic Eye Procedures.
5504.....................................  Level 4 Extraocular, Repair,  EXEYE                                *
                                            and Plastic Eye Procedures.
5627.....................................  Level 7 Radiation Therapy...  RADTX                   ...............
5881.....................................  Ancillary Outpatient          N/A                     ...............
                                            Services When Patient Dies.
8011.....................................  Comprehensive Observation     N/A                     ...............
                                            Services.
----------------------------------------------------------------------------------------------------------------
* New C-APC for CY 2017.
C-APC Clinical Family Descriptor Key: AENDO = Airway Endoscopy; AICDP = Automatic Implantable Cardiac
  Defibrillators, Pacemakers, and Related Devices; BREAS = Breast Surgery; COCHL = Cochlear Implant; EBIDX =
  Excision/Biopsy/Incision and Drainage; ENTXX = ENT Procedures; EPHYS = Cardiac Electrophysiology; EXEYE =
  Extraocular Ophthalmic Surgery; GIXXX = Gastrointestinal Procedures; GYNXX = Gynecologic Procedures; INEYE =
  Intraocular Surgery; LAPXX = Laparoscopic Procedures; NERVE = Nerve Procedures; NSTIM = Neurostimulators;
  ORTHO = Orthopedic Surgery; PUMPS = Implantable Drug Delivery Systems; RADTX = Radiation Oncology; SCTXX =
  Stem Cell Transplant; UROXX = Urologic Procedures; VASCX = Vascular Procedures; WPMXX = Wireless PA Pressure
  Monitor.

(b) New Allogeneic Hematopoietic Stem Cell Transplantation (HSCT) C-APC
    Allogeneic hematopoietic stem cell transplantation (HSCT) involves 
the intravenous infusion of hematopoietic stem cells derived from the 
bone marrow, umbilical cord blood, or peripheral blood of a donor to a 
recipient. Allogeneic hematopoietic stem cell collection procedures, 
which are performed not on the beneficiary but on a donor, cannot be 
paid separately under the OPPS because hospitals may bill and receive 
payment only for services provided to a Medicare beneficiary who is the 
recipient of the HSCT and whose illness is being treated with the 
transplant. Currently, under the OPPS, payment for these acquisition 
services is packaged into the APC payment for the allogeneic HSCT when 
the transplant occurs in the hospital outpatient setting (74 FR 60575). 
In the CY 2016 OPPS/ASC final rule with comment period, we assigned 
allogeneic HSCT to APC 5281 (Apheresis and Stem

[[Page 79586]]

Cell Procedures), which has a CY 2016 OPPS payment rate of $3,015.
    As provided in the Medicare Claims Processing Manual, Pub. 100-04, 
Chapter 4, section 231.11, donor acquisition charges for allogeneic 
HSCT may include, but are not limited to, charges for the costs of 
several services. These services include, but are not necessarily 
limited to, National Marrow Donor Program fees, if applicable, tissue 
typing of donor and recipient, donor evaluation, physician pre-
procedure donor evaluation services, costs associated with the 
collection procedure (for example, general routine and special care 
services, procedure/operating room and other ancillary services, 
apheresis services, among others), post-operative/post-procedure 
evaluation of donor, and the preparation and processing of stem cells.
    When the allogeneic stem cell transplant occurs in the hospital 
outpatient setting, providers are instructed to report stem cell donor 
acquisition charges for allogeneic HSCT separately in Field 42 on Form 
CMS-1450 (or UB-04) by using revenue code 0819 (Organ Acquisition: 
Other Donor). Revenue code 0819 charges should include all services 
required to acquire hematopoietic stem cells from a donor, as defined 
earlier, and should be reported on the same date of service as the 
transplant procedure in order to be appropriately packaged for payment 
purposes. Revenue code 0819 maps to cost center code 086XX (Other organ 
acquisition where XX is ``00'' through ``19'') and is reported on line 
112 (or applicable subscripts of line 112) of the Medicare cost report.
    In recent years, we have received comments from stakeholders 
detailing concerns about the accuracy of ratesetting for allogeneic 
HSCT (79 FR 40950 through 40951; 79 FR 66809; and 80 FR 70414 through 
70415). Stakeholders have presented several issues that could result in 
an inappropriate estimation of provider costs for these procedures, 
including outpatient allogeneic HCST reported on claims being 
identified as multiple procedure claims that are unusable under the 
standard OPPS ratesetting methodology. Stakeholders also have indicated 
that the requirement for the reporting of revenue code 0819 on claims 
reporting allogeneic HSCTs and the lack of a dedicated cost center for 
stem cell transplantation donor acquisition costs have led to an overly 
broad CCR being applied to these procedures, which comprise a very low 
volume of the services reported within the currently assigned cost 
center. In addition, commenters noted that it is likely that there are 
services being reported with the same revenue code (0819) and mapped to 
the same cost center code (086XX) as allogeneic HSCT donor acquisition 
charges that are unrelated to these services. Lastly, providers have 
commented that the donor acquisition costs of allogeneic HSCT are much 
higher relative to their charges when compared to the other items and 
services that are reported in the current cost center. Providers also 
have stated that hospitals have difficulty applying an appropriate 
markup to donor acquisition charges that will sufficiently generate a 
cost that approximates the total cost of donor acquisition. Through our 
examination of the CY 2016 claims data, we believe that the issues 
presented above provide a persuasive rationale for payment adjustment 
for donor acquisition costs for allogeneic HCST.
    Stakeholders suggested that the establishment of a C-APC for stem 
cell transplant services would improve payment adequacy by allowing the 
use of multiple procedure claims, provided CMS also create a separate 
and distinct CCR for donor search and acquisition charges so that they 
are not diluted by lower cost services. In the CY 2016 OPPS/ASC final 
rule with comment period (80 FR 70414 through 70415), we stated that we 
would not create a new C-APC for stem cell transplant procedures at 
that time and that we would instead continue to pay for the services 
through the assigned APCs while continuing to monitor the issue.
    Based on our current analysis of this longstanding issue and 
stakeholder input, in the CY 2017 OPPS/ASC proposed rule (81 FR 45623), 
for CY 2017, we proposed to create a new C-APC 5244 (Level 4 Blood 
Product Exchange and Related Services) and to assign procedures 
described by CPT code 38240 (Hematopoietic progenitor cell (HPC); 
allogeneic transplantation per donor) to this C-APC and to assign 
status indicator ``J1'' to the code. The creation of a new C-APC for 
allogeneic HSCT and the assignment of status indicator ``J1'' to CPT 
code 38240 would allow for the costs for all covered OPD services, 
including donor acquisition services, included on the claim to be 
packaged into the C-APC payment rate. These costs also will be analyzed 
using our comprehensive cost accounting methodology to establish future 
C-APC payment rates. We proposed to establish a payment rate for 
proposed new C-APC 5244 of $15,267 for CY 2017.
    In order to develop an accurate estimate of allogeneic HSCT donor 
acquisition costs for future ratesetting, for CY 2017 and subsequent 
years, we proposed to update the Medicare hospital cost report (Form 
CMS-2552-10) by adding a new standard cost center 112.50, ``Allogeneic 
Stem Cell Acquisition,'' to Worksheet A (and applicable worksheets) 
with the standard cost center code of ``11250.'' The proposed new cost 
center, line 112.50, would be used for the recording of any acquisition 
costs related to allogeneic stem cell transplants as defined in Section 
231.11, Chapter 4, of the Medicare Claims Processing Manual (Pub. 100-
04). Acquisition charges for allogeneic stem cell transplants apply 
only to allogeneic transplants for which stem cells are obtained from a 
donor (rather than from the recipient). Acquisition charges do not 
apply to autologous transplants (transplanted stem cells are obtained 
from the recipient) because autologous transplants involve services 
provided to a beneficiary only (and not to a donor), for which the 
hospital may bill and receive payment. Acquisition costs for allogeneic 
stem cells are included in the prospective payment. This cost center 
flows through cost finding and accumulates any appropriate overhead 
costs.
    In conjunction with our proposed addition of the new ``Allogeneic 
Stem Cell Acquisition'' standard cost center, we proposed to use the 
newly created revenue code 0815 (Allogeneic Stem Cell Acquisition 
Services) to identify hospital charges for stem cell acquisition for 
allogeneic bone marrow/stem cell transplants. Specifically, for CY 2017 
and subsequent years, we proposed to require hospitals to identify stem 
cell acquisition charges for allogeneic bone marrow/stem cell 
transplants separately in Field 42 on Form CMS-1450 (or UB-04), when an 
allogeneic stem cell transplant occurs. Revenue code 0815 charges 
should include all services required to acquire stem cells from a 
donor, as defined above, and should be reported on the same date of 
service as the transplant procedure in order to be appropriately 
packaged for payment purposes. The proposed new revenue code 0815 would 
map to the proposed new line 112.50 (with the cost center code of 
``11250'') on the Form CMS-2552-10 cost report. In addition, for CY 
2017 and subsequent years, we proposed to no longer use revenue code 
0819 for the identification of stem cell acquisition charges for 
allogeneic bone marrow/stem cell transplants. We invited public 
comments on these proposals.
    Comment: Several commenters supported the proposal to create a new 
C-APC for allogeneic HSCT (C-APC 5244) and the assignment of status

[[Page 79587]]

indicator ``J1'' to CPT code 38240. However, many commenters believed 
that the proposed payment for C-APC 5244 continued to be significantly 
less than the overall cost of the service. Some commenters stated that 
CMS used claims to calculate the proposed payment rate for this service 
that were incomplete and did not adhere to CMS billing instructions for 
providers for allogeneic bone marrow/stem cell transplants. 
Specifically, the commenters stated that there were claims included in 
the geometric mean cost calculation for allogeneic HSCT (CPT code 
38240) that did not include donor acquisition costs reported with 
revenue code 0819 on the same date of service as the transplant. 
According to the commenters, this resulted in an inaccurate and low 
estimation of the total cost of this service. The commenters requested 
that CMS exclude these claims from ratesetting for allogeneic HSCT. 
Commenters also suggested that CMS institute an edit beginning in CY 
2017 that requires both the donor acquisition revenue code and the stem 
cell transplant CPT code on the claim to ensure that Medicare receives 
correctly coded claims for this relatively costly service.
    Lastly, commenters stated that the new cost center and revenue code 
should be utilized for both inpatient and outpatient donor acquisition 
cost reporting, requested instructions from CMS on how to reclassify 
expenses into the new cost center from ancillary departments, and also 
suggested that CMS reconsider the use of cost center line 112.50 
because this line is designated for solid organ acquisition costs, 
which are paid at cost. According to these commenters, these costs do 
not carry to Worksheet C and, for calculation of CCR, are dropped from 
cost report after accumulation of overhead. The commenter suggested the 
use of a cost center in the range of lines 50 through 76.99.
    Response: We are persuaded by the commenters and note that at the 
summer 2016 meeting of the Advisory Panel on Hospital Outpatient 
Payment (HOP Panel), the panel also recommended that CMS use only the 
claims that include both CPT code 38240 and revenue code 0819 in 
calculating the CY 2017 payment rates for allogeneic HSCT. Therefore, 
we believe it is preferable to use only the claims with both the CPT 
code for the transplant (CPT code 38240) and the revenue code for the 
donor acquisition costs (revenue code 0819) to calculate the payment 
rate for this service under the new C-APC. We agree, in this case, to 
use only the subset of claims that include both codes because hospitals 
were specifically instructed in the CMS Internet Only Manual and in 
prior final rule preamble language to use revenue code 0819 to report 
donor acquisition costs. This instruction is different from our general 
instructions regarding correct coding in that this instruction is very 
specific and was issued to address problems associated with the 
reporting of donor acquisition costs. We also agree with the 
commenters' that implementing a code edit beginning in CY 2017 that 
will require revenue code 0815 to be on a claim with CPT code 38240 is 
appropriate because this practice will help to ensure that donor 
acquisition costs for allogeneic HSCT are reported with the appropriate 
revenue code and that these costs are accurately recorded in the 
Medicare hospital cost report. This edit will become effective January 
1, 2017, and will return claims to the provider if CPT code 38240 is 
present for the transplant procedure without a separate line on the 
claim reporting revenue code 0815 for donor acquisition services. 
Again, we emphasize that this is an exceptional circumstance. We do not 
anticipate taking any similar actions for any other existing or future 
APCs or C-APCs. The combination of forming a new C-APC, providing 
unusually specific instructions in the CMS Internet Only Manual, 
needing to create a new cost center on the hospital cost report, and 
the clear recommendation from the HOP Panel--following both its and our 
thorough analysis of the issue--make this case particularly unique.
    Regarding the comment related to the use of cost center line 112.50 
to report allogeneic HSCT donor acquisition costs, we agree with the 
commenter that cost report lines 105 through 117 are designated for 
solid organ acquisition costs and other data for informational 
purposes. The commenter also indicated that the proposed line 112.50 
does not carry over to Worksheet C for the calculation of a CCR and 
drops off after accumulation of overhead. The commenter makes a valid 
point regarding the proposed line 112.50, and we agree that the 
proposed new revenue code 0815 should be mapped to a different cost 
center. The commenters recommended the use of a cost center in the 
range of lines 50 through 76.99. However these cost centers have 
standard cost center descriptions that do not have a logical subscript 
for the proposed new line ``Allogeneic Stem Cell Acquisition''. Also, 
line 76 is used for too many variables and would not provide the needed 
isolation of costs or charges. However, the Medicare hospital cost 
report contains an available expansion in the range of lines 77 through 
87. We are revising our proposal to update the Medicare hospital cost 
report (Form CMS-2552- 10) by adding proposed new line 112.50 (with the 
cost center code of ``11250'') and are instead adding a new standard 
cost center 77, ``Allogeneic Stem Cell Acquisition,'' to Worksheet A 
(and applicable worksheets) with the standard cost center code of 
``07700.'' The new cost center, line 77, will be used for the recording 
of any acquisition costs related to allogeneic stem cell transplants as 
defined in Section 231.11, Chapter 4, of the Medicare Claims Processing 
Manual (Pub. 100-04).
    After consideration of the public comments we received, we are 
finalizing the proposal for C-APC 5244 (Level 4 Blood Product Exchange 
and Related Services), with the modification to exclude claims that do 
not include donor acquisition costs reported with revenue code 0819 
from ratesetting. In addition, for CY 2017 and subsequent years, we are 
finalizing the proposal to no longer use revenue code 0819 for the 
identification of stem cell acquisition charges for allogeneic bone 
marrow/stem cell transplants. We are establishing a final payment rate 
for new C-APC 5244 of $27,752 for CY 2017.
d. Calculation of Composite APC Criteria-Based Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide necessary, high quality care as 
efficiently as possible. For CY 2008, we developed composite APCs to 
provide a single payment for groups of services that are typically 
performed together during a single clinical encounter and that result 
in the provision of a complete service. Combining payment for multiple, 
independent services into a single OPPS payment in this way enables 
hospitals to manage their resources with maximum flexibility by 
monitoring and adjusting the volume and efficiency of services 
themselves. An additional advantage to the composite APC model is that 
we can use data from correctly coded multiple procedure claims to 
calculate payment rates for the specified combinations of services, 
rather than relying upon single procedure claims which may be low in 
volume and/or incorrectly coded. Under the OPPS, we currently have 
composite policies for low dose rate (LDR) prostate brachytherapy, 
mental health services, and multiple imaging services. We refer

[[Page 79588]]

readers to the CY 2008 OPPS/ASC final rule with comment period for a 
full discussion of the development of the composite APC methodology (72 
FR 66611 through 66614 and 66650 through 66652) and the CY 2012 OPPS/
ASC final rule with comment period (76 FR 74163) for more recent 
background. In the CY 2017 OPPS/ASC proposed rule (81 FR 45623), for CY 
2017 and subsequent years, we proposed to continue our composite APC 
payment policies for LDR prostate brachytherapy services, mental health 
services, and multiple imaging services, as discussed below.
    At its August 22, 2016 meeting the HOP Panel recommended that CMS 
develop a composite APC for pathology services when multiple pathology 
services are reported on a claim with no other payable services.
    Comment: Several commenters supported the HOP Panel's 
recommendation to develop a composite APC for pathology services when 
multiple pathology services are reported on a claim with no other 
payable services and urged CMS to propose and finalize a policy to 
create such a composite APC. Some commenters also requested that CMS 
create additional composite APCs for X-ray services, respiratory 
services, cardiology services, and allergy testing services.
    Response: We appreciate the HOP Panel's recommendation, as well as 
the commenters' request to create new composite APCs for additional 
services. However, we did not propose to create any new composite APCs 
for CY 2017. Therefore, we are not accepting the HOP Panel's 
recommendation at this time. We may consider this HOP Panel 
recommendation in conjunction with the commenters' request for the 
creation of new additional composite APCs for future rulemaking.
(1) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT codes are used 
to report the composite treatment service because there are separate 
codes that describe placement of the needles/catheters and the 
application of the brachytherapy sources: CPT code 55875 (Transperineal 
placement of needles or catheters into prostate for interstitial 
radioelement application, with or without cystoscopy) and CPT code 
77778 (Interstitial radiation source application; complex), which are 
generally present together on claims for the same date of service in 
the same operative session. In order to base payment on claims for the 
most common clinical scenario, and to further our goal of providing 
payment under the OPPS for a larger bundle of component services 
provided in a single hospital encounter, beginning in CY 2008, we began 
providing a single payment for LDR prostate brachytherapy when the 
composite service, reported as CPT codes 55875 and 77778, is furnished 
in a single hospital encounter. We base the payment for composite APC 
8001 (LDR Prostate Brachytherapy Composite) on the geometric mean cost 
derived from claims for the same date of service that contain both CPT 
codes 55875 and 77778 and that do not contain other separately paid 
codes that are not on the bypass list. We refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for 
a full history of OPPS payment for LDR prostate brachytherapy services 
and a detailed description of how we developed the LDR prostate 
brachytherapy composite APC.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45623 through 45624), 
we proposed to continue to pay for LDR prostate brachytherapy services 
using the composite APC payment methodology proposed and implemented 
for CY 2008 through CY 2016. That is, we proposed to use CY 2015 claims 
reporting charges for both CPT codes 55875 and 77778 on the same date 
of service with no other separately paid procedure codes (other than 
those on the bypass list) to calculate the proposed payment rate for 
composite APC 8001. Consistent with our CY 2008 through CY 2016 
practice, in the CY 2017 OPPS/ASC proposed rule, we proposed not to use 
the claims that meet these criteria in the calculation of the geometric 
mean costs of procedures or services assigned to APC 5375 (Level IV 
Cystourethroscopy and Other Genitourinary Procedures) and APC 5641 
(Complex Interstitial Radiation Source Application), the APCs to which 
CPT codes 55875 and 77778 are assigned, respectively. We proposed to 
continue to calculate the proposed geometric mean costs of procedures 
or services assigned to APCs 5375 and 5641 using single and ``pseudo'' 
single procedure claims. We continue to believe that composite APC 8001 
contributes to our goal of creating hospital incentives for efficiency 
and cost containment, while providing hospitals with the most 
flexibility to manage their resources. We also continue to believe that 
data from claims reporting both services required for LDR prostate 
brachytherapy provide the most accurate geometric mean cost upon which 
to base the proposed composite APC payment rate.
    Using a partial year of CY 2015 claims data available for the CY 
2017 OPPS/ASC proposed rule, we were able to use 202 claims that 
contained both CPT codes 55875 and 77778 to calculate the proposed 
geometric mean cost of approximately $3,581 for these procedures upon 
which the proposed CY 2017 payment rate for composite APC 8001 was 
based.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal, without modification, to continue to 
use the payment rate for composite APC 8001 to pay for LDR prostate 
brachytherapy services for CY 2017 and to set the payment rate for this 
APC using our established methodology. Using the CY 2015 claims data 
available for this CY 2017 final rule with comment period, we were able 
to use 224 claims that contained both CPT codes 55875 and 77778 to 
calculate the geometric mean cost of approximately $3,598 for these 
procedures upon which the final CY 2017 payment rate for composite APC 
8001 is based.
(2) Mental Health Services Composite APC
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45624), we proposed to 
continue our longstanding policy of limiting the aggregate payment for 
specified less resource-intensive mental health services furnished on 
the same date to the payment for a day of partial hospitalization 
services provided by a hospital, which we consider to be the most 
resource-intensive of all outpatient mental health services. We refer 
readers to the April 7, 2000 OPPS final rule with comment period (65 FR 
18452 through 18455) for the initial discussion of this longstanding 
policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74168) for more recent background.
    Specifically, we proposed that when the aggregate payment for 
specified mental health services provided by one hospital to a single 
beneficiary on one date of service based on the payment rates 
associated with the APCs for the individual services exceeds the 
maximum per diem payment rate for partial hospitalization services 
provided by a hospital, those specified mental health services would be 
assigned to composite APC 8010 (Mental Health Services Composite). We 
also proposed to continue to set the payment rate for

[[Page 79589]]

composite APC 8010 at the same payment rate that we proposed to 
establish for APC 5862 (Level 2 Partial Hospitalization (4 or more 
services) for hospital-based PHPs), which is the maximum partial 
hospitalization per diem payment rate for a hospital, and that the 
hospital continue to be paid the payment rate for composite APC 8010. 
Under this policy, the I/OCE would continue to determine whether to pay 
for these specified mental health services individually, or to make a 
single payment at the same payment rate established for APC 5862 for 
all of the specified mental health services furnished by the hospital 
on that single date of service. We continue to believe that the costs 
associated with administering a partial hospitalization program at a 
hospital represent the most resource-intensive of all outpatient mental 
health services. Therefore, we do not believe that we should pay more 
for mental health services under the OPPS than the highest partial 
hospitalization per diem payment rate for hospitals.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45667 through 45678), 
we proposed to combine the existing Level 1 and Level 2 hospital- based 
PHP APCs into a single hospital-based PHP APC and thereby discontinue 
APCs 5861 (Level 1 Partial Hospitalization (3 services) for Hospital-
Based PHPs) and 5862 (Level 2 Partial Hospitalization (4 or more 
services) for Hospital-Based PHPs) and replace them with proposed new 
APC 5863 (Partial Hospitalization (3 or more services per day)). This 
proposal is being finalized in section VIII. of this final rule with 
comment period. In light of this policy, we are modifying our final 
policy for CY 2017, as fully discussed below.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2017 proposal, without modification, that when 
the aggregate payment for specified mental health services provided by 
one hospital to a single beneficiary on a single date of service, based 
on the payment rates associated with the APCs for the individual 
services, exceeds the maximum per diem payment rate for partial 
hospitalization services provided by a hospital, those specified mental 
health services will be paid through composite APC 8010 (Mental Health 
Services Composite) for CY 2017. In addition, we are finalizing our CY 
2017 proposal, with modification, to set the payment rate for composite 
APC 8010 for CY 2017 at the same payment rate that we established for 
new APC 5863, which is the maximum partial hospitalization per diem 
payment rate for a hospital, and that the hospital continue to be paid 
the payment rate for composite APC 8010.
(3) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Effective January 1, 2009, we provide a single payment each time a 
hospital submits a claim for more than one imaging procedure within an 
imaging family on the same date of service, in order to reflect and 
promote the efficiencies hospitals can achieve when performing multiple 
imaging procedures during a single session (73 FR 41448 through 41450). 
We utilize three imaging families based on imaging modality for 
purposes of this methodology: (1) Ultrasound; (2) computed tomography 
(CT) and computed tomographic angiography (CTA); and (3) magnetic 
resonance imaging (MRI) and magnetic resonance angiography (MRA). The 
HCPCS codes subject to the multiple imaging composite policy and their 
respective families are listed in Table 12 of the CY 2014 OPPS/ASC 
final rule with comment period (78 FR 74920 through 74924). While there 
are three imaging families, there are five multiple imaging composite 
APCs due to the statutory requirement under section 1833(t)(2)(G) of 
the Act that we differentiate payment for OPPS imaging services 
provided with and without contrast. While the ultrasound procedures 
included under the policy do not involve contrast, both CT/CTA and MRI/
MRA scans can be provided either with or without contrast. The five 
multiple imaging composite APCs established in CY 2009 are:
     APC 8004 (Ultrasound Composite);
     APC 8005 (CT and CTA without Contrast Composite);
     APC 8006 (CT and CTA with Contrast Composite);
     APC 8007 (MRI and MRA without Contrast Composite); and
     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 based on the payment rate for APC 8008, the ``with 
contrast'' composite APC.
    We make a single payment for those imaging procedures that qualify 
for payment based on the composite APC payment rate, which includes any 
packaged services furnished on the same date of service. The standard 
(noncomposite) APC assignments continue to apply for single imaging 
procedures and multiple imaging procedures performed across families. 
For a full discussion of the development of the multiple imaging 
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68559 through 68569).
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45624 through 45625), 
we proposed to continue to pay for all multiple imaging procedures 
within an imaging family performed on the same date of service using 
the multiple imaging composite APC payment methodology. We continue to 
believe that this policy will reflect and promote the efficiencies 
hospitals can achieve when performing multiple imaging procedures 
during a single session.
    The proposed CY 2017 payment rates for the five multiple imaging 
composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) were based on 
proposed geometric mean costs calculated from a partial year of CY 2015 
claims available for the CY 2017 OPPS/ASC proposed rule that qualified 
for composite payment under the current policy (that is, those claims 
reporting more than one procedure within the same family on a single 
date of service). To calculate the proposed geometric mean costs, we 
used the same methodology that we used to calculate the final geometric 
mean costs for these composite APCs since CY 2014, as described in the 
CY 2014 OPPS/ASC final rule with comment period (78 FR 74918). The 
imaging HCPCS codes referred to as ``overlap bypass codes'' that we 
removed from the bypass list for purposes of calculating the proposed 
multiple imaging composite APC geometric mean costs, in accordance with 
our established methodology as stated in the CY 2014 OPPS/ASC final 
rule with comment period (78 FR 74918), were identified by asterisks in 
Addendum N to the CY 2017 OPPS/ASC proposed rule (which is available 
via the Internet on the CMS Web site) and were discussed in more detail 
in section II.A.1.b. of the CY 2017 OPPS/ASC proposed rule. For the CY 
2017 OPPS/ASC proposed rule, we were able to identify approximately 
599,294 ``single session'' claims out of an estimated 1.6 million 
potential claims for payment through composite APCs from our 
ratesetting claims data, which represents approximately 38 percent of 
all eligible claims, to calculate the proposed CY 2017 geometric mean 
costs for the multiple imaging composite APCs. Table 7 of the CY 2017 
OPPS/

[[Page 79590]]

ASC proposed rule lists the proposed HCPCS codes that would be subject 
to the multiple imaging composite APC policy and their respective 
families and approximate composite APC proposed geometric mean costs 
for CY 2017.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal to continue the use of multiple imaging 
composite APCs to pay for services providing more than one imaging 
procedure from the same family on the same date, without modification. 
For this CY 2017 final rule with comment period, we were able to 
identify approximately 635,363 ``single session'' claims out of an 
estimated 1.7 million potential claims for payment through composite 
APCs from our ratesetting claims data, which represents approximately 
37 percent of all eligible claims, to calculate the final CY 2017 
geometric mean costs for the multiple imaging composite APCs. Table 3 
below lists the HCPCS codes that are subject to the multiple imaging 
composite APC policy and their respective families and approximate 
composite APC geometric mean costs for CY 2017.

               Table 3--Final OPPS Imaging Families and Multiple Imaging Procedure Composite APCs
----------------------------------------------------------------------------------------------------------------
                                              Family 1--Ultrasound
-----------------------------------------------------------------------------------------------------------------
    CY 2017 APC 8004 (ultrasound composite)            CY 2017 Approximate APC geometric mean cost = $296
----------------------------------------------------------------------------------------------------------------
76604.........................................  Us exam, chest.
76700.........................................  Us exam, abdom, complete.
76705.........................................  Echo exam of abdomen.
76770.........................................  Us exam abdo back wall, comp.
76775.........................................  Us exam abdo back wall, lim.
76776.........................................  Us exam k transpl w/Doppler.
76831.........................................  Echo exam, uterus.
76856.........................................  Us exam, pelvic, complete.
76870.........................................  Us exam, scrotum.
76857.........................................  Us exam, pelvic, limited.
----------------------------------------------------------------------------------------------------------------


 
                                 Family 2--CT and CTA with and without contrast
-----------------------------------------------------------------------------------------------------------------
 CY 2017 APC 8005 (CT and CTA without contrast
                 composite) *                          CY 2017 Approximate APC geometric mean cost = $325
----------------------------------------------------------------------------------------------------------------
70450.........................................  Ct head/brain w/o dye.
70480.........................................  Ct orbit/ear/fossa w/o dye.
70486.........................................  Ct maxillofacial w/o dye.
70490.........................................  Ct soft tissue neck w/o dye.
71250.........................................  Ct thorax w/o dye.
72125.........................................  Ct neck spine w/o dye.
72128.........................................  Ct chest spine w/o dye.
72131.........................................  Ct lumbar spine w/o dye.
72192.........................................  Ct pelvis w/o dye.
73200.........................................  Ct upper extremity w/o dye.
73700.........................................  Ct lower extremity w/o dye.
74150.........................................  Ct abdomen w/o dye.
74261.........................................  Ct colonography, w/o dye.
74176.........................................  Ct angio abd & pelvis.
----------------------------------------------------------------------------------------------------------------


 
  CY 2017 APC 8006 (CT and CTA with contrast
                  composite)                           CY 2017 Approximate APC geometric mean cost = $548
----------------------------------------------------------------------------------------------------------------
70487.........................................  Ct maxillofacial w/dye.
70460.........................................  Ct head/brain w/dye.
70470.........................................  Ct head/brain w/o & w/dye.
70481.........................................  Ct orbit/ear/fossa w/dye.
70482.........................................  Ct orbit/ear/fossa w/o & w/dye.
70488.........................................  Ct maxillofacial w/o & w/dye.
70491.........................................  Ct soft tissue neck w/dye.
70492.........................................  Ct sft tsue nck w/o & w/dye.
70496.........................................  Ct angiography, head.
70498.........................................  Ct angiography, neck.
71260.........................................  Ct thorax w/dye.
71270.........................................  Ct thorax w/o & w/dye.
71275.........................................  Ct angiography, chest.
72126.........................................  Ct neck spine w/dye.
72127.........................................  Ct neck spine w/o & w/dye.
72129.........................................  Ct chest spine w/dye.
72130.........................................  Ct chest spine w/o & w/dye.
72132.........................................  Ct lumbar spine w/dye.
72133.........................................  Ct lumbar spine w/o & w/dye.
72191.........................................  Ct angiograph pelv w/o & w/dye.
72193.........................................  Ct pelvis w/dye.
72194.........................................  Ct pelvis w/o & w/dye.
73201.........................................  Ct upper extremity w/dye.
73202.........................................  Ct uppr extremity w/o & w/dye.

[[Page 79591]]

 
73206.........................................  Ct angio upr extrm w/o & w/dye.
73701.........................................  Ct lower extremity w/dye.
73702.........................................  Ct lwr extremity w/o & w/dye.
73706.........................................  Ct angio lwr extr w/o & w/dye.
74160.........................................  Ct abdomen w/dye.
74170.........................................  Ct abdomen w/o & w/dye.
74175.........................................  Ct angio abdom w/o & w/dye.
74262.........................................  Ct colonography, w/dye.
75635.........................................  Ct angio abdominal arteries.
74177.........................................  Ct angio abd & pelv w/contrast.
74178.........................................  Ct angio abd & pelv 1+ regns.
----------------------------------------------------------------------------------------------------------------
* If a ``without contrast'' CT or CTA procedure is performed during the same session as a ``with contrast'' CT
  or CTA procedure, the I/OCE assigns the procedure to APC 8006 rather than APC 8005.


----------------------------------------------------------------------------------------------------------------
                                 Family 3--MRI and MRA with and without Contrast
-----------------------------------------------------------------------------------------------------------------
CY 2017 APC 8007 (MRI and MRA without contrast
                 composite) *                          CY 2017 Approximate APC geometric mean cost = $631
----------------------------------------------------------------------------------------------------------------
70336.........................................  Magnetic image, jaw joint.
70540.........................................  Mri orbit/face/neck w/o dye.
70544.........................................  Mr angiography head w/o dye.
70547.........................................  Mr angiography neck w/o dye.
70551.........................................  Mri brain w/o dye.
70554.........................................  Fmri brain by tech.
71550.........................................  Mri chest w/o dye.
72141.........................................  Mri neck spine w/o dye.
72146.........................................  Mri chest spine w/o dye.
72148.........................................  Mri lumbar spine w/o dye.
72195.........................................  Mri pelvis w/o dye.
73218.........................................  Mri upper extremity w/o dye.
73221.........................................  Mri joint upr extrem w/o dye.
73718.........................................  Mri lower extremity w/o dye.
73721.........................................  Mri jnt of lwr extre w/o dye.
74181.........................................  Mri abdomen w/o dye.
75557.........................................  Cardiac mri for morph.
75559.........................................  Cardiac mri w/stress img.
C8901.........................................  MRA w/o cont, abd.
C8904.........................................  MRI w/o cont, breast, uni.
C8907.........................................  MRI w/o cont, breast, bi.
C8910.........................................  MRA w/o cont, chest.
C8913.........................................  MRA w/o cont, lwr ext.
C8919.........................................  MRA w/o cont, pelvis.
C8932.........................................  MRA, w/o dye, spinal canal.
C8935.........................................  MRA, w/o dye, upper extr.
----------------------------------------------------------------------------------------------------------------


 
  CY 2017 APC 8008 (MRI and MRA with contrast
                  composite)                           CY 2017 Approximate APC geometric mean cost = $945
----------------------------------------------------------------------------------------------------------------
70549.........................................  Mr angiograph neck w/o & w/dye.
70542.........................................  Mri orbit/face/neck w/dye.
70543.........................................  Mri orbt/fac/nck w/o & w/dye.
70545.........................................  Mr angiography head w/dye.
70546.........................................  Mr angiograph head w/o & w/dye.
70547.........................................  Mr angiography neck w/o dye.
70548.........................................  Mr angiography neck w/dye.
70552.........................................  Mri brain w/dye.
70553.........................................  Mri brain w/o & w/dye.
71551.........................................  Mri chest w/dye.
71552.........................................  Mri chest w/o & w/dye.
72142.........................................  Mri neck spine w/dye.
72147.........................................  Mri chest spine w/dye.
72149.........................................  Mri lumbar spine w/dye.
72156.........................................  Mri neck spine w/o & w/dye.
72157.........................................  Mri chest spine w/o & w/dye.
72158.........................................  Mri lumbar spine w/o & w/dye.
72196.........................................  Mri pelvis w/dye.
72197.........................................  Mri pelvis w/o & w/dye.
73219.........................................  Mri upper extremity w/dye.
73220.........................................  Mri uppr extremity w/o & w/dye.
73222.........................................  Mri joint upr extrem w/dye.
73223.........................................  Mri joint upr extr w/o & w/dye.
73719.........................................  Mri lower extremity w/dye.

[[Page 79592]]

 
73720.........................................  Mri lwr extremity w/o & w/dye.
73722.........................................  Mri joint of lwr extr w/dye.
73723.........................................  Mri joint lwr extr w/o & w/dye.
74182.........................................  Mri abdomen w/dye.
74183.........................................  Mri abdomen w/o & w/dye.
75561.........................................  Cardiac mri for morph w/dye.
75563.........................................  Card mri w/stress img & dye.
C8900.........................................  MRA w/cont, abd.
C8902.........................................  MRA w/o fol w/cont, abd.
C8903.........................................  MRI w/cont, breast, uni.
C8905.........................................  MRI w/o fol w/cont, brst, un.
C8906.........................................  MRI w/cont, breast, bi.
C8908.........................................  MRI w/o fol w/cont, breast,.
C8909.........................................  MRA w/cont, chest.
C8911.........................................  MRA w/o fol w/cont, chest.
C8912.........................................  MRA w/cont, lwr ext.
C8914.........................................  MRA w/o fol w/cont, lwr ext.
C8918.........................................  MRA w/cont, pelvis.
C8920.........................................  MRA w/o fol w/cont, pelvis.
C8931.........................................  MRA, w/dye, spinal canal.
C8933.........................................  MRA, w/o&w/dye, spinal canal.
C8934.........................................  MRA, w/dye, upper extremity.
C8936.........................................  MRA, w/o&w/dye, upper extr.
----------------------------------------------------------------------------------------------------------------
* If a ``without contrast'' MRI or MRA procedure is performed during the same session as a ``with contrast'' MRI
  or MRA procedure, the I/OCE assigns the procedure to APC 8008 rather than APC 8007.

3. Changes to Packaged Items and Services
a. Background and Rationale for Packaging in the OPPS
    Like other prospective payment systems, the OPPS relies on the 
concept of averaging to establish a payment rate for services. The 
payment may be more or less than the estimated cost of providing a 
specific service or a bundle of specific services for a particular 
patient. The OPPS packages payment for multiple interrelated items and 
services into a single payment to create incentives for hospitals to 
furnish services most efficiently and to manage their resources with 
maximum flexibility. Our packaging policies support our strategic goal 
of using larger payment bundles in the OPPS to maximize hospitals' 
incentives to provide care in the most efficient manner. For example, 
where there are a variety of devices, drugs, items, and supplies that 
could be used to furnish a service, some of which are more costly than 
others, packaging encourages hospitals to use the most cost-efficient 
item that meets the patient's needs, rather than to routinely use a 
more expensive item, which often results if separate payment is 
provided for the item.
    Packaging also encourages hospitals to effectively negotiate with 
manufacturers and suppliers to reduce the purchase price of items and 
services or to explore alternative group purchasing arrangements, 
thereby encouraging the most economical health care delivery. 
Similarly, packaging encourages hospitals to establish protocols that 
ensure that necessary services are furnished, while scrutinizing the 
services ordered by practitioners to maximize the efficient use of 
hospital resources. Packaging payments into larger payment bundles 
promotes the predictability and accuracy of payment for services over 
time. Finally, packaging may reduce the importance of refining service-
specific payment because packaged payments include costs associated 
with higher cost cases requiring many ancillary items and services and 
lower cost cases requiring fewer ancillary items and services. Because 
packaging encourages efficiency and is an essential component of a 
prospective payment system, packaging payment for items and services 
that are typically integral, ancillary, supportive, dependent, or 
adjunctive to a primary service has been a fundamental part of the OPPS 
since its implementation in August 2000. For an extensive discussion of 
the history and background of the OPPS packaging policy, we refer 
readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66580), the CY 2014 OPPS/ASC 
final rule with comment period (78 FR 74925), the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66817), and the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70343). As we continue to develop 
larger payment groups that more broadly reflect services provided in an 
encounter or episode of care, we have expanded the OPPS packaging 
policies. Most, but not necessarily all, items and services currently 
packaged in the OPPS are listed in 42 CFR 419.2(b). Our overarching 
goal is to make OPPS payments for all services paid under the OPPS more 
consistent with those of a prospective payment system and less like 
those of a per service fee schedule, which pays separately for each 
coded item. As a part of this effort, we have continued to examine the 
payment for items and services provided under the OPPS to determine 
which OPPS services can be packaged to further achieve the objective of 
advancing the OPPS toward a more prospective payment system.
    For CY 2017, we have examined our OPPS packaging policies, 
reviewing categories of integral, ancillary, supportive, dependent, or 
adjunctive items and services that are packaged into payment for the 
primary service that they support. In the CY 2017 OPPS/ASC proposed 
rule (81 FR 45628), we proposed some modifications to our packaging 
policies. The specific proposals and any applicable summations of and 
responses to any public comments received in response to these 
proposals are discussed under the sections below.
b. Clinical Diagnostic Laboratory Test Packaging Policy
(1) Background
    In CY 2014, we finalized a policy to package payment for most 
clinical

[[Page 79593]]

diagnostic laboratory tests in the OPPS (78 FR 74939 through 74942, and 
42 CFR 419.2(b)(17)). In CY 2016, we made some minor modifications to 
this policy (80 FR 70348 through 70350). Under current policy, certain 
clinical diagnostic laboratory tests that are listed on the Clinical 
Laboratory Fee Schedule (CLFS) are packaged in the OPPS as integral, 
ancillary, supportive, dependent, or adjunctive to the primary service 
or services provided in the hospital outpatient setting. Specifically, 
we conditionally package laboratory tests and only pay separately for 
laboratory tests when (1) they are the only services provided to a 
beneficiary on a claim; (2) they are ``unrelated'' laboratory tests, 
meaning they are on the same claim as other hospital outpatient 
services, but are ordered for a different diagnosis than the other 
hospital outpatient services and are ordered by a different 
practitioner than the practitioner who ordered the other hospital 
outpatient services; (3) they are molecular pathology tests; or (4) the 
laboratory tests are considered preventive services.
(2) ``Unrelated'' Laboratory Test Exception
    Laboratory tests are separately paid in the HOPD when they are 
considered ``unrelated'' laboratory tests. Unrelated laboratory tests 
are tests on the same claim as other hospital outpatient services, but 
are ordered for a different diagnosis than the other hospital 
outpatient services and are ordered by a different practitioner than 
the practitioner who ordered the other hospital outpatient services. 
Unrelated laboratory tests are designated for separate payment by 
hospitals with the ``L1'' modifier. This is the only use of the ``L1'' 
modifier.
    For CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45628), 
we proposed to discontinue the unrelated laboratory test exception (and 
the ``L1'' modifier) for the following reasons: We believe that, in 
most cases, ``unrelated'' laboratory tests are not significantly 
different than most other packaged laboratory tests provided in the 
HOPD. Multiple hospitals have informed us that the ``unrelated'' 
laboratory test exception is not useful to them because they cannot 
determine when a laboratory test has been ordered by a different 
physician and for a different diagnosis than the other services 
reported on the same claim. We agree with these hospitals, and we also 
believe that the requirements for ``unrelated'' laboratory tests 
(different diagnosis and different ordering physician) do not 
necessarily correlate with the relatedness of a laboratory test to the 
other HOPD services that a patient receives during the same hospital 
stay. In the context of most hospital outpatient encounters, most 
laboratory tests are related in some way to other services being 
provided because most common laboratory tests evaluate the functioning 
of the human body as a physiologic system and, therefore, relate to 
other tests and interventions that a patient receives. Also, it is not 
uncommon for beneficiaries to have multiple diagnoses, and often times 
the various diagnoses are related in some way. Therefore, the 
associated diagnosis is not necessarily indicative of how related a 
laboratory test is to other hospital outpatient services performed 
during a hospital stay, especially given the granularity of ICD-10 
diagnosis coding. Packaging of other ancillary services in the OPPS is 
not dependent upon a common diagnosis with the primary service into 
which an ancillary service is packaged. Therefore, we do not believe 
that this should be a requirement for laboratory test packaging. 
Furthermore, we believe that just because a laboratory test is ordered 
by a different physician than the physician who ordered the other 
hospital outpatient services furnished during a hospital outpatient 
stay does not necessarily mean that the laboratory test is not related 
to other services being provided to a beneficiary.
    Therefore, because the ``different physician, different diagnosis'' 
criteria for ``unrelated'' laboratory tests do not clearly identify or 
distinguish laboratory tests that are not integral, ancillary, 
supportive, dependent, or adjunctive to other hospital outpatient 
services provided to the beneficiary during the hospital stay, we 
proposed to no longer permit the use of the ``L1'' modifier to self-
designate an exception to the laboratory test packaging under these 
circumstances, and seek separate payment for such laboratory tests at 
the CLFS payment rates. Instead, we proposed to package any and all 
laboratory tests (except molecular pathology tests, certain ADLTs, and 
preventive tests) if they appear on a claim with other hospital 
outpatient services.
    We invited public comments on this proposal.
    Comment: The majority of commenters supported the proposal. Some of 
the commenters believed that the proposal would reduce administrative 
burden. Other commenters opposed the proposal and stated that, despite 
the burden, they would rather have the opportunity for separate payment 
for ``unrelated'' laboratory tests. Some commenters believed that the 
proposal would result in no separate payment for laboratory tests when 
laboratory tests are the only services provided.
    Response: We appreciate the commenters' support. The proposal was 
made in response to concerns raised by hospitals about when to use 
modifier ``L1,'' and because we agreed with the commenters' concerns as 
noted above. We also do not believe that the discontinuation of the 
modifier ``L1'' policy is inconsistent with our policy to package items 
and services that are integral, ancillary, supportive, dependent, or 
adjunctive to other hospital outpatient services. Also, we stated in 
the CY 2017 OPPS/ASC proposed rule (81 FR 45628) that ``[i]n the 
context of most hospital outpatient encounters, most laboratory tests 
are related in some way to other services being provided because most 
common laboratory tests evaluate the functioning of the human body as a 
physiologic system and therefore relate to other tests and 
interventions that a patient receives.'' Therefore, we do not believe 
that it is necessary to attempt to identify certain laboratory tests as 
unrelated to other services furnished to a patient. Finally, the 
discontinuation of the ``L1'' modifier and the associated policy does 
not affect the separate payment for laboratory tests when these 
procedures are the only services that are provided to the beneficiary.
    After consideration of the public comments we received, we are 
finalizing, as proposed, the discontinuation of the ``unrelated'' 
laboratory test exception and consequently the ``L1'' modifier.
(3) Molecular Pathology Test Exception
    In 2014, we excluded from the laboratory packaging policy molecular 
pathology tests described by CPT codes in the ranges of 81200 through 
81383, 81400 through 81408, and 81479 (78 FR 74939 through 74942). In 
2016, we expanded this policy to include not only the original code 
range but also all new molecular pathology test codes. Molecular 
pathology laboratory tests were excluded from packaging because we 
believed that these relatively new tests may have a different pattern 
of clinical use than more conventional laboratory tests, which may make 
them generally less tied to a primary service in the hospital 
outpatient setting than the more common and routine laboratory tests 
that are packaged (80 FR 70348 through 70350).
    In response to the CY 2016 OPPS/ASC proposed rule, commenters 
argued that CMS' rationale for excluding molecular

[[Page 79594]]

pathology tests from the laboratory test packaging policy also applies 
to certain CPT codes that describe some new multianalyte assays with 
algorithmic analyses (MAAAs).
    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70349 
through 70350), we stated that ``we may consider whether additional 
exceptions to the OPPS laboratory test packaging policy should apply to 
tests other than molecular pathology tests in the future.'' After 
further consideration, we agree with these commenters that the 
exception that currently applies to molecular pathology tests may be 
appropriately applied to other laboratory tests that, like molecular 
pathology tests, are relatively new and may have a different pattern of 
clinical use than more conventional laboratory tests, which may make 
them generally less tied to a primary service in the hospital 
outpatient setting than the more common and routine laboratory tests 
that are packaged. Therefore, for CY 2017, in the CY 2017 OPPS/ASC 
proposed rule (81 FR 45628), we proposed an expansion of the laboratory 
packaging exception that currently applies to molecular pathology tests 
to also apply to all advanced diagnostic laboratory tests (ADLTs) that 
meet the criteria of section 1834A(d)(5)(A) of the Act. We believe that 
some of these diagnostic tests that meet these criteria will not be 
molecular pathology tests but will also have a different pattern of 
clinical use than more conventional laboratory tests, which may make 
them generally less tied to a primary service in the hospital 
outpatient setting than the more common and routine laboratory tests 
that are packaged. We proposed to assign status indicator ``A'' 
(Separate payment under the CLFS) to ADLTs once a laboratory test is 
designated an ADLT under the CLFS.
    We invited public comments on this proposal.
    Comment: Many commenters supported the proposal. A few commenters 
suggested that CMS apply the exception not just to ADLTs that meet the 
criteria of section 1834A(d)(5)(A) of the Act, but to all MAAAs.
    Response: We appreciate the commenters' support. Regarding the 
suggestion that we exempt all MAAAs from OPPS packaging, we do not 
believe that this would be prudent, as MAAAs are a broad category of 
tests. We are limiting the expansion of this exception to only those 
ADLTs that meet the criteria of section 1834A(d)(5)(A) of the Act, 
which are defined as tests that provide an analysis of multiple 
biomarkers of DNA, RNA, or proteins combined with a unique algorithm to 
yield a single patient-specific result.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to assign status 
indicator ``A'' (Separate payment under the CLFS) to ADLTs once a 
laboratory test is designated an ADLT under the CLFS.
c. Conditional Packaging Status Indicators ``Q1'' and ``Q2''
(1) Background
    Packaged payment versus separate payment of items and services in 
the OPPS is designated at the code level through the assignment of a 
status indicator to all CPT and HCPCS codes. One type of packaging in 
the OPPS is conditional packaging, which means that, under certain 
circumstances, items and services are packaged, and under other 
circumstances, they are paid separately. There are several different 
conditional packaging status indicators. Two of these status indicators 
indicate packaging of the services with other services furnished on the 
same date of service: Status indicator ``Q1,'' which packages items or 
services on the same date of service with services assigned status 
indicator ``S'' (Procedure or Service, Not Discounted When Multiple), 
``T'' (Procedure or Service, Multiple Procedure Reduction Applies), or 
``V'' (Clinic or Emergency Department Visit); and status indicator 
``Q2,'' which packages items or services on the same date of service 
with services assigned status indicator ``T.'' Other conditional 
packaging status indicators, ``Q4'' (Conditionally packaged laboratory 
tests) and ``J1''/``J2'' (Hospital Part B services paid through a 
comprehensive APC), package services on the same claim, regardless of 
the date of service.
(2) Change in Conditional Packaging Status Indicators Logic
    We do not believe that some conditional packaging status indicators 
should package based on date of service, while other conditional 
packaging status indicators package based on services reported on the 
same claim. For CY 2017, we proposed to align the packaging logic for 
all of the conditional packaging status indicators and change the logic 
for status indicators ``Q1'' and ``Q2'' so that packaging would occur 
at the claim level (instead of based on the date of service) to promote 
consistency and ensure that items and services that are provided during 
a hospital stay that may span more than one day are appropriately 
packaged according to OPPS packaging policies (81 FR 45629). We pointed 
out that this would increase the conditional packaging of conditionally 
packaged items and services because conditional packaging would occur 
whenever a conditionally packaged item or service is reported on the 
same claim as a primary service without regard to the date of service.
    We invited public comments on this proposal.
    Comment: The majority of commenters opposed the proposal. These 
commenters opposed the proposal primarily because of a general 
opposition to packaging in the OPPS. Other commenters supported the 
proposal and acknowledged CMS' efforts to promote consistency in the 
OPPS. Some commenters requested further information on the impacts of 
the proposed change.
    Response: We thank the commenters who support this proposal. The 
commenters who opposed the proposal did not provide specifics as to why 
the proposed change would be inconsistent with OPPS packaging policies. 
We believe that conditional packaging should operate at the claim level 
for an entire hospital stay and not be limited to a single date of 
service. We refer the commenters interested in the impacts of this and 
other policies to section XXIII. of this final rule with comment 
period.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to align the packaging 
logic for all of the conditional packaging status indicators and change 
the logic for status indicators ``Q1'' and ``Q2'' so that packaging 
occurs at the claim level (instead of based on the date of service).
4. Calculation of OPPS Scaled Payment Weights
    We established a policy in the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68283) of using geometric mean-based APC costs to 
calculate relative payment weights under the OPPS. In the CY 2016 OPPS/
ASC final rule with comment period (80 FR 70350 through 70351), we 
applied this policy and calculated the relative payment weights for 
each APC for CY 2016 that were shown in Addenda A and B to that final 
rule with comment period (which were made available via the Internet on 
the CMS Web site) using the APC costs discussed in sections II.A.1. and 
II.A.2. of that final rule with comment period. For CY 2017, we 
proposed to continue to apply the policy established in CY 2013 and 
calculate relative payment weights for each APC for CY 2017 using 
geometric mean-based APC costs (81 FR 45629).
    For CY 2012 and CY 2013, outpatient clinic visits were assigned to 
one of five

[[Page 79595]]

levels of clinic visit APCs, with APC 0606 representing a mid-level 
clinic visit. In the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 75036 through 75043), we finalized a policy that created 
alphanumeric HCPCS code G0463 (Hospital outpatient clinic visit for 
assessment and management of a patient), representing any and all 
clinic visits under the OPPS. HCPCS code G0463 was assigned to APC 0634 
(Hospital Clinic Visits). We also finalized a policy to use CY 2012 
claims data to develop the CY 2014 OPPS payment rates for HCPCS code 
G0463 based on the total geometric mean cost of the levels one through 
five CPT E/M codes for clinic visits previously recognized under the 
OPPS (CPT codes 99201 through 99205 and 99211 through 99215). In 
addition, we finalized a policy to no longer recognize a distinction 
between new and established patient clinic visits.
    For CY 2016, we deleted APC 0634 and reassigned the outpatient 
clinic visit HCPCS code G0463 to APC 5012 (Level 2 Examinations and 
Related Services) (80 FR 70351).
    For CY 2017, we proposed to continue to standardize all of the 
relative payment weights to APC 5012 (81 FR 45629). We believe that 
standardizing relative payment weights to the geometric mean of the APC 
to which HCPCS code G0463 is assigned maintains consistency in 
calculating unscaled weights that represent the cost of some of the 
most frequently provided OPPS services. For CY 2017, in the CY 2017 
OPPS/ASC proposed rule (81 FR 45629), we proposed to assign APC 5012 a 
relative payment weight of 1.00 and to divide the geometric mean cost 
of each APC by the geometric mean cost for APC 5012 to derive the 
unscaled relative payment weight for each APC. The choice of the APC on 
which to standardize the relative payment weights does not affect 
payments made under the OPPS because we scale the weights for budget 
neutrality.
    Section 1833(t)(9)(B) of the Act requires that APC reclassification 
and recalibration changes, wage index changes, and other adjustments be 
made in a budget neutral manner. Budget neutrality ensures that the 
estimated aggregate weight under the OPPS for CY 2017 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 2016 scaled relative payment weights to 
the estimated aggregate weight using the proposed CY 2017 unscaled 
relative payment weights.
    We did not receive any public comments on our proposal to use the 
geometric mean cost of renumbered APC 5012 to standardize relative 
payment weights. Therefore, we are finalizing our proposal and 
assigning APC 5012 the relative payment weight of 1.00, and using the 
relative payment weight for APC 5012 to derive the unscaled relative 
payment weight for each APC for CY 2017.
    For CY 2016, we multiplied the CY 2016 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2015 claims to calculate the total relative 
payment weight for each service. We then added together the total 
relative payment weight for each of these services in order to 
calculate an estimated aggregate weight for the year. For CY 2017, in 
the CY 2017 OPPS/ASC proposed rule (81 FR 45629), we proposed to apply 
the same process using the estimated CY 2017 unscaled relative payment 
weights rather than scaled relative payment weights. We proposed to 
calculate the weight scalar by dividing the CY 2016 estimated aggregate 
weight by the unscaled CY 2017 estimated aggregate weight.
    For a detailed discussion of the weight scalar calculation, we 
refer readers to the OPPS claims accounting document available on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Click on the CY 2017 OPPS 
final rule link and open the claims accounting document link at the 
bottom of the page.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45630), we proposed to 
compare the estimated unscaled relative payment weights in CY 2017 to 
the estimated total relative payment weights in CY 2016 using CY 2015 
claims data, holding all other components of the payment system 
constant to isolate changes in total weight. Based on this comparison, 
we proposed to adjust the calculated CY 2017 unscaled relative payment 
weights for purposes of budget neutrality. We proposed to adjust the 
estimated CY 2017 unscaled relative payment weights by multiplying them 
by a weight scaler of 1.4059 to ensure that the proposed CY 2017 
relative payment weights are scaled to be budget neutral. The proposed 
CY 2017 relative payment weights listed in Addenda A and B to the 
proposed rule (which are available via the Internet on the CMS Web 
site) were scaled and incorporated the recalibration adjustments 
discussed in sections II.A.1. and II.A.2. of the proposed rule.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain SCODs. Section 1833(t)(14)(H) of the Act provides that 
additional expenditures resulting from this paragraph shall not be 
taken into account in establishing the conversion factor, weighting, 
and other adjustment factors for 2004 and 2005 under paragraph (9), but 
shall be taken into account for subsequent years. Therefore, the cost 
of those SCODs (as discussed in section V.B.3. of this final rule with 
comment period) is included in the budget neutrality calculations for 
the CY 2017 OPPS.
    We did not receive any public comments on the proposed weight 
scaler calculation.
    Therefore, we are finalizing our proposal to use the calculation 
process described in the proposed rule, without modification. Using 
updating final rule claims data, we are updating the estimated CY 2017 
unscaled relative payment weights by multiplying them by a weight 
scaler of 1.4208 to ensure that the final CY 2017 relative payment 
weights are scaled to be budget neutral.
B. Conversion Factor Update
    Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to 
update the conversion factor used to determine the payment rates under 
the OPPS on an annual basis by applying the OPD fee schedule increase 
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject 
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee 
schedule increase factor is equal to the hospital inpatient market 
basket percentage increase applicable to hospital discharges under 
section 1886(b)(3)(B)(iii) of the Act. In the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56938 through 81 FR 56939), consistent with current 
law, based on IHS Global Insight, Inc.'s second quarter 2016 forecast 
of the FY 2017 market basket increase, the FY 2017 IPPS market basket 
update is 2.7 percent.
    However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(v) of the Act, as 
added by section 3401(i) of the Patient Protection and Affordable Care 
Act of 2010 (Pub. L. 111-148) and as amended by section 10319(g) of 
that law and further amended by section 1105(e) of the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), provide 
adjustments to the OPD fee schedule increase factor for CY 2017.
    Specifically, section 1833(t)(3)(F)(i) of the Act requires that, 
for 2012 and subsequent years, the OPD fee schedule increase factor 
under subparagraph

[[Page 79596]]

(C)(iv) be reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the 
Act defines the productivity adjustment as equal to the 10-year moving 
average of changes in annual economy-wide, private nonfarm business 
multifactor productivity (MFP) (as projected by the Secretary for the 
10-year period ending with the applicable fiscal year, year, cost 
reporting period, or other annual period) (the ``MFP adjustment''). In 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we 
finalized our methodology for calculating and applying the MFP 
adjustment, and then revised this methodology as discussed in the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49509). In the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 56938 through 81 FR 56939), we discussed the 
calculation of the final MFP adjustment for FY 2017, which is 0.3 
percentage point.
    In the CY 2017 OPPS/ASC proposed rule, we proposed that if more 
recent data became subsequently available after the publication of the 
proposed rule (for example, a more recent estimate of the market basket 
increase and the MFP adjustment), we would use such updated data, if 
appropriate, to determine the CY 2017 market basket update and the MFP 
adjustment, which are components in calculating the OPD fee schedule 
increase factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of 
the Act, in this CY 2017 OPPS/ASC final rule with comment period. 
Consistent with that proposal, and the FY 2017 IPPS/LTCH PPS final 
rule, we applied the updated final FY 2017 market basket percentage 
increase (2.7 percent) and the MFP adjustment (0.3 percent) to the OPD 
fee schedule increase factor for the CY 2017 OPPS.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that, 
for each of years 2010 through 2019, the OPD fee schedule increase 
factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the 
adjustment described in section 1833(t)(3)(G) of the Act. For CY 2017, 
section 1833(t)(3)(G)(v) of the Act provides a 0.75 percentage point 
reduction to the OPD fee schedule increase factor under section 
1833(t)(3)(C)(iv) of the Act. Therefore, in accordance with sections 
1833(t)(3)(F)(ii) and 1833(t)(3)(G)(v) of the Act, in the CY 2017 OPPS/
ASC proposed rule, we proposed to apply a 0.75 percentage point 
reduction to the OPD fee schedule increase factor for CY 2017.
    We note that section 1833(t)(3)(F) of the Act provides that 
application of this subparagraph may result in the OPD fee schedule 
increase factor under section 1833(t)(3)(C)(iv) of the Act being less 
than 0.0 percent for a year, and may result in OPPS payment rates being 
less than rates for the preceding year. As described in further detail 
below, we are applying an OPD fee schedule increase factor of 1.65 
percent for the CY 2017 OPPS (which is 2.7 percent, the final estimate 
of the hospital inpatient market basket percentage increase, less the 
final 0.3 percentage point MFP adjustment, and less the 0.75 percentage 
point additional adjustment).
    Hospitals that fail to meet the Hospital OQR Program reporting 
requirements are subject to an additional reduction of 2.0 percentage 
points from the OPD fee schedule increase factor adjustment to the 
conversion factor that would be used to calculate the OPPS payment 
rates for their services, as required by section 1833(t)(17) of the 
Act. For further discussion of the Hospital OQR Program, we refer 
readers to section XIII. of this final rule with comment period.
    In the CY 2017 OPPS/ASC proposed rule, we proposed to amend 42 CFR 
419.32(b)(1)(iv)(B) by adding a new paragraph (8) to reflect the 
requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2017, 
we reduce the OPD fee schedule increase factor by the MFP adjustment as 
determined by CMS, and to reflect the requirement in section 
1833(t)(3)(G)(v) of the Act, as required by section 1833(t)(3)(F)(ii) 
of the Act, that we reduce the OPD fee schedule increase factor by an 
additional 0.75 percentage point for CY 2017.
    We did not receive any public comments on the proposed adjustments 
to the OPD fee schedule increase factor or on the proposed changes to 
the regulations at 42 CFR 419.32(b)(1)(iv)(B). For the reasons 
discussed above, we are adjusting the OPD fee schedule increase factor 
and finalizing the changes to the regulations as proposed. To set the 
OPPS conversion factor for the CY 2017 proposed rule, we proposed to 
increase the CY 2016 conversion factor of $73.725 by 1.55 percent. In 
accordance with section 1833(t)(9)(B) of the Act, we proposed further 
to adjust the conversion factor for CY 2017 to ensure that any 
revisions made to the wage index and rural adjustment were made on a 
budget neutral basis. We proposed to calculate an overall budget 
neutrality factor of 1.0000 for wage index changes by comparing 
proposed total estimated payments from our simulation model using the 
proposed FY 2017 IPPS wage indexes to those payments using the FY 2016 
IPPS wage indexes, as adopted on a calendar year basis for the OPPS.
    For the CY 2017 proposed rule, we proposed to maintain the current 
rural adjustment policy, as discussed in section II.E. of this final 
rule with comment period. Therefore, the proposed budget neutrality 
factor for the rural adjustment was 1.0000.
    For the CY 2017 proposed rule, we proposed to continue previously 
established policies for implementing the cancer hospital payment 
adjustment described in section 1833(t)(18) of the Act, as discussed in 
section II.F. of this final rule with comment period. We proposed to 
calculate a CY 2017 budget neutrality adjustment factor for the cancer 
hospital payment adjustment by comparing estimated total CY 2017 
payments under section 1833(t) of the Act, including the proposed CY 
2017 cancer hospital payment adjustment, to estimated CY 2017 total 
payments using the CY 2016 final cancer hospital payment adjustment as 
required under section 1833(t)(18)(B) of the Act.
    The CY 2017 proposed estimated payments applying the proposed CY 
2017 cancer hospital payment adjustment were identical to estimated 
payments applying the CY 2016 final cancer hospital payment adjustment. 
Therefore, we proposed to apply a budget neutrality adjustment factor 
of 1.0000 to the conversion factor for the cancer hospital payment 
adjustment.
    For CY 2017, we proposed to apply a budget neutrality adjustment 
factor of 1.0003 to increase the conversion factor to account for our 
proposal to package unrelated laboratory tests into OPPS payment.
    For the proposed rule, we estimated that proposed pass-through 
spending for drugs, biologicals, and devices for CY 2017 would equal 
approximately $148.3 million, which represented 0.24 percent of total 
projected CY 2017 OPPS spending. Therefore, the proposed conversion 
factor would be adjusted by the difference between the 0.26 percent 
estimate of pass-through spending for CY 2016 and the 0.24 percent 
estimate of proposed pass-through spending for CY 2017, resulting in a 
proposed adjustment for CY 2017 of 0.02 percent. Proposed estimated 
payments for outliers would remain at 1.0 percent of total OPPS 
payments for CY 2017. We estimated for the proposed rule that outlier 
payments would be 0.96 percent of total OPPS payments in CY 2016; the 
1.0 percent for proposed outlier payments in CY 2017 would constitute a 
0.04 percent increase in payment in CY 2017 relative to CY 2016.
    Comment: One commenter requested that CMS verify the amount of 
dollars

[[Page 79597]]

used to calculate the adjustment of the conversion factor from the 
policy change to include payments for unrelated laboratory services 
with modifier ``L1'' that will be packaged into OPPS services starting 
in CY 2017. The commenter believed that the cost of packaging those 
services would be approximately $40 million rather than the 
approximately $22 million that CMS identified using the methodology and 
claims data from the CY 2017 OPPS/ASC proposed rule (81 FR 45631).
    Response: We appreciate the commenter's review of our analysis. We 
note that, while estimated cost is generally used for ratesetting 
purposes to establish the relative payment weights, our proposed policy 
of including those payments for unrelated laboratory services with the 
``L1'' modifier that would be newly packaged would be in the context of 
budget neutralizing those payments into the OPPS. While the costs used 
from these services in establishing the relative weights would be 
approximately $45 million, the payments that would be used for budget 
neutralization would be approximately $25 million, using the same 
source claims dataset as in the CY 2017 OPPS/ASC final rule with 
comment period. We then determine how to adjust the OPPS conversion 
factor by comparing the CY 2015 aggregate payment of approximately $25 
million to the total estimated payment for the CY 2015 OPPS, which 
results in a final conversion factor adjustment for this final 
laboratory services policy change of 1.0004.
    For the proposed rule, we also proposed that hospitals that fail to 
meet the reporting requirements of the Hospital OQR Program would 
continue to be subject to a further reduction of 2.0 percentage points 
to the OPD fee schedule increase factor. For hospitals that fail to 
meet the requirements of the Hospital OQR Program, we proposed to make 
all other adjustments discussed above, but use a reduced OPD fee 
schedule update factor of -0.45 percent (that is, the proposed OPD fee 
schedule increase factor of 1.55 percent further reduced by 2.0 
percentage points). This would result in a proposed reduced conversion 
factor for CY 2017 of 73.411 for hospitals that fail to meet the 
Hospital OQR requirements (a difference of -1.498 in the conversion 
factor relative to hospitals that met the requirements).
    In summary, for CY 2017, we proposed to amend Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (8) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2017 to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(v) of the Act. We proposed to use a reduced 
conversion factor of 73.411 in the calculation of payments for 
hospitals that fail to meet the Hospital OQR Program requirements (a 
difference of -1.498 in the conversion factor relative to hospitals 
that met the requirements).
    We invited public comments on these proposals. However, we did not 
receive any public comments. Therefore, we are finalizing these 
proposals without modification. For CY 2017, we proposed to continue 
previously established policies for implementing the cancer hospital 
payment adjustment described in section 1833(t)(18) of the Act, as 
discussed in section II.F. of this final rule with comment period. 
Based on the final rule updated data used in calculating the cancer 
hospital payment adjustment in section II.F. of this final rule with 
comment period, the target payment-to-cost ratio for the cancer 
hospital payment adjustment, which was 0.92 for CY 2016, is 0.91 for CY 
2017. As a result, we are applying a budget neutrality adjustment 
factor of 1.0003 to the conversion factor for the cancer hospital 
payment adjustment.
    As a result of these finalized policies, the OPD fee schedule 
increase factor for the CY 2017 OPPS is 1.65 percent (which is 2.7 
percent, the estimate of the hospital inpatient market basket 
percentage increase, less the 0.3 percentage point MFP adjustment, and 
less the 0.75 percentage point additional adjustment). For CY 2017, we 
are using a conversion factor of $75.001 in the calculation of the 
national unadjusted payment rates for those items and services for 
which payment rates are calculated using geometric mean costs; that is, 
the OPD fee schedule increase factor of 1.65 percent for CY 2017, the 
required wage index budget neutrality adjustment of approximately 
0.9999, the cancer hospital payment adjustment of 1.0003, the packaging 
of unrelated laboratory tests adjustment factor of 1.0004, and the 
adjustment of 0.02 percentage point of projected OPPS spending for the 
difference in the pass-through spending and outlier payments that 
result in a conversion factor for CY 2017 of $75.001.

C. Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust the portion of payment and 
coinsurance attributable to labor-related costs for relative 
differences in labor and labor-related costs across geographic regions 
in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion 
of the OPPS payment rate is called the OPPS labor-related share. Budget 
neutrality is discussed in section II.B. of this final rule with 
comment period.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, for all hospitals, approximately 60 percent of 
the costs of services paid under the OPPS were attributable to wage 
costs. We confirmed that this labor-related share for outpatient 
services is appropriate during our regression analysis for the payment 
adjustment for rural hospitals in the CY 2006 OPPS final rule with 
comment period (70 FR 68553). In the CY 2017 OPPS/ASC proposed rule (81 
FR 45631), we proposed to continue this policy for the CY 2017 OPPS. We 
refer readers to section II.H. of this final rule with comment period 
for a description and an example of how the wage index for a particular 
hospital is used to determine payment for the hospital.
    As discussed in section II.A.2.c. of this final rule with comment 
period, for estimating APC costs, we standardize 60 percent of 
estimated claims costs for geographic area wage variation using the 
same FY 2017 pre-reclassified wage index that the IPPS uses to 
standardize costs. This standardization process removes the effects of 
differences in area wage levels from the determination of a national 
unadjusted OPPS payment rate and copayment amount.
    Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the OPPS 
April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), 
the OPPS adopted the final fiscal year IPPS post-reclassified wage 
index as the calendar year wage index for adjusting the OPPS standard 
payment amounts for labor market differences. Therefore, the wage index 
that applies to a particular acute care, short-stay hospital under the 
IPPS also applies to that hospital under the OPPS. As initially 
explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we 
believe that using the IPPS wage index as the source of an adjustment 
factor for the OPPS is reasonable and logical, given the inseparable, 
subordinate status of the HOPD within the hospital overall. In 
accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index 
is updated annually.
    The Affordable Care Act contained several provisions affecting the 
wage index. These provisions were discussed in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74191). Section 10324 of the 
Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, 
which defines a frontier State

[[Page 79598]]

and amended section 1833(t) of the Act to add new paragraph (19), which 
requires a frontier State wage index floor of 1.00 in certain cases, 
and states that the frontier State floor shall not be applied in a 
budget neutral manner. We codified these requirements at Sec.  
419.43(c)(2) and (c)(3) of our regulations. For the CY 2017 OPPS, we 
proposed to implement this provision in the same manner as we have 
since CY 2011. Under this policy, the frontier State hospitals would 
receive a wage index of 1.00 if the otherwise applicable wage index 
(including reclassification, rural and imputed floors, and rural floor 
budget neutrality) is less than 1.00. Because the HOPD receives a wage 
index based on the geographic location of the specific inpatient 
hospital with which it is associated, the frontier State wage index 
adjustment applicable for the inpatient hospital also would apply for 
any associated HOPD. We refer readers to the following sections in the 
FY 2011 through FY 2017 IPPS/LTCH PPS final rules for discussions 
regarding this provision, including our methodology for identifying 
which areas meet the definition of ``frontier States'' as provided for 
in section 1886(d)(3)(E)(iii)(II) of the Act: for FY 2011, 75 FR 50160 
through 50161; for FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 
77 FR 53369 through 53370; for FY 2014, 78 FR 50590 through 50591; for 
FY 2015, 79 FR 49971; for FY 2016, 80 FR 49498; and for FY 2017, 81 FR 
56922.
    In addition to the changes required by the Affordable Care Act, we 
note that the FY 2017 IPPS wage indexes continue to reflect a number of 
adjustments implemented over the past few years, including, but not 
limited to, reclassification of hospitals to different geographic 
areas, the rural floor and imputed floor provisions, an adjustment for 
occupational mix, and an adjustment to the wage index based on 
commuting patterns of employees (the out-migration adjustment). We 
refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56912 
through 56937) for a detailed discussion of all changes to the FY 2017 
IPPS wage indexes. In addition, we refer readers to the CY 2005 OPPS 
final rule with comment period (69 FR 65842 through 65844) and 
subsequent OPPS rules for a detailed discussion of the history of these 
wage index adjustments as applied under the OPPS.
    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 
through 49963), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49488 
through 49489 and 49494 through 49496), and the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56913), the Office of Management and Budget (OMB) 
issued revisions to the labor market area delineations on February 28, 
2013 (based on 2010 Decennial Census data), that included a number of 
significant changes such as new Core Based Statistical Areas (CBSAs), 
urban counties that became rural, rural counties that became urban, and 
existing CBSAs that were split apart (OMB Bulletin 13-01). This 
bulletin can be found at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. In the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 49950 through 49985), we adopted the use of the OMB labor 
market area delineations that were based on the 2010 Decennial Census 
data, effective October 1, 2014.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. However, OMB 
occasionally issues minor updates and revisions to statistical areas in 
the years between the decennial censuses. On July 15, 2015, OMB issued 
OMB Bulletin No. 15-01, which provides updates to and supersedes OMB 
Bulletin No. 13-01 that was issued on February 28, 2013. The attachment 
to OMB Bulletin No. 15-01 provides detailed information on the update 
to statistical areas since February 28, 2013. The updates provided in 
OMB Bulletin No. 15-01 are based on the application of the 2010 
Standards for Delineating Metropolitan and Micropolitan Statistical 
Areas to Census Bureau population estimates for July 1, 2012 and July 
1, 2013. The complete list of statistical areas incorporating these 
changes is provided in the attachment to OMB Bulletin No. 15-01. 
According to OMB, ``[t]his bulletin establishes revised delineations 
for the Nation's Metropolitan Statistical Areas, Micropolitan 
Statistical Areas, and Combined Statistical Areas. The bulletin also 
provides delineations of Metropolitan Divisions as well as delineations 
of New England City and Town Areas.'' A copy of this bulletin may be 
obtained on the Web site at: https://www.whitehouse.gov/omb/bulletins_default.
    OMB Bulletin No. 15-01 made the following changes that are relevant 
to the IPPS and OPPS wage index:
     Garfield County, OK, with principal city Enid, OK, which 
was a Micropolitan (geographically rural) area, now qualifies as an 
urban new CBSA 21420 called Enid, OK.
     The county of Bedford City, VA, a component of the 
Lynchburg, VA CBSA 31340, changed to town status and is added to 
Bedford County. Therefore, the county of Bedford City (SSA State county 
code 49088, FIPS State County Code 51515) is now part of the county of 
Bedford, VA (SSA State county code 49090, FIPS State County Code 
51019). However, the CBSA remains Lynchburg, VA 31340.
     The name of Macon, GA, CBSA 31420, as well as a principal 
city of the Macon-Warner Robins, GA combined statistical area, is now 
Macon-Bibb County, GA. The CBSA code remains as 31420.
    In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25062), we 
proposed to implement these revisions, effective October 1, 2016, 
beginning with the FY 2017 wage indexes. In the FY 2017 IPPS/LTCH PPS 
proposed rule, we proposed to use these new definitions to calculate 
area IPPS wage indexes in a manner that is generally consistent with 
the CBSA-based methodologies finalized in the FY 2005 and the FY 2015 
IPPS final rules. Implementation of these revisions for the IPPS/LTCH 
PPS was finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56913). We believe that it is important for the OPPS to use the latest 
labor market area delineations available as soon as is reasonably 
possible in order to maintain a more accurate and up-to-date payment 
system that reflects the reality of population shifts and labor market 
conditions. Therefore, for purposes of the OPPS, in the CY 2017 OPPS/
ASC proposed rule (81 FR 45632), we proposed to implement these 
revisions to the OMB statistical area delineations, effective January 
1, 2017, beginning with the CY 2017 OPPS wage indexes. We invited 
public comments on these proposals for the CY 2017 OPPS wage indexes. 
We note that Tables 2 and 3 for the FY 2017 IPPS/LTCH PPS final rule 
and the County to CBSA Crosswalk File and Urban CBSAs and Constituent 
Counties for Acute Care Hospitals File posted on the CMS Web site 
reflect the CBSA changes. These two tables are available via the 
Internet on the CMS Web site.
    In the CY 2017 OPPS/ASC proposed rule, we proposed to use the FY 
2017 hospital IPPS post-reclassified wage index for urban and rural 
areas as the wage index for the OPPS to determine the wage adjustments 
for both the OPPS payment rate and the copayment standardized amount 
for CY 2017. Therefore, we stated that any adjustments that were 
proposed for the FY 2017 IPPS post-reclassified wage index would be 
reflected in the proposed CY 2017 OPPS wage index, including the 
revisions to the OMB labor market delineations discussed above, as set 
forth in OMB Bulletin No.

[[Page 79599]]

15-01. (We refer readers to the FY 2017 IPPS/LTCH PPS proposed rule (81 
FR 25062 through 25076) and final rule (81 FR 56912 through 56937), and 
the proposed and final FY 2017 hospital wage index files posted on the 
CMS Web site.)
    Hospitals that are paid under the OPPS, but not under the IPPS, do 
not have an assigned hospital wage index under the IPPS. Therefore, for 
non-IPPS hospitals paid under the OPPS, it is our longstanding policy 
to assign the wage index that would be applicable if the hospital were 
paid under the IPPS, based on its geographic location and any 
applicable wage index adjustments. We proposed to continue this policy 
for CY 2017. The following is a brief summary of the major FY 2017 IPPS 
wage index policies and adjustments that we proposed to apply to these 
hospitals under the OPPS for CY 2017. We further refer readers to the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56912 through 56937) for a 
detailed discussion of the final changes to the FY 2017 IPPS wage 
indexes.
    It has been our longstanding policy to allow non-IPPS hospitals 
paid under the OPPS to qualify for the out-migration adjustment if they 
are located in a section 505 out-migration county (section 505 of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA)). Applying this adjustment is consistent with our policy of 
adopting IPPS wage index policies for hospitals paid under the OPPS. We 
note that, because non-IPPS hospitals cannot reclassify, they would be 
eligible for the out-migration wage adjustment if they are located in a 
section 505 out-migration county. This is the same out-migration 
adjustment policy that would apply if the hospital were paid under the 
IPPS. For CY 2017, we proposed to continue our policy of allowing non-
IPPS hospitals paid under the OPPS to qualify for the out-migration 
adjustment if they are located in a section 505 out-migration county 
(section 505 of the MMA).
    As stated earlier, in the FY 2015 IPPS/LTCH PPS final rule, we 
adopted the OMB labor market area delineations issued by OMB in OMB 
Bulletin No. 13-01 on February 28, 2013, based on standards published 
on June 28, 2010 (75 FR 37246 through 37252) and the 2010 Census data 
to delineate labor market areas for purposes of the IPPS wage index. 
For IPPS wage index purposes, for hospitals that were located in urban 
CBSAs in FY 2014 but were designated as rural under these revised OMB 
labor market area delineations, we generally assigned them the urban 
wage index value of the CBSA in which they were physically located for 
FY 2014 for a period of 3 fiscal years (79 FR 49957 through 49960). To 
be consistent, we applied the same policy to hospitals paid under the 
OPPS but not under the IPPS so that such hospitals will maintain the 
wage index of the CBSA in which they were physically located for FY 
2014 for 3 calendar years (until December 31, 2017). Therefore, for the 
CY 2017 OPPS, consistent with the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56912 through 56937), this 3-year transition will continue for the 
third year in CY 2017.
    In addition, for the FY 2017 IPPS, we extended the imputed floor 
policy (both the original methodology and alternative methodology) for 
another year, through September 30, 2017 (81 FR 56919 through 56922). 
For purposes of the CY 2017 OPPS, we proposed to apply the imputed 
floor policy to hospitals paid under the OPPS but not under the IPPS so 
long as the IPPS continues an imputed floor policy.
    For CMHCs, for CY 2017, we proposed to continue to calculate the 
wage index by using the post-reclassification IPPS wage index based on 
the CBSA where the CMHC is located. As with OPPS hospitals and for the 
same reasons, for CMHCs previously located in urban CBSAs that were 
designated as rural under the revised OMB labor market area 
delineations in OMB Bulletin No. 13-01, we finalized a policy to 
maintain the urban wage index value of the CBSA in which they were 
physically located for CY 2014 for 3 calendar years (until December 31, 
2017). Consistent with our current policy, the wage index that applies 
to CMHCs includes both the imputed floor adjustment and the rural floor 
adjustment, but does not include the out-migration adjustment because 
that adjustment only applies to hospitals.
    We did not receive any public comments on our proposals as 
discussed above.
    Therefore, for the reasons discussed above and in the CY 2017 OPPS/
ASC proposed rule, we are finalizing our proposals, without 
modification, to:
     Continue to use an OPPS labor-related share of 60 percent 
of the national OPPS payment for the CY 2017 OPPS;
     Use the final FY 2017 IPPS post-reclassified wage index 
for urban and rural areas in its entirety, including the frontier State 
wage index floor, the rural floor, geographic reclassifications, and 
all other applicable wage index adjustments, as the final CY 2017 wage 
index for OPPS hospitals and CMHCs based on where the facility is 
located for both the OPPS payment rate and the copayment standardized 
amount, as discussed above and as set forth in the CY 2017 OPPS/ASC 
proposed rule (81 FR 45631 through 45633). (We refer readers to the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56912 through 56937) and the final 
FY 2017 hospital wage index files posted on the CMS Web site.);
     Implement the revisions to the OMB statistical area 
delineations set forth in OMB Bulletin No. 15-01 effective January 1, 
2017, beginning with the CY 2017 OPPS wage indexes;
     Implement the frontier State floor provisions in the same 
manner as we have since CY 2011 as discussed above;
     For non-IPPS hospitals paid under the OPPS, continue to 
assign the wage index that would be applicable if the hospital were 
paid under the IPPS, based on its geographic location and any 
applicable wage index adjustments;
     Apply the imputed floor policy to hospitals paid under the 
OPPS but not under the IPPS so long as the IPPS continues an imputed 
floor policy, which CMS has extended for an additional year under the 
IPPS in the FY 2017 IPPS/LTCH PPS final rule; and
     Continue our policy of allowing non-IPPS hospitals paid 
under the OPPS to qualify for the out-migration adjustment if they are 
located in a section 505 out-migration county (section 505 of the MMA).
    Table 2 associated with the FY 2017 IPPS/LTCH PPS final rule 
(available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) 
identifies counties eligible for the out-migration adjustment and IPPS 
hospitals that will receive the adjustment for FY 2017. We are 
including the out-migration adjustment information from Table 2 
associated with the FY 2017 IPPS/LTCH PPS final rule as Addendum L to 
this final rule with comment period with the addition of non-IPPS 
hospitals that will receive the section 505 out-migration adjustment 
under the CY 2017 OPPS. Addendum L is available via the Internet on the 
CMS Web site. We refer readers to the CMS Web site for the OPPS at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a 
link to the final FY 2017 IPPS wage index tables and Addendum L.

D. Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses overall hospital-specific CCRs calculated 
from the

[[Page 79600]]

hospital's most recent cost report to determine outlier payments, 
payments for pass-through devices, and monthly interim transitional 
corridor payments under the OPPS during the PPS year. MACs cannot 
calculate a CCR for some hospitals because there is no cost report 
available. For these hospitals, CMS uses the statewide average default 
CCRs to determine the payments mentioned above until a hospital's MAC 
is able to calculate the hospital's actual CCR from its most recently 
submitted Medicare cost report. These hospitals include, but are not 
limited to, hospitals that are new, hospitals that have not accepted 
assignment of an existing hospital's provider agreement, and hospitals 
that have not yet submitted a cost report. CMS also uses the statewide 
average default CCRs to determine payments for hospitals that appear to 
have a biased CCR (that is, the CCR falls outside the predetermined 
ceiling threshold for a valid CCR) or for hospitals in which the most 
recent cost report reflects an all-inclusive rate status (Medicare 
Claims Processing Manual (Pub. 100-04), Chapter 4, Section 10.11).
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45633), we proposed to 
update the default ratios for CY 2017 using the most recent cost report 
data. We discussed our policy for using default CCRs, including setting 
the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68594 through 68599) in the context of 
our adoption of an outlier reconciliation policy for cost reports 
beginning on or after January 1, 2009. For detail on our process for 
calculating the statewide average CCRs, we referred readers to the CY 
2017 OPPS proposed rule Claims Accounting Narrative that was posted on 
the CMS Web site. Table 4 published in the proposed rule (81 FR 45634 
through 45635) listed the proposed statewide average default CCRs for 
OPPS services furnished on or after January 1, 2017.
    We did not receive any public comments on the proposed statewide 
average default CCR policy. Therefore, we are finalizing our proposal, 
without modification, to apply our standard methodology of calculating 
the statewide average default CCRs using the same hospital overall CCRs 
that we used to adjust charges to costs on claims data for setting the 
final CY 2017 OPPS relative payment weights. Table 4 below lists the 
statewide average default CCRs for OPPS services furnished on or after 
January 1, 2017 based on final rule data.

                                     Table 4--CY 2017 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
                                                                                               Previous  default
                   State                             Urban/rural           CY 2017  default   CCR  (CY 2016 OPPS
                                                                                  CCR             final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA....................................  RURAL.......................               0.449               0.588
ALASKA....................................  URBAN.......................               0.237               0.269
ALABAMA...................................  RURAL.......................               0.196               0.224
ALABAMA...................................  URBAN.......................               0.158               0.168
ARKANSAS..................................  RURAL.......................               0.196               0.223
ARKANSAS..................................  URBAN.......................               0.205               0.218
ARIZONA...................................  RURAL.......................               0.238               0.246
ARIZONA...................................  URBAN.......................               0.176               0.170
CALIFORNIA................................  RURAL.......................               0.179               0.179
CALIFORNIA................................  URBAN.......................               0.188               0.190
COLORADO..................................  RURAL.......................               0.354               0.366
COLORADO..................................  URBAN.......................               0.208               0.208
CONNECTICUT...............................  RURAL.......................               0.402               0.366
CONNECTICUT...............................  URBAN.......................               0.253               0.257
DISTRICT OF COLUMBIA......................  URBAN.......................               0.286               0.298
DELAWARE..................................  URBAN.......................               0.288               0.308
FLORIDA...................................  RURAL.......................               0.169               0.170
FLORIDA...................................  URBAN.......................               0.143               0.150
GEORGIA...................................  RURAL.......................               0.230               0.251
GEORGIA...................................  URBAN.......................               0.196               0.199
HAWAII....................................  RURAL.......................               0.338               0.339
HAWAII....................................  URBAN.......................               0.319               0.313
IOWA......................................  RURAL.......................               0.291               0.305
IOWA......................................  URBAN.......................               0.252               0.256
IDAHO.....................................  RURAL.......................               0.341               0.337
IDAHO.....................................  URBAN.......................               0.401               0.459
ILLINOIS..................................  RURAL.......................               0.241               0.234
ILLINOIS..................................  URBAN.......................               0.209               0.208
INDIANA...................................  RURAL.......................               0.272               0.314
INDIANA...................................  URBAN.......................               0.218               0.237
KANSAS....................................  RURAL.......................               0.269               0.287
KANSAS....................................  URBAN.......................               0.194               0.209
KENTUCKY..................................  RURAL.......................               0.194               0.202
KENTUCKY..................................  URBAN.......................               0.189               0.203
LOUISIANA.................................  RURAL.......................               0.217               0.256
LOUISIANA.................................  URBAN.......................               0.201               0.202
MASSACHUSETTS.............................  RURAL.......................               0.316               0.324
MASSACHUSETTS.............................  URBAN.......................               0.345               0.330
MAINE.....................................  RURAL.......................               0.425               0.470
MAINE.....................................  URBAN.......................               0.413               0.395
MARYLAND..................................  RURAL.......................               0.264               0.277
MARYLAND..................................  URBAN.......................               0.229               0.234
MICHIGAN..................................  RURAL.......................               0.295               0.317
MICHIGAN..................................  URBAN.......................               0.324               0.319

[[Page 79601]]

 
MINNESOTA.................................  RURAL.......................               0.398               0.449
MINNESOTA.................................  URBAN.......................               0.319               0.377
MISSOURI..................................  RURAL.......................               0.222               0.238
MISSOURI..................................  URBAN.......................               0.261               0.253
MISSISSIPPI...............................  RURAL.......................               0.224               0.235
MISSISSIPPI...............................  URBAN.......................               0.167               0.169
MONTANA...................................  RURAL.......................               0.450               0.480
MONTANA...................................  URBAN.......................               0.368               0.403
NORTH CAROLINA............................  RURAL.......................               0.216               0.229
NORTH CAROLINA............................  URBAN.......................               0.223               0.235
NORTH DAKOTA..............................  RURAL.......................               0.411               0.443
NORTH DAKOTA..............................  URBAN.......................               0.334               0.355
NEBRASKA..................................  RURAL.......................               0.294               0.283
NEBRASKA..................................  URBAN.......................               0.238               0.238
NEW HAMPSHIRE.............................  RURAL.......................               0.320               0.306
NEW HAMPSHIRE.............................  URBAN.......................               0.279               0.306
NEW JERSEY................................  URBAN.......................               0.195               0.194
NEW MEXICO................................  RURAL.......................               0.225               0.280
NEW MEXICO................................  URBAN.......................               0.280               0.290
NEVADA....................................  RURAL.......................               0.196               0.219
NEVADA....................................  URBAN.......................               0.123               0.146
NEW YORK..................................  RURAL.......................               0.309               0.311
NEW YORK..................................  URBAN.......................               0.292               0.298
OHIO......................................  RURAL.......................               0.292               0.295
OHIO......................................  URBAN.......................               0.207               0.212
OKLAHOMA..................................  RURAL.......................               0.231               0.255
OKLAHOMA..................................  URBAN.......................               0.180               0.192
OREGON....................................  RURAL.......................               0.280               0.265
OREGON....................................  URBAN.......................               0.344               0.341
PENNSYLVANIA..............................  RURAL.......................               0.274               0.277
PENNSYLVANIA..............................  URBAN.......................               0.179               0.195
PUERTO RICO...............................  URBAN.......................               0.527               0.590
RHODE ISLAND..............................  URBAN.......................               0.291               0.290
SOUTH CAROLINA............................  RURAL.......................               0.185               0.188
SOUTH CAROLINA............................  URBAN.......................               0.190               0.197
SOUTH DAKOTA..............................  RURAL.......................               0.383               0.367
SOUTH DAKOTA..............................  URBAN.......................               0.229               0.224
TENNESSEE.................................  RURAL.......................               0.181               0.198
TENNESSEE.................................  URBAN.......................               0.180               0.177
TEXAS.....................................  RURAL.......................               0.214               0.238
TEXAS.....................................  URBAN.......................               0.177               0.179
UTAH......................................  RURAL.......................               0.349               0.493
UTAH......................................  URBAN.......................               0.315               0.325
VIRGINIA..................................  RURAL.......................               0.191               0.195
VIRGINIA..................................  URBAN.......................               0.226               0.233
VERMONT...................................  RURAL.......................               0.426               0.434
VERMONT...................................  URBAN.......................               0.340               0.336
WASHINGTON................................  RURAL.......................               0.271               0.349
WASHINGTON................................  URBAN.......................               0.294               0.308
WISCONSIN.................................  RURAL.......................               0.354               0.317
WISCONSIN.................................  URBAN.......................               0.290               0.296
WEST VIRGINIA.............................  RURAL.......................               0.266               0.276
WEST VIRGINIA.............................  URBAN.......................               0.285               0.294
WYOMING...................................  RURAL.......................               0.429               0.433
WYOMING...................................  URBAN.......................               0.311               0.311
----------------------------------------------------------------------------------------------------------------

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

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

[[Page 79602]]

payable drugs and biologicals, brachytherapy sources, and devices paid 
under the pass-through payment policy, in accordance with section 
1833(t)(13)(B) of the Act.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 
and 68227), for purposes of receiving this rural adjustment, we revised 
Sec.  419.43(g) of the regulations to clarify that EACHs also are 
eligible to receive the rural SCH adjustment, assuming these entities 
otherwise meet the rural adjustment criteria. Currently, two hospitals 
are classified as EACHs, and as of CY 1998, under section 4201(c) of 
Public Law 105-33, a hospital can no longer become newly classified as 
an EACH.
    This adjustment for rural SCHs is budget neutral and applied before 
calculating outlier payments and copayments. We stated in the CY 2006 
OPPS final rule with comment period (70 FR 68560) that we would not 
reestablish the adjustment amount on an annual basis, but we may review 
the adjustment in the future and, if appropriate, would revise the 
adjustment. We provided the same 7.1 percent adjustment to rural SCHs, 
including EACHs, again in CYs 2008 through 2016. Further, in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated 
the regulations at Sec.  419.43(g)(4) to specify, in general terms, 
that items paid at charges adjusted to costs by application of a 
hospital-specific CCR are excluded from the 7.1 percent payment 
adjustment.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45635), for the CY 
2017 OPPS, we proposed to continue our policy of a 7.1 percent payment 
adjustment that is done in a budget neutral manner for rural SCHs, 
including EACHs, for all services and procedures paid under the OPPS, 
excluding separately payable drugs and biologicals, devices paid under 
the pass-through payment policy, and items paid at charges reduced to 
costs (80 FR 39244).
    Comment: Commenters supported the proposed payment adjustment for 
rural SCHs and EACHs, and stated that this adjustment would support 
access to care in rural areas.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing the proposal for CY 2017 to continue our policy of a 7.1 
percent payment adjustment that is done in a budget neutral manner for 
rural SCHs, including EACHs, for all services and procedures paid under 
the OPPS, excluding separately payable drugs and biologicals, devices 
paid under the pass-through payment policy, and items paid at charges 
reduced to costs.

F. Payment Adjustment for Certain Cancer Hospitals for CY 2017

1. Background
    Since the inception of the OPPS, which was authorized by the 
Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid 
the 11 hospitals that meet the criteria for cancer hospitals identified 
in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered 
outpatient hospital services. These cancer hospitals are exempted from 
payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced 
Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established 
section 1833(t)(7) of the Act, ``Transitional Adjustment to Limit 
Decline in Payment,'' to determine OPPS payments to cancer and 
children's hospitals based on their pre-BBA payment amount (often 
referred to as ``held harmless'').
    As required under section 1833(t)(7)(D)(ii) of the Act, a cancer 
hospital receives the full amount of the difference between payments 
for covered outpatient services under the OPPS and a ``pre-BBA 
amount.'' That is, cancer hospitals are permanently held harmless to 
their ``pre-BBA amount,'' and they receive transitional outpatient 
payments (TOPs) or hold harmless payments to ensure that they do not 
receive a payment that is lower in amount under the OPPS than the 
payment amount they would have received before implementation of the 
OPPS, as set forth in section 1833(t)(7)(F) of the Act. The ``pre-BBA 
amount'' is the product of the hospital's reasonable costs for covered 
outpatient services occurring in the current year and the base payment-
to-cost ratio (PCR) for the hospital defined in section 
1833(t)(7)(F)(ii) of the Act. The ``pre-BBA amount'' and the 
determination of the base PCR are defined at 42 CFR 419.70(f). TOPs are 
calculated on Worksheet E, Part B, of the Hospital Cost Report or the 
Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-
2552-10, respectively) as applicable each year. Section 1833(t)(7)(I) 
of the Act exempts TOPs from budget neutrality calculations.
    Section 3138 of the Affordable Care Act amended section 1833(t) of 
the Act by adding a new paragraph (18), which instructs the Secretary 
to conduct a study to determine if, under the OPPS, outpatient costs 
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of 
the Act with respect to APC groups exceed outpatient costs incurred by 
other hospitals furnishing services under section 1833(t) of the Act, 
as determined appropriate by the Secretary. Section 1833(t)(18)(A) of 
the Act requires the Secretary to take into consideration the cost of 
drugs and biologicals incurred by cancer hospitals and other hospitals. 
Section 1833(t)(18)(B) of the Act provides that, if the Secretary 
determines that cancer hospitals' costs, the Secretary shall provide an 
appropriate adjustment under section 1833(t)(2)(E) of the Act to 
reflect these higher costs. In 2011, after conducting the study 
required by section 1833(t)(18)(A) of the Act, we determined that 
outpatient costs incurred by the 11 specified cancer hospitals were 
greater than the costs incurred by other OPPS hospitals. For a complete 
discussion regarding the cancer hospital cost study, we refer readers 
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74200 
through 74201).
    Based on these findings, we finalized a policy to provide a payment 
adjustment to the 11 specified cancer hospitals that reflects their 
higher outpatient costs as discussed in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74202 through 74206). Specifically, we 
adopted a policy to provide additional payments to the cancer hospitals 
so that each cancer hospital's final PCR for services provided in a 
given calendar year is equal to the weighted average PCR (which we 
refer to as the ``target PCR'') for other hospitals paid under the 
OPPS. The target PCR is set in advance of the calendar year and is 
calculated using the most recent submitted or settled cost report data 
that are available at the time of final rulemaking for the calendar 
year. The amount of the payment adjustment is made on an aggregate 
basis at cost report settlement. We note that the changes made by 
section 1833(t)(18) of the Act do not affect the existing statutory 
provisions that provide for TOPs for cancer hospitals. The TOPs are 
assessed as usual after all payments, including the cancer hospital 
payment adjustment, have been made for a cost reporting period. For CYs 
2012 and 2013, the target PCR for purposes of the cancer hospital 
payment adjustment was 0.91. For CY 2014, the target PCR for purposes 
of the cancer hospital payment adjustment was 0.89. For CY 2015, the 
target PCR was 0.90. For CY 2016, the target PCR was 0.92, as discussed 
in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70362 
through 70363).

[[Page 79603]]

b. Proposed and Finalized Policy for CY 2017
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45636), for CY 2017, 
we proposed to continue our policy to provide additional payments to 
the 11 specified cancer hospitals so that each cancer hospital's final 
PCR is equal to the weighted average PCR (or ``target PCR'') for the 
other OPPS hospitals using the most recent submitted or settled cost 
report data that are available at the time of the development of the 
proposed rule. To calculate the proposed CY 2017 target PCR, we used 
the same extract of cost report data from HCRIS, as discussed in 
section II.A. of the proposed rule, used to estimate costs for the CY 
2017 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 2015 claims 
data that we used to model the impact of the proposed CY 2017 APC 
relative payment weights (3,716 hospitals) because it is appropriate to 
use the same set of hospitals that we are using to calibrate the 
modeled CY 2017 OPPS. The cost report data for the hospitals in this 
dataset were from cost report periods with fiscal year ends ranging 
from 2012 to 2015. We then removed the cost report data of the 50 
hospitals located in Puerto Rico from our dataset because we do not 
believe that their cost structure reflects the costs of most hospitals 
paid under the OPPS and, therefore, their inclusion may bias the 
calculation of hospital-weighted statistics. We also removed the cost 
report data of 14 hospitals because these hospitals had cost report 
data that were not complete (missing aggregate OPPS payments, missing 
aggregate cost data, or missing both), so that all cost reports in the 
study would have both the payment and cost data necessary to calculate 
a PCR for each hospital, leading to a proposed analytic file of 3,652 
hospitals with cost report data.
    Using this smaller dataset of cost report data, we estimated that, 
on average, the OPPS payments to other hospitals furnishing services 
under the OPPS were approximately 92 percent of reasonable cost 
(weighted average PCR of 0.92). Therefore, we proposed that the payment 
amount associated with the cancer hospital payment adjustment to be 
determined at cost report settlement would be the additional payment 
needed to result in a proposed target PCR equal to 0.92 for each cancer 
hospital. Table 5 of the proposed rule indicated the proposed estimated 
percentage increase in OPPS payments to each cancer hospital for CY 
2017 due to the cancer hospital payment adjustment policy.
    Comment: Several commenters supported the proposed cancer hospital 
payment adjustment for CY 2017.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our cancer hospital payment adjustment methodology as 
proposed. For this final rule with comment period, we are using the 
most recent cost report data through June 30, 2016 to update the 
adjustment. This update yields a target PCR of 0.91. We limited the 
dataset to the hospitals with CY 2015 claims data that we used to model 
the impact of the CY 2017 APC relative payment weights (3,744 
hospitals) because it is appropriate to use the same set of hospitals 
that we are using to calibrate the modeled CY 2017 OPPS. The cost 
report data for the hospitals in this dataset were from cost report 
periods with fiscal year ends ranging from 2012 to 2016. We then 
removed the cost report data of the 49 hospitals located in Puerto Rico 
from our dataset because we do not believe that their cost structure 
reflects the costs of most hospitals paid under the OPPS and, 
therefore, their inclusion may bias the calculation of hospital-
weighted statistics. We also removed the cost report data of 13 
hospitals because these hospitals had cost report data that were not 
complete (missing aggregate OPPS payments, missing aggregate cost data, 
or missing both), so that all cost reports in the study would have both 
the payment and cost data necessary to calculate a PCR for each 
hospital, leading to a proposed analytic file of 3,682 hospitals with 
cost report data.
    Using this smaller dataset of cost report data, we estimated that, 
on average, the OPPS payments to other hospitals furnishing services 
under the OPPS are approximately 91 percent of reasonable cost 
(weighted average PCR of 0.91). Therefore, we are finalizing that the 
payment amount associated with the cancer hospital payment adjustment 
to be determined at cost report settlement will be the additional 
payment needed to result in a PCR equal to 0.91 for each cancer 
hospital.
    Table 5 below indicates the final estimated percentage increase in 
OPPS payments to each cancer hospital for CY 2017 due to the finalized 
cancer hospital payment adjustment policy. The actual amount of the CY 
2017 cancer hospital payment adjustment for each cancer hospital will 
be determined at cost report settlement and will depend on each 
hospital's CY 2017 payments and costs. We note that the requirements 
contained in section 1833(t)(18) of the Act do not affect the existing 
statutory provisions that provide for TOPs for cancer hospitals. The 
TOPs will be assessed as usual after all payments, including the cancer 
hospital payment adjustment, have been made for a cost reporting 
period.

   Table 5--Estimated CY 2017 Hospital-Specific Payment Adjustment for Cancer Hospitals To Be Provided At Cost
                                                Report Settlement
----------------------------------------------------------------------------------------------------------------
                                                                               Estimated percentage  increase in
                Provider No.                           Hospital name           OPPS  payments for CY 2017 due to
                                                                                    payment adjustment  (%)
----------------------------------------------------------------------------------------------------------------
050146......................................  City of Hope Comprehensive                                    25.8
                                               Cancer Center.
050660......................................  USC Norris Cancer Hospital....                                14.0
100079......................................  Sylvester Comprehensive Cancer                                32.4
                                               Center.
100271......................................  H. Lee Moffitt Cancer Center &                                27.3
                                               Research Institute.
220162......................................  Dana-Farber Cancer Institute..                                49.8
330154......................................  Memorial Sloan-Kettering                                      50.4
                                               Cancer Center.
330354......................................  Roswell Park Cancer Institute.                                30.0
360242......................................  James Cancer Hospital & Solove                                37.9
                                               Research Institute.
390196......................................  Fox Chase Cancer Center.......                                16.6
450076......................................  M.D. Anderson Cancer Center...                                52.3

[[Page 79604]]

 
500138......................................  Seattle Cancer Care Alliance..                                58.7
----------------------------------------------------------------------------------------------------------------

G. Hospital Outpatient Outlier Payments

1. Background
    The OPPS provides outlier payments to hospitals to help mitigate 
the financial risk associated with high-cost and complex procedures, 
where a very costly service could present a hospital with significant 
financial loss. As explained in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66832 through 66834), we set our projected target 
for aggregate outlier payments at 1.0 percent of the estimated 
aggregate total payments under the OPPS for the prospective year. 
Outlier payments are provided on a service-by-service basis when the 
cost of a service exceeds the APC payment amount multiplier threshold 
(the APC payment amount multiplied by a certain amount) as well as the 
APC payment amount plus a fixed-dollar amount threshold (the APC 
payment plus a certain amount of dollars). In CY 2016, the outlier 
threshold was met when the hospital's cost of furnishing a service 
exceeded 1.75 times (the multiplier threshold) the APC payment amount 
and exceeded the APC payment amount plus $3,250 (the fixed-dollar 
amount threshold) (80 FR 70365). If the cost of a service exceeds both 
the multiplier threshold and the fixed-dollar threshold, the outlier 
payment is calculated as 50 percent of the amount by which the cost of 
furnishing the service exceeds 1.75 times the APC payment amount. 
Beginning with CY 2009 payments, outlier payments are subject to a 
reconciliation process similar to the IPPS outlier reconciliation 
process for cost reports, as discussed in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68594 through 68599).
    It has been our policy to report the actual amount of outlier 
payments as a percent of total spending in the claims being used to 
model the OPPS. In the CY 2017 OPPS/ASC proposed rule (81 FR 45637), we 
indicated that our estimate of total outlier payments as a percent of 
total CY 2015 OPPS payment, using CY 2015 claims available for the 
proposed rule and the revised OPPS expenditure estimate for the FY 2016 
President's Budget, was approximately 1.0 percent of the total 
aggregated OPPS payments. For CY 2015, we continue to estimate that we 
paid the outlier target of 1.0 percent of total aggregated OPPS 
payments.
    As stated in the proposed rule, using CY 2015 claims data and CY 
2016 payment rates, we estimated that the aggregate outlier payments 
for CY 2016 would be approximately 1.0 percent of the total CY 2016 
OPPS payments. Using an updated claims dataset and OPPS ancillary CCRs, 
we estimate that we paid approximately 0.96 percent of the total CY 
2016 OPPS payments, in OPPS outliers. We provided estimated CY 2017 
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: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
2. Outlier Calculation for CY 2017
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45637), for CY 2017, 
we proposed to continue our policy of estimating outlier payments to be 
1.0 percent of the estimated aggregate total payments under the OPPS. 
We proposed that a portion of that 1.0 percent, an amount equal to less 
than 0.01 percent of outlier payments (or 0.0001 percent of total OPPS 
payments) would be allocated to CMHCs for PHP outlier payments. This is 
the amount of estimated outlier payments that would result from the 
proposed CMHC outlier threshold as a proportion of total estimated OPPS 
outlier payments. As discussed in section VIII.C. of the proposed rule 
and this final rule with comment period, we proposed to continue our 
longstanding policy that if a CMHC's cost for partial hospitalization 
services, paid under proposed APC 5853 (Partial Hospitalization for 
CMHCs), exceeds 3.40 times the payment rate for proposed APC 5853, the 
outlier payment would be calculated as 50 percent of the amount by 
which the cost exceeds 3.40 times the proposed APC 5853 payment rate. 
For further discussion of CMHC outlier payments, we refer readers to 
section VIII.D. of the proposed rule and this final rule with comment 
period.
    To ensure that the estimated CY 2017 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we proposed that the hospital outlier threshold be set so that 
outlier payments would be triggered when a hospital's cost of 
furnishing a service exceeds 1.75 times the APC payment amount and 
exceeds the APC payment amount plus $3,825.
    We calculated the proposed fixed-dollar threshold of $3,825 using 
the standard methodology most recently used for CY 2016 (80 FR 70364 
through 70365). For purposes of estimating outlier payments for the 
proposed rule, we used the hospital-specific overall ancillary CCRs 
available in the April 2016 update to the Outpatient Provider-Specific 
File (OPSF). The OPSF contains provider-specific data, such as the most 
current CCRs, which are maintained by the MACs and used by the OPPS 
Pricer to pay claims. The claims that we use to model each OPPS update 
lag by 2 years.
    In order to estimate the CY 2017 hospital outlier payments for the 
proposed rule, we inflated the charges on the CY 2015 claims using the 
same inflation factor of 1.0898 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2017 IPPS/LTCH PPS proposed 
rule (81 FR 25270 through 25273). We used an inflation factor of 1.0440 
to estimate CY 2016 charges from the CY 2015 charges reported on CY 
2015 claims. The methodology for determining this charge inflation 
factor is discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57286). 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.

[[Page 79605]]

    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we could systematically overestimate 
the OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, we proposed to apply the same CCR 
inflation adjustment factor that we proposed to apply for the FY 2017 
IPPS outlier calculation to the CCRs used to simulate the proposed CY 
2017 OPPS outlier payments to determine the fixed-dollar threshold. 
Specifically, for CY 2017, we proposed to apply an adjustment factor of 
0.9696 to the CCRs that were in the April 2016 OPSF to trend them 
forward from CY 2016 to CY 2017. The methodology for calculating this 
proposed adjustment was discussed in the FY 2017 IPPS/LTCH PPS proposed 
rule (81 FR 25272).
    To model hospital outlier payments for the proposed rule, we 
applied the overall CCRs from the April 2016 OPSF after adjustment 
(using the proposed CCR inflation adjustment factor of 0.9696 to 
approximate CY 2017 CCRs) to charges on CY 2015 claims that were 
adjusted (using the proposed charge inflation factor of 1.0898 to 
approximate CY 2017 charges). We simulated aggregated CY 2017 hospital 
outlier payments using these costs for several different fixed-dollar 
thresholds, holding the 1.75 multiplier 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 2017 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $3,825, combined 
with the proposed multiplier threshold of 1.75 times the APC payment 
rate, would allocate 1.0 percent of aggregated total OPPS payments to 
outlier payments. For CMHCs, we proposed that, if a CMHC's cost for 
partial hospitalization services, paid under APC 5853, exceeds 3.40 
times the payment rate for APC 5853, the outlier payment would be 
calculated as 50 percent of the amount by which the cost exceeds 3.40 
times the APC 5853 payment rate.
    Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary, in the form and manner required by the Secretary under 
section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point 
reduction to their OPD fee schedule increase factor; that is, the 
annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that will apply to certain outpatient items and services 
furnished by hospitals that are required to report outpatient quality 
data and that fail to meet the Hospital OQR Program requirements. For 
hospitals that fail to meet the Hospital OQR Program requirements, we 
proposed to continue the policy that we implemented in CY 2010 that the 
hospitals' costs will be compared to the reduced payments for purposes 
of outlier eligibility and payment calculation. For more information on 
the Hospital OQR Program, we refer readers to section XIII. of this 
final rule with comment period.
    Comment: One commenter suggested that the OPPS outlier fixed-dollar 
threshold of $3,825 was too high for CMS to pay the target aggregate 
outlier payment amount of 1.0 percent of the estimated aggregate total 
payments under the OPPS for the prospective year. The commenter 
suggested that CMS reduce the OPPS outlier threshold to compensate for 
the difference between the proposed and final fixed-dollar thresholds 
for outlier payments under the IPPS.
    Response: As indicated earlier, we introduced a fixed-dollar 
threshold in order to better target outlier payments to those high-cost 
and complex procedures where a very costly service could present a 
hospital with significant financial loss. We maintain the target 
outlier percentage of 1.0 percent of estimated aggregate total payment 
under the OPPS and have a fixed-dollar threshold so that OPPS outlier 
payments are made only when the hospital would experience a significant 
loss for furnishing a particular service. The methodology we use to 
calculate the fixed-dollar threshold for the prospective payment year 
factors is based on several data inputs that may change from prior 
payment years. For instance, updated hospital CCR data and changes to 
the OPPS payment methodology influence projected outlier payments in 
the prospective year. For this final rule with comment period, we used 
the same methodology for calculating the outlier fixed-dollar threshold 
that we used for the proposed rule but used updated data. We do not 
believe that incorporating the percentage difference between the 
proposed and final fixed-dollar loss thresholds under the IPPS would 
improve our methodology to meet our target outlier payment percentage 
of 1.0 percent.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue our policy of estimating outlier 
payments to be 1.0 percent of the estimated aggregate total payments 
under the OPPS and to use our established methodology to set the OPPS 
outlier fixed-dollar loss threshold for CY 2017.
3. Final Outlier Calculation
    Consistent with historical practice, we used updated data for this 
final rule with comment period for outlier calculations. For CY 2017, 
we are applying the overall CCRs from the July 2016 OPSF file after 
adjustment (using the CCR inflation adjustment factor of 0.9688 to 
approximate CY 2017 CCRs) to charges on CY 2015 claims that were 
adjusted (using the charge inflation factor of 1.0984 to approximate CY 
2017 charges). These are the same CCR adjustment and charge inflation 
factors that were used to set the IPPS fixed-dollar thresholds for the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 57286). We simulated aggregated 
CY 2017 hospital outlier payments using these costs for several 
different fixed-dollar thresholds, holding the 1.75 multiple threshold 
constant and assuming that outlier payments will continue to be made at 
50 percent of the amount by which the cost of furnishing the service 
would exceed 1.75 times the APC payment amount, until the total outlier 
payments equaled 1.0 percent of aggregated estimated total CY 2017 OPPS 
payments. We estimated that a fixed-dollar threshold of $3,825, 
combined with the multiple threshold of 1.75 times the APC payment 
rate, will allocate 1.0 percent of aggregated total OPPS payments to 
outlier payments. For CMHCs, if a CMHC's cost for partial 
hospitalization services, paid under APC 5853 exceeds 3.40 times the 
payment rate, the outlier payment will be calculated as 50 percent of 
the amount by which the cost exceeds 3.40 times APC 5853.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR part 419, subparts C and D. For this CY 2017 OPPS/ASC final rule 
with comment period, the payment rate for most services and procedures 
for which payment is made under the OPPS is the product of the 
conversion factor calculated in accordance with section II.B. of this 
final rule with comment period and the relative payment weight 
determined under section II.A. of this

[[Page 79606]]

final rule with comment period. Therefore, the national unadjusted 
payment rate for most APCs contained in Addendum A to this final rule 
with comment period (which is available via the Internet on the CMS Web 
site) and for most HCPCS codes to which separate payment under the OPPS 
has been assigned in Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site) was 
calculated by multiplying the CY 2017 scaled weight for the APC by the 
CY 2017 conversion factor.
    We note that section 1833(t)(17) of the Act, which applies to 
hospitals as defined under section 1886(d)(1)(B) of the Act, requires 
that hospitals that fail to submit data required to be submitted on 
quality measures selected by the Secretary, in the form and manner and 
at a time specified by the Secretary, incur a reduction of 2.0 
percentage points to their OPD fee schedule increase factor, that is, 
the annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that apply to certain outpatient items and services provided by 
hospitals that are required to report outpatient quality data and that 
fail to meet the Hospital OQR Program (formerly referred to as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) 
requirements. For further discussion of the payment reduction for 
hospitals that fail to meet the requirements of the Hospital OQR 
Program, we refer readers to section XIII. of this final rule with 
comment period.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45638), we 
demonstrated the steps on how to determine the APC payments that will 
be made in a calendar year under the OPPS to a hospital that fulfills 
the Hospital OQR Program requirements and to a hospital that fails to 
meet the Hospital OQR Program requirements for a service that has any 
of the following status indicator assignments: ``J1,'' ``J2,'' ``P,'' 
``Q1,'' ``Q2,'' ``Q3,'' ``Q4,'' ``R,'' ``S,'' ``T,'' ``U,'' or ``V'' 
(as defined in Addendum D1 to the proposed rule, which is available via 
the Internet on the CMS Web site), in a circumstance in 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 noted that, 
although blood and blood products with status indicator ``R'' and 
brachytherapy sources with status indicator ``U'' are not subject to 
wage adjustment, they are subject to reduced payments when a hospital 
fails to meet the Hospital OQR Program requirements.
    We did not receive any public comments on these steps under the 
methodology that we included in the proposed rule to determine the APC 
payments for CY 2017. Therefore, we are using the steps in the 
methodology specified below, as we proposed, to demonstrate the 
calculation of the final CY 2017 OPPS payments using the same 
parameters.
    Individual providers interested in calculating the payment amount 
that they will receive for a specific service from the national 
unadjusted payment rates presented in Addenda A and B to this final 
rule with comment period (which are available via the Internet on the 
CMS Web site) should follow the formulas presented in the following 
steps. For purposes of the payment calculations below, we refer to the 
national unadjusted payment rate for hospitals that meet the 
requirements of the Hospital OQR Program as the ``full'' national 
unadjusted payment rate. We refer to the national unadjusted payment 
rate for hospitals that fail to meet the requirements of the Hospital 
OQR Program as the ``reduced'' national unadjusted payment rate. The 
reduced national unadjusted payment rate is calculated by multiplying 
the reporting ratio of 0.980 times the ``full'' national unadjusted 
payment rate. The national unadjusted payment rate used in the 
calculations below is either the full national unadjusted payment rate 
or the reduced national unadjusted payment rate, depending on whether 
the hospital met its Hospital OQR Program requirements in order to 
receive the full CY 2017 OPPS fee schedule increase factor.
    Step 1. Calculate 60 percent (the labor-related portion) of the 
national unadjusted payment rate. Since the initial implementation of 
the OPPS, we have used 60 percent to represent our estimate of that 
portion of costs attributable, on average, to labor. We refer readers 
to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 
through 18497) for a detailed discussion of how we derived this 
percentage. During our regression analysis for the payment adjustment 
for rural hospitals in the CY 2006 OPPS final rule with comment period 
(70 FR 68553), we confirmed that this labor-related share for hospital 
outpatient services is appropriate.
    The formula below is a mathematical representation of Step 1 and 
identifies the labor-related portion of a specific payment rate for a 
specific service.

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

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

    Step 2. Determine the wage index area in which the hospital is 
located and identify the wage index level that applies to the specific 
hospital. We note that, under the CY 2017 OPPS policy for continuing to 
use the OMB labor market area delineations based on the 2010 Decennial 
Census data for the wage indexes used under the IPPS, a hold harmless 
policy for the wage index may apply, as discussed in section II.C. of 
this final rule with comment period. The wage index values assigned to 
each area reflect the geographic statistical areas (which are based 
upon OMB standards) to which hospitals are assigned for FY 2017 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. For 
further discussion of the changes to the FY 2017 IPPS wage indexes, as 
applied to the CY 2017 OPPS, we refer readers to section II.C. of this 
final rule with comment period. As we proposed, we are continuing to 
apply a wage index floor of 1.00 to frontier States, in accordance with 
section 10324 of the Affordable Care Act of 2010.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this final rule with comment period (which is 
available via the Internet on the CMS Web site) contains the qualifying 
counties and the associated wage index increase developed for the FY 
2017 IPPS, which are listed in Table 2 in the FY 2017 IPPS/LTCH PPS 
final rule and correction notice tables and available via the Internet 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be 
followed only if the hospital is not reclassified or redesignated under 
section 1886(d)(8) or section 1886(d)(10) of the Act.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the labor-related portion of the national unadjusted payment 
rate for the specific service by the wage index.


[[Page 79607]]


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

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

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

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

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

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

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 
1.071.

    We are providing examples below of the calculation of both the full 
and reduced national unadjusted payment rates that will apply to 
certain outpatient items and services performed by hospitals that meet 
and that fail to meet the Hospital OQR Program requirements, using the 
steps outlined above. For purposes of this example, we used a provider 
that is located in Brooklyn, New York that is assigned to CBSA 35614. 
This provider bills one service that is assigned to APC 5071 (Level 1 
Excision/Biopsy/Incision and Drainage). The CY 2017 full national 
unadjusted payment rate for APC 5071 is approximately $538.88. The 
reduced national unadjusted payment rate for APC 5071 for a hospital 
that fails to meet the Hospital OQR Program requirements is 
approximately $528.10. This reduced rate is calculated by multiplying 
the reporting ratio of 0.980 by the full unadjusted payment rate for 
APC 5071.
    The FY 2017 wage index for a provider located in CBSA 35614 in New 
York is 1.2936. The labor-related portion of the full national 
unadjusted payment is approximately $418.26 (.60 * $538.88 * 1.2936). 
The labor-related portion of the reduced national unadjusted payment is 
approximately $409.89 (.60 * $528.10 * 1.2936). The nonlabor-related 
portion of the full national unadjusted payment is approximately 
$215.55 (.40 * $538.88). The nonlabor-related portion of the reduced 
national unadjusted payment is approximately $211.24 (.40 * $528.10). 
The sum of the labor-related and nonlabor-related portions of the full 
national adjusted payment is approximately $633.81 ($418.26 + $215.55). 
The sum of the portions of the reduced national adjusted payment is 
approximately $621.13 ($409.89 + $211.24).

I. Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in calendar years thereafter, shall not exceed 40 percent of 
the APC payment rate. Section 1833(t)(3)(B)(ii) of the Act provides 
that, for a covered OPD service (or group of such services) furnished 
in a year, the national unadjusted copayment amount cannot be less than 
20 percent of the OPD fee schedule amount. However, section 
1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment 
that may be collected for a procedure performed in a year to the amount 
of the inpatient hospital deductible for that year.
    Section 4104 of the Affordable Care Act eliminated the Medicare 
Part B coinsurance for preventive services furnished on and after 
January 1, 2011, that meet certain requirements, including flexible 
sigmoidoscopies and screening colonoscopies, and waived the Part B 
deductible for screening colonoscopies that become diagnostic during 
the procedure. Our discussion of the changes made by the Affordable 
Care Act with regard to copayments for preventive services furnished on 
and after January 1, 2011, may be found in section XII.B. of the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72013).
2. OPPS Copayment Policy
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45640), for CY 2017, 
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.) We included the proposed national 
unadjusted copayment amounts for services payable under the OPPS that 
would be effective January 1, 2017, in Addenda A and B to the proposed 
rule (which are available via the Internet on the CMS Web site).
    As discussed in section XIII.E. of the proposed and this final rule 
with comment period, for CY 2017, the Medicare beneficiary's minimum 
unadjusted copayment and national unadjusted copayment for a service to 
which a reduced national unadjusted payment rate applies will equal the 
product of the reporting ratio and the national unadjusted copayment, 
or the product of the reporting ratio and the minimum unadjusted 
copayment, respectively, for the service.
    We note that OPPS copayments may increase or decrease each year 
based on changes in the calculated APC payment rates due to updated 
cost report and claims data, and any changes to the OPPS cost modeling 
process. However, as described in the CY 2004 OPPS final rule with 
comment period, the development of the copayment methodology generally 
moves beneficiary copayments closer to 20 percent of OPPS APC payments 
(68 FR 63458 through 63459).
    In the CY 2004 OPPS final rule with comment period (68 FR 63459), 
we adopted a new methodology to calculate unadjusted copayment amounts 
in situations including reorganizing APCs, and we finalized the 
following rules to determine copayment amounts in CY 2004 and 
subsequent years.

[[Page 79608]]

     When an APC group consists solely of HCPCS codes that were 
not paid under the OPPS the prior year because they were packaged or 
excluded or are new codes, the unadjusted copayment amount would be 20 
percent of the APC payment rate.
     If a new APC that did not exist during the prior year is 
created and consists of HCPCS codes previously assigned to other APCs, 
the copayment amount is calculated as the product of the APC payment 
rate and the lowest coinsurance percentage of the codes comprising the 
new APC.
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
equal to or greater than the prior year's rate, the copayment amount 
remains constant (unless the resulting coinsurance percentage is less 
than 20 percent).
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
less than the prior year's rate, the copayment amount is calculated as 
the product of the new payment rate and the prior year's coinsurance 
percentage.
     If HCPCS codes are added to or deleted from an APC and, 
after recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in a decrease in the coinsurance 
percentage for the reconfigured APC, the copayment amount would not 
change (unless retaining the copayment amount would result in a 
coinsurance rate less than 20 percent).
     If HCPCS codes are added to an APC and, after 
recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in an increase in the coinsurance 
percentage for the reconfigured APC, the copayment amount would be 
calculated as the product of the payment rate of the reconfigured APC 
and the lowest coinsurance percentage of the codes being added to the 
reconfigured APC.
    We noted in the CY 2004 OPPS final rule with comment period that we 
would seek to lower the copayment percentage for a service in an APC 
from the prior year if the copayment percentage was greater than 20 
percent. We noted that this principle was consistent with section 
1833(t)(8)(C)(ii) of the Act, which accelerates the reduction in the 
national unadjusted coinsurance rate so that beneficiary liability will 
eventually equal 20 percent of the OPPS payment rate for all OPPS 
services to which a copayment applies, and with section 1833(t)(3)(B) 
of the Act, which is consistent with the Congressional goal of 
achieving a 20-percent copayment percentage when fully phased in and 
gives the Secretary the authority to set rules for determining 
copayment amounts for new services. We further noted that the use of 
this methodology would, in general, reduce the beneficiary coinsurance 
rate and copayment amount for APCs for which the payment rate changes 
as the result of the reconfiguration of APCs and/or recalibration of 
relative payment weights (68 FR 63459).
    We did not receive any public comments on the copayment policy 
proposal. For the reasons set forth in this final rule with comment 
period, we are finalizing our proposed CY 2017 copayment policy without 
modification.
3. Calculation of an Adjusted Copayment Amount for an APC Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its Hospital OQR Program 
requirements should follow the formulas presented in the following 
steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using APC 5071, $107.78 is approximately 20 percent of the 
full national unadjusted payment rate of $538.88. For APCs with only a 
minimum unadjusted copayment in Addenda A and B to this final rule with 
comment period (which are available via the Internet on the CMS Web 
site), the beneficiary payment percentage is 20 percent.
    The formula below is a mathematical representation of Step 1 and 
calculates the national copayment as a percentage of national payment 
for a given service.

B is the beneficiary payment percentage.

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

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

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

    Step 4. For a hospital that failed to meet its Hospital OQR Program 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.980.
    The unadjusted copayments for services payable under the OPPS that 
will be effective January 1, 2017, are shown in Addenda A and B to this 
final rule with comment period (which are available via the Internet on 
the CMS Web site). We note that the national unadjusted payment rates 
and copayment rates shown in Addenda A and B to this final rule with 
comment period reflect the CY 2017 OPD fee schedule increase factor 
discussed in section II.B. of this final rule with comment period.
    In addition, as noted above, section 1833(t)(8)(C)(i) of the Act 
limits the amount of beneficiary copayment that may be collected for a 
procedure performed in a year to the amount of the inpatient hospital 
deductible for that year.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the hospital OPPS. Specifically, 
CMS recognizes the following codes on OPPS claims:
     Category I CPT codes, which describe surgical procedures 
and medical services;
     Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and
     Level II HCPCS codes, which are used primarily to identify 
products, supplies, temporary procedures, and services not described by 
CPT codes.
    CPT codes are established by the American Medical Association (AMA) 
and the Level II HCPCS codes are established by the CMS HCPCS 
Workgroup. These codes are updated and changed throughout the year. CPT 
and HCPCS code changes that affect the OPPS are published both through 
the annual rulemaking cycle and through

[[Page 79609]]

the OPPS quarterly update Change Requests (CRs). CMS releases new Level 
II HCPCS codes to the public or recognizes the release of new CPT codes 
by the AMA and makes these codes effective (that is, the codes can be 
reported on Medicare claims) outside of the formal rulemaking process 
via OPPS quarterly update CRs. Based on our review, we assign the new 
CPT and Level II HCPCS codes to interim status indicator (SI) and APC 
assignments. These interim assignments are finalized in the OPPS/ASC 
final rules. This quarterly process offers hospitals access to codes 
that may more accurately describe items or services furnished and 
provides payment or more accurate payment for these items or services 
in a timelier manner than if we waited for the annual rulemaking 
process. We solicit public comments on these new codes and finalize our 
proposals related to these codes through our annual rulemaking process.
    We note that, under the OPPS, the APC assignment determines the 
payment rate for an item, procedure, or service. For those items, 
procedures, or services not paid separately under the hospital OPPS, 
they are assigned to appropriate status indicators. Section XI. of this 
final rule with comment period provides a discussion of the various 
status indicators used under the OPPS. Certain payment status 
indicators provide separate payment while other payment status 
indicators do not.
    In Table 6 below, we summarize our current process for updating 
codes through our OPPS quarterly update CRs, seeking public comments, 
and finalizing the treatment of these new codes under the OPPS.

                            Table 6--Comment Timeframe for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
  OPPS quarterly update CR       Type of code           Effective date         Comments sought   When finalized
----------------------------------------------------------------------------------------------------------------
April l, 2016...............  Level II HCPCS     April 1, 2016..............  CY 2017 OPPS/ASC  CY 2017 OPPS/ASC
                               Codes.                                          proposed rule.    final rule with
                                                                                                 comment period.
July 1, 2016................  Level II HCPCS     July 1, 2016...............  CY 2017 OPPS/ASC  CY 2017 OPPS/ASC
                               Codes.                                          proposed rule.    final rule with
                                                                                                 comment period.
                              Category I         July 1, 2016...............  CY 2017 OPPS/ASC  CY 2017 OPPS/ASC
                               (certain vaccine                                proposed rule.    final rule with
                               codes) and III                                                    comment period.
                               CPT codes.
October 1, 2016.............  Level II HCPCS     October 1, 2016............  CY 2017 OPPS/ASC  CY 2018 OPPS/ASC
                               Codes.                                          final rule with   final rule with
                                                                               comment period.   comment period.
January 1, 2017.............  Level II HCPCS     January 1, 2017............  CY 2017 OPPS/ASC  CY 2018 OPPS/ASC
                               Codes.                                          final rule with   final rule with
                                                                               comment period.   comment period.
                              Category I and     January 1, 2017............  CY 2017 OPPS/ASC  CY 2017 OPPS/ASC
                               III CPT Codes.                                  proposed rule.    final rule with
                                                                                                 comment period.
----------------------------------------------------------------------------------------------------------------

1. Treatment of New Level II HCPCS Codes Effective April 1, 2016 for 
Which We Solicited Public Comments in the CY 2017 OPPS/ASC Proposed 
Rule
    Through the April 2016 OPPS quarterly update CR (Transmittal 3471, 
Change Request 9549, dated February 26, 2016) we recognized several new 
Level II HCPCS codes for separate payment under the OPPS. Effective 
April 1, 2016, we implemented 10 new HCPCS codes and also assigned them 
to appropriate interim OPPS status indicators and APCs. Specifically, 
as displayed in Table 7 of the CY 2017 OPPS/ASC proposed rule (81 FR 
45642), we provided separate payment for HCPCS codes C9137, C9138, 
C9461, C9470, C9471, C9472, C9473, C9474, C9475, and J7503. We note 
that HCPCS code J7503 was initially assigned to OPPS status indicator 
``E'' (Not paid by Medicare when submitted on outpatient claims (any 
outpatient bill type) when the code was established on January 1, 2016. 
However, we revised its OPPS status indicator from ``E'' to ``G'' 
(Pass-Through Drugs and Biologicals. Paid under OPPS; separate APC 
payment) effective April 1, 2016, when the drug associated with HCPCS 
code J7503 was approved for pass-through payment status under the 
hospital OPPS.
    In the CY 2017 OPPS/ASC proposed rule, we solicited public comments 
on the proposed APC and status indicator assignments for the 10 HCPCS 
codes implemented on April 1, 2016. We indicated that the proposed 
payment rates for these codes, where applicable, could be found in 
Addendum B to the proposed rule (which is available via the Internet on 
the CMS Web site).
    We did not receive any public comments on the proposed APC and 
status indicator assignments for the HCPCS codes implemented in April 
2016. Therefore, we are finalizing the proposed APC assignments and 
status indicators for the new HCPCS codes that were implemented on 
April 1, 2016. The final APC and status indicator assignments are 
listed in Table 7 below.
    We note that, for the CY 2017 update, the HCPCS Workgroup replaced 
the temporary drug HCPCS C-codes that were listed in Table 7 of the 
proposed rule with permanent HCPCS J-codes effective January 1, 2017. 
Because the replacement HCPCS J-codes describe the same drugs with the 
same dosage descriptors as their predecessor HCPCS C-codes, they will 
continue to receive pass-through payment status in CY 2017. Therefore, 
we are assigning the replacement HCPCS J-codes to the same APCs and 
status indicators as their predecessor HCPCS C-codes, as shown in Table 
7 below. The final payment rates for these codes, where applicable, can 
be found in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site).

   Table 7--Final CY 2017 Status Indicator (SI) and APC Assignments for the New Level II HCPCS Codes That Were
                                          Implemented on April 1, 2016
----------------------------------------------------------------------------------------------------------------
                                                                                  Final CY 2017    Final CY 2017
    CY 2016 HCPCS code          CY 2017 HCPCS code      CY 2017 long descriptor         SI              APC
----------------------------------------------------------------------------------------------------------------
C9137.....................  J7207....................  Injection, factor viii,                G             1844
                                                        (antihemophilic factor,
                                                        recombinant),
                                                        PEGylated, 1 i.u..
C9138.....................  J7209....................  Injection, factor viii,                G             1846
                                                        (antihemophilic factor,
                                                        recombinant), (Nuwiq),
                                                        1 i.u..
C9461.....................  A9515....................  Choline c-11,                          G             9461
                                                        diagnostic, per study
                                                        dose up to 20
                                                        millicuries.

[[Page 79610]]

 
C9470.....................  J1942....................  Injection, aripiprazole                G             9470
                                                        lauroxil, 1 mg.
C9471.....................  J7322....................  Hyaluronan or                          G             9471
                                                        derivative, Hymovis,
                                                        for intra-articular
                                                        injection, 1 mg.
C9472.....................  J9325....................  Injection, talimogene                  G             9472
                                                        laherparepvec, per 1
                                                        million plaque forming
                                                        units.
C9473.....................  J2182....................  Injection, mepolizumab,                G             9473
                                                        1 mg.
C9474.....................  J9205....................  Injection, irinotecan                  G             9474
                                                        liposome, 1 mg.
C9475.....................  J9295....................  Injection, necitumumab,                G             9475
                                                        1 mg.
J7503.....................  J7503....................  Tacrolimus, extended                   G             1845
                                                        release, (Envarsus XR),
                                                        oral, 0.25 mg.
----------------------------------------------------------------------------------------------------------------

2. Treatment of New CPT and Level II HCPCS Codes Effective July 1, 2016 
for Which We Solicited Public Comments in the CY 2017 OPPS/ASC Proposed 
Rule
    Effective July 1, 2016, we implemented several new CPT and Level II 
HCPCS codes under the hospital OPPS. Through the July 2016 OPPS 
quarterly update CR (Transmittal 3523, Change Request 9658, dated May 
13, 2016), we assigned nine new Category III CPT codes and nine Level 
II HCPCS codes that were made effective July 1, 2016, to interim OPPS 
status indicators and APCs. Specifically, as displayed in Table 8 of 
the CY 2017 OPPS/ASC proposed rule (81 FR 45643), we established 
interim OPPS status indicator and APC assignments for Category III CPT 
codes 0438T, 0440T, 0441T, 0442T, and 0443T, and Level II HCPCS codes 
C9476, C9477, C9478, C9479, C9480, Q5102, Q9981, Q9982, and Q9983. We 
noted that Category III CPT codes 0437T, 0439T, 0444T, and 0445T are 
assigned to OPPS status indicator ``N'' to indicate that the services 
described by the codes are packaged and their payment is included in 
the primary procedure codes reported with these codes.
    Table 8 of the CY 2017 OPPS/ASC proposed rule listed the CPT and 
Level II HCPCS codes that were implemented on July 1, 2016, along with 
the proposed status indicators and proposed APC assignments, where 
applicable, for CY 2017. We solicited public comments on the proposed 
APC and status indicator assignments.
    We received one comment related to the proposed APC assignment for 
Category III CPT codes 0440T, 0441T, and 0442T, which we address in 
section III.D.10. of this final rule with comment period. We did not 
receive any public comments on the proposed APC and status indicator 
assignments for the other 15 codes that were listed in Table 8 of the 
CY 2017 OPPS/ASC proposed rule. Therefore, in this final rule with 
comment period, we are adopting as final, without modification, the 
proposed APC and/or status indicator assignments for Category III CPT 
codes 0437T, 0438T, 0439T, 0444T, and 0445T and Level II HCPCS codes 
C9476, C9477, C9478, C9479, C9480, Q5102, Q9981, Q9982, and Q9983. 
However, we are modifying the OPPS status indicator for CPT code 0443T 
from ``T'' to ``N'' because this is an add-on code. Since January 1, 
2014, payment for procedures described by add-on codes have been 
packaged under the hospital OPPS.
    In addition, for the CY 2017 update, the HCPCS Workgroup replaced 
temporary HCPCS codes C9476, C9477, C9478, C9480, and Q9981 with 
permanent HCPCS J-codes effective January 1, 2017. Because the 
replacement HCPCS J-codes describe the same drugs with the same dosage 
descriptors as their predecessor HCPCS C-codes and Q-codes, they will 
continue to receive pass-through payment status in CY 2017. 
Consequently, we are assigning the replacement HCPCS J-codes to the 
same APCs and status indicators as their predecessor HCPCS C-codes and 
Q-codes, as shown in Table 8 below. Table 8 lists the CPT and Level II 
HCPCS codes that were implemented on July 1, 2016, along with the final 
status indicators and APC assignments for CY 2017. The final payment 
rates for these codes, where applicable, can be found in Addendum B to 
this final rule with comment period (which is available via the 
Internet on the CMS Web site).

   Table 8--Final CY 2017 Status Indicators (SI) and APC Assignments for the New Category III CPT and Level II
                                     HCPCS Codes Implemented on July 1, 2016
----------------------------------------------------------------------------------------------------------------
                                                                                  Final CY 2017    Final CY 2017
  CY 2016 CPT/HCPCS code      CY 2017 CPT/HCPCS code    CY 2017 long descriptor         SI              APC
----------------------------------------------------------------------------------------------------------------
C9476.....................  J9145....................  Injection, daratumumab,                G             9476
                                                        10 mg.
C9477.....................  J9176....................  Injection, elotuzumab, 1               G             9477
                                                        mg.
C9478.....................  J2840....................  Injection, sebelipase                  G             9478
                                                        alfa, 1 mg.
C9479.....................  J7342....................  Instillation,                          G             9479
                                                        ciprofloxacin otic
                                                        suspension, 6 mg.
C9480.....................  J9352....................  Injection, trabectedin,                G             9480
                                                        0.1 mg.
Q5102.....................  Q5102....................  Injection, Infliximab,                E2              N/A
                                                        Biosimilar, 10 mg.
Q9981.....................  J8670....................  Rolapitant, oral, 1 mg..               K             1761
Q9982 *...................  Q9982....................  Flutemetamol F18,                      G             9459
                                                        diagnostic, per study
                                                        dose, up to 5
                                                        millicuries.
Q9983 **..................  Q9983....................  Florbetaben f18,                       G             9458
                                                        diagnostic, per study
                                                        dose, up to 8.1
                                                        millicuries.
0437T.....................  0437T....................  Implantation of non-                   N              N/A
                                                        biologic or synthetic
                                                        implant (e.g.,
                                                        polypropylene) for
                                                        fascial reinforcement
                                                        of the abdominal wall
                                                        (List separately in
                                                        addition to primary
                                                        procedure).
0438T.....................  0438T ***................  Transperineal placement                T             5374
                                                        of biodegradable
                                                        material, peri-
                                                        prostatic (via needle),
                                                        single or multiple,
                                                        includes image guidance.
0439T.....................  0439T....................  Myocardial contrast                    N              N/A
                                                        perfusion
                                                        echocardiography; at
                                                        rest or with stress,
                                                        for assessment of
                                                        myocardial ischemia or
                                                        viability (List
                                                        separately in addition
                                                        to primary procedure).

[[Page 79611]]

 
0440T.....................  0440T....................  Ablation, percutaneous,               J1             5432
                                                        cryoablation, includes
                                                        imaging guidance; upper
                                                        extremity distal/
                                                        peripheral nerve.
0441T.....................  0441T....................  Ablation, percutaneous,               J1             5432
                                                        cryoablation, includes
                                                        imaging guidance; lower
                                                        extremity distal/
                                                        peripheral nerve.
0442T.....................  0442T....................  Ablation, percutaneous,               J1             5432
                                                        cryoablation, includes
                                                        imaging guidance; nerve
                                                        plexus or other truncal
                                                        nerve (e.g., brachial
                                                        plexus, pudendal nerve).
0443T.....................  0443T....................  Real time spectral                     N              N/A
                                                        analysis of prostate
                                                        tissue by fluorescence
                                                        spectroscopy.
0444T.....................  0444T....................  Initial placement of a                 N              N/A
                                                        drug-eluting ocular
                                                        insert under one or
                                                        more eyelids, including
                                                        fitting, training, and
                                                        insertion, unilateral
                                                        or bilateral.
0445T.....................  0445T....................  Subsequent placement of                N              N/A
                                                        a drug-eluting ocular
                                                        insert under one or
                                                        more eyelids, including
                                                        re-training, and
                                                        removal of existing
                                                        insert, unilateral or
                                                        bilateral.
----------------------------------------------------------------------------------------------------------------
* HCPCS code C9459 (Flutemetamol f18, diagnostic, per study dose, up to 5 millicuries) was deleted June 30,
  2016, and replaced with HCPCS code Q9982 effective July 1, 2016.
** HCPCS code C9458 (Florbetaben f18, diagnostic, per study dose, up to 8.1 millicuries) was deleted June 30,
  2016, and replaced with HCPCS code Q9983 effective July 1, 2016.
*** HCPCS code C9743 (Injection/implantation of bulking or spacer material (any type) with or without image
  guidance (not to be used if a more specific code applies) was deleted June 30, 2016 and replaced with CPT code
  0438T effective July 1, 2016.

3. Process for New Level II HCPCS Codes That Became Effective October 
1, 2016 and New Level II HCPCS Codes That Will Be Effective January 1, 
2017 for Which We Are Soliciting Public Comments in This CY 2017 OPPS/
ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Level II HCPCS codes that are effective October 1 and January 1 in the 
final rule with comment period thereby updating the OPPS for the 
following calendar year. These codes are released to the public through 
the October and January OPPS quarterly update CRs and via the CMS HCPCS 
Web site (for Level II HCPCS codes). For CY 2017, we proposed to 
continue our established policy of assigning comment indicator ``NI'' 
to these codes to indicate that we are assigning them an interim 
payment status which is subject to public comment (81 FR 45643). 
Specifically, the status indicators and the APC assignments for codes 
flagged with comment indicator ``NI'' are open to public comment in 
this final rule with comment period, and we will respond to these 
public comments in the OPPS/ASC final rule with comment period for the 
next year's OPPS/ASC update. For CY 2017, we proposed to include in 
Addendum B to the CY 2017 OPPS/ASC final rule with comment period the 
following new HCPCS codes:
     New Level II HCPCS codes effective October 1, 2016, that 
would be incorporated in the October 2016 OPPS quarterly update CR;
     New Level II HCPCS codes effective January 1, 2017, that 
would be incorporated in the January 2017 OPPS quarterly update CR.
    As stated above, the October 1, 2016 and January 1, 2017 codes are 
flagged with comment indicator ``NI'' in Addendum B to this CY 2017 
OPPS/ASC final rule with comment period to indicate that we have 
assigned the codes an interim OPPS payment status for CY 2017. We are 
inviting public comments on the interim status indicator and APC 
assignments and payment rates for these codes, if applicable, that will 
be finalized in the CY 2018 OPPS/ASC final rule with comment period.
4. Treatment of New and Revised CY 2017 Category I and III CPT Codes 
That Will Be Effective January 1, 2017, for Which We Solicited Public 
Comments in the CY 2017 OPPS/ASC Proposed Rule
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841 
through 66844), we finalized a revised process of assigning APC and 
status indicators for new and revised Category I and III CPT codes that 
would be effective January 1. Specifically, for the new/revised CPT 
codes that we receive in a timely manner from the AMA's CPT Editorial 
Panel, we finalized our proposal to include the codes that would be 
effective January 1 in the OPPS/ASC proposed rules, along with proposed 
APC and status indicator assignments for them, and to finalize the APC 
and status indicator assignments in the OPPS/ASC final rules beginning 
with the CY 2016 OPPS update. For those new/revised CPT codes that were 
received too late for inclusion in the OPPS/ASC proposed rule, we 
finalized our proposal to establish and use HCPCS G-codes that mirror 
the predecessor CPT codes and retain the current APC and status 
indicator assignments for a year until we can propose APC and status 
indicator assignments in the following year's rulemaking cycle. We 
noted that even if we find that we need to create HCPCS G-codes in 
place of certain CPT codes for the MPFS proposed rule, we do not 
anticipate that these HCPCS G codes will always be necessary for OPPS 
purposes. We will make every effort to include proposed APC and status 
indicator assignments for all new and revised CPT codes that the AMA 
makes publicly available in time for us to include them in the proposed 
rule, and to avoid establishing HCPCS G codes and the resulting delay 
in utilization of the most current CPT codes. In addition, we finalized 
our proposal to make interim APC and status indicator assignments for 
CPT codes that are not available in time for the proposed rule and that 
describe wholly new services (such as new technologies or new surgical 
procedures), solicit public comments, and finalize the specific APC and 
status indicator assignments for those codes in the following year's 
final rule.
    For the CY 2017 OPPS update, we received the CY 2017 CPT codes that 
will be effective January 1, 2017, from the AMA in time for inclusion 
in the CY 2017 OPPS/ASC proposed rule. In the proposed rule (81 FR 
45643 through 45644), we indicated that the new and revised CY 2017 
Category I and III CPT codes could be found in OPPS Addendum B to the 
proposed rule and were assigned to new comment indicator ``NP'' to 
indicate that the code

[[Page 79612]]

is new for the next calendar year or the code is an existing code with 
substantial revision to its code descriptor in the next calendar year 
as compared to current calendar year with a proposed APC assignment. We 
further stated that comments would be accepted on the proposed APC 
assignment and status indicator.
    In addition, we reminded readers that the CPT code descriptors that 
appeared in OPPS Addendum B are short descriptors and do not accurately 
describe the complete procedure, service, or item described of the CPT 
code. Therefore, we included the 5-digit placeholder codes and their 
long descriptors in Addendum O to the proposed rule (which is available 
via the Internet on the CMS Web site) so that the public could 
adequately comment on our proposed APCs and status indicator 
assignments. The 5-digit placeholder codes were listed in Addendum O of 
the proposed rule, specifically under the column labeled ``CY 2017 
OPPS/ASC Proposed Rule 5-Digit Placeholder Code.'' We also indicated 
that the final CPT code numbers would be included in this CY 2017 OPPS/
ASC final rule with comment period. The final CPT code numbers, along 
with their corresponding 5-digit placeholder codes, can be found in 
Addendum O of this final rule with comment period.
    We note that not every code listed in Addendum O of the proposed 
rule was subject to comment. For the new/revised Category I and III CPT 
codes, we requested public comments on only those codes that were 
assigned to comment indicator ``NP.'' We indicated that public comments 
would not be accepted for new Category I CPT laboratory codes that were 
not assigned to ``NP'' comment indicator in Addendum O to the proposed 
rule. We stated that comments to these codes must be submitted at the 
Clinical Laboratory Fee Schedule (CLFS) Public Meeting, which was 
scheduled for July 18, 2016.
    We received public comments on several of the new CPT codes that 
were assigned to comment indicator ``NP'' in Addendum B of the CY 2017 
OPPS/ASC proposed rule. We respond to these comments in section III.D. 
of this CY 2017 OPPS/ASC final rule with comment period.
    The final status indicators, APC assignments, and payment rates for 
the new CPT codes that will be effective January 1, 2017, can be found 
in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site).

B. OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
services. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services within this classification 
system, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, we developed a grouping classification system, 
referred to as Ambulatory Payment Classifications (APCs), as set forth 
in Sec.  419.31 of the regulations. We use Level I and Level II HCPCS 
codes to identify and group the services within each APC. The APCs are 
organized such that each group is homogeneous both clinically and in 
terms of resource use. Using this classification system, we have 
established distinct groups of similar services. We also have developed 
separate APC groups for certain medical devices, drugs, biologicals, 
therapeutic radiopharmaceuticals, and brachytherapy devices that are 
not packaged into the payment for the procedure.
    We have packaged into the payment for each procedure or service 
within an APC group the costs associated with those items and services 
that are typically ancillary and supportive to a primary diagnostic or 
therapeutic modality and, in those cases, are an integral part of the 
primary service they support. Therefore, we do not make separate 
payment for these packaged items or services. In general, packaged 
items and services include, but are not limited to, the items and 
services listed in Sec.  419.2(b) of the regulations. A further 
discussion of packaged services is included in section II.A.3. of this 
final rule with comment period.
    Under the OPPS, we generally pay for covered hospital outpatient 
services on a rate-per-service basis, where the service may be reported 
with one or more HCPCS codes. Payment varies according to the APC group 
to which the independent service or combination of services is 
assigned. In the CY 2017 OPPS/ASC proposed rule (81 FR 45644), for CY 
2017, we proposed that each APC relative payment weight represents the 
hospital cost of the services included in that APC, relative to the 
hospital cost of the services included in APC 5012 (Clinic Visits and 
Related Services). The APC relative payment weights are scaled to APC 
5012 because it is the hospital clinic visit APC and clinic visits are 
among the most frequently furnished services in the hospital outpatient 
setting.
2. Application of the 2 Times Rule
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
not less often than annually, and revise the APC groups, the relative 
payment weights, and the wage and other adjustments described in 
paragraph (2) to take into account changes in medical practice, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors. 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. We note that the Panel 
recommendations for specific services for the CY 2017 OPPS and our 
responses to them are discussed in the relevant specific sections 
throughout this final rule with comment period.
    In addition, section 1833(t)(2) of the Act provides that, subject 
to certain exceptions, the items and services within an APC group 
cannot be considered comparable with respect to the use of resources if 
the highest cost for an item or service in the group is more than 2 
times greater than the lowest cost for an item or service within the 
same group (referred to as the ``2 times rule''). The statute 
authorizes the Secretary to make exceptions to the 2 times rule in 
unusual cases, such as low-volume items and services (but the Secretary 
may not make such an exception in the case of a drug or biological that 
has been designated as an orphan drug under section 526 of the Federal 
Food, Drug, and Cosmetic Act).
    Therefore, 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 if there are any APC 
violations of the 2 times rule and whether there are any appropriate 
revisions to APC assignments that may be necessary or exceptions to be 
made. In determining the APCs with a 2 times rule violation, we 
consider only those HCPCS codes that are significant based on the 
number of claims. We note that, for purposes of identifying significant 
procedure codes for examination under the 2 times rule, we consider 
procedure codes that have more than 1,000 single major claims or 
procedure codes that have both greater than 99 single major claims and 
contribute at least 2 percent

[[Page 79613]]

of the single major claims used to establish the APC cost to be 
significant (75 FR 71832). This longstanding definition of when a 
procedure code is significant for purposes of the 2 times rule was 
selected because we believe that a subset of 1,000 claims (or less than 
1,000 claims) is negligible within the set of approximately 100 million 
single procedure or single session claims we use for establishing 
costs. Similarly, a procedure code for which there are fewer than 99 
single claims and which comprises less than 2 percent of the single 
major claims within an APC will have a negligible impact on the APC 
cost. In the CY 2017 OPPS/ASC proposed rule (81 FR 45644 through 
45645), we proposed to make exceptions to this limit on the variation 
of costs within each APC group in unusual cases, such as low-volume 
items and services.
    For the CY 2017 OPPS update, we identified the APCs with violations 
of the 2 times rule, and we proposed changes to the procedure codes 
assigned to these APCs in Addendum B to the CY 2017 OPPS/ASC proposed 
rule. We noted that Addendum B did not appear in the printed version of 
the Federal Register as part of the CY 2017 OPPS/ASC proposed rule. 
Rather, it was published and made available via the Internet on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In these cases, to eliminate 
a violation of the 2 times rule or to improve clinical and resource 
homogeneity, in the CY 2017 OPPS/ASC proposed rule (81 FR 45645), we 
proposed to reassign these procedure codes to new APCs that contain 
services that are similar with regard to both their clinical and 
resource characteristics. In many cases, the proposed procedure code 
reassignments and associated APC reconfigurations for CY 2017 included 
in the proposed rule are related to changes in costs of services that 
were observed in the CY 2015 claims data newly available for CY 2017 
ratesetting. We also proposed changes to the status indicators for some 
procedure codes that were not specifically and separately discussed in 
the proposed rule. In these cases, we proposed to change the status 
indicators for these procedure codes because we believe that another 
status indicator would more accurately describe their payment status 
from an OPPS perspective based on the policies that we proposed for CY 
2017. Addendum B to the CY 2017 OPPS/ASC proposed rule identified with 
a comment indicator ``CH'' those procedure codes for which we proposed 
a change to the APC assignment or status indicator, or both, that were 
initially assigned in the April 1, 2016 OPPS Addendum B Update 
(available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Addendum-A-and-Addendum-B-Updates.html). In 
contrast, Addendum B to this final rule with comment period (available 
via the Internet on the CMS Web site) identifies with the ``CH'' 
comment indicator the final CY 2017 changes compared to the HCPCS 
codes' status as reflected in the October 2016 Addendum B update.
3. APC Exceptions to the 2 Times Rule
    Taking into account the APC changes that we proposed for CY 2017, 
we reviewed all of the APCs to determine which APCs would not meet the 
requirements of the 2 times rule. We used the following criteria to 
evaluate whether to propose exceptions to the 2 times rule for affected 
APCs:
     Resource homogeneity;
     Clinical homogeneity;
     Hospital outpatient setting utilization;
     Frequency of service (volume); and
     Opportunity for upcoding and code fragments.
    Based on the CY 2015 claims data available for the CY 2017 proposed 
rule, we found 4 APCs with violations of the 2 times rule. We applied 
the criteria as described above to identify the APCs that we proposed 
to make exceptions for under the 2 times rule for CY 2017, and 
identified 4 APCs that met the criteria for an exception to the 2 times 
rule based on the CY 2015 claims data available for the proposed rule. 
For a detailed discussion of these criteria, we refer readers to the 
April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 
18458).
    In addition, in the proposed rule, we noted that, for cases in 
which a recommendation by the Panel appears to result in or allow a 
violation of the 2 times rule, we may accept the Panel's recommendation 
because those recommendations are based on explicit consideration (that 
is, a review of the latest OPPS claims data and group discussion of the 
issue) of resource use, clinical homogeneity, site of service, and the 
quality of the claims data used to determine the APC payment rates.
    Table 9 of the proposed rule listed the 4 APCs that we proposed to 
make exceptions for under the 2 times rule for CY 2017 based on the 
criteria cited above and claims data submitted between January 1, 2015, 
and December 31, 2015, and processed on or before December 31, 2015. We 
indicated that, for the final rule with comment period, we intend to 
use claims data for dates of service between January 1, 2015, and 
December 31, 2015, that were processed on or before June 30, 2016, and 
updated CCRs, if available.
    Based on the updated final rule CY 2015 claims data, we found 7 
APCs with violations of the 2 times rule for this final rule with 
comment period. We applied the criteria as described earlier to 
identify the APCs that are exceptions to the 2 times rule for CY 2015, 
and identified 4 additional APCs that meet the criteria for exception 
to the 2 times rule for this final rule with comment period, but that 
did not meet the criteria using proposed rule claims data. 
Specifically, we found that the following 4 additional APCs violated 
the 2 times rule using the final rule with comment period claims data:

 APC 5181 (Level 1 Vascular Procedures)
 APC 5732 (Level 2 Minor Procedures)
 APC 5821 (Level 1 Health and Behavior Services)
 APC 5823 (Level 3 Health and Behavior Services)

    After considering the public comments we received on APC 
assignments and our analysis of the CY 2015 costs from hospital claims 
and cost report data available for this final rule with comment period, 
we are finalizing our proposals with some modifications. Specifically, 
we are finalizing our proposal to except 3 of the 4 proposed APCs from 
the 2 times rule for CY 2017 (APCs 5521, 5735, and 5771), and also 
excepting 4 additional APCs (APCs 5181, 5732, 5821, and 5823). APC 5841 
(Psychotherapy), which appeared as one of the 4 APCs in Table 9 of the 
CY 2017 OPPS/ASC proposed rule, no longer met the criteria for 
exception to the 2 times rule in this final rule with comment period. 
Table 9 below lists the 7 APCs that we are excepting from the 2 times 
rule for CY 2017 based on the criteria described earlier and a review 
of updated claims data. We note that, for cases in which a 
recommendation by the HOP Panel appears to result in or allow a 
violation of the 2 times rule, we generally accept the Panel's 
recommendation because those recommendations are based on explicit 
consideration of resource use, clinical homogeneity, site of service, 
and the quality of the claims data used to determine the APC payment 
rates. The geometric mean costs for hospital outpatient services for 
these and all other APCs that were used in the development of this 
final rule with comment period can be found on the CMS Web site at: 
http://www.cms.gov/

[[Page 79614]]

Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/
Hospital-Outpatient-Regulations-and-Notices.html.

        Table 9--Final CY 2017 APC Exceptions to the 2 Times Rule
------------------------------------------------------------------------
           CY 2017 APC                       CY 2017 APC title
------------------------------------------------------------------------
5181.............................  Level 1 Vascular Procedures.
5521.............................  Level 1 Imaging without Contrast.
5732.............................  Level 2 Minor Procedures.
5735.............................  Level 5 Minor Procedures.
5771.............................  Cardiac Rehabilitation.
5821.............................  Level 1 Health and Behavior Services.
5823.............................  Level 3 Health and Behavior Services.
------------------------------------------------------------------------

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.
    For CY 2016, there are 48 New Technology APC levels, ranging from 
the lowest cost band assigned to APC 1491 (New Technology--Level 1A 
($0-$10)) through the highest cost band assigned to APC 1599 (New 
Technology--Level 48 ($90,001-$100,000)). In the CY 2004 OPPS final 
rule with comment period (68 FR 63416), we restructured the New 
Technology APCs to make the cost intervals more consistent across 
payment levels and refined the cost bands for these APCs to retain two 
parallel sets of New Technology APCs, one set with a status indicator 
of ``S'' (Significant Procedures, Not Discounted when Multiple. Paid 
under OPPS; separate APC payment) and the other set with a status 
indicator of ``T'' (Significant Procedure, Multiple Reduction Applies. 
Paid under OPPS; separate APC payment). These current New Technology 
APC configurations allow us to price new technology services more 
appropriately and consistently.
    We note that the cost bands for the New Technology APCs, 
specifically, APCs 1491 through 1599, vary with increments ranging from 
$10 to $9,999. 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 7 
($501-$600)) is made at $550.50.
    Every year we receive several requests for higher payment amounts 
under the New Technology APCs for specific procedures paid under the 
OPPS because they require the use of expensive equipment. We are taking 
this opportunity to reiterate our response in general to the issue of 
hospitals' capital expenditures as they relate to the OPPS and 
Medicare, as specified in the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70374).
    Under the OPPS, one of our goals is to make payments that are 
appropriate for the services that are necessary for the treatment of 
Medicare beneficiaries. The OPPS, like other Medicare payment systems, 
is budget neutral and increases are limited to the annual hospital 
inpatient market basket increase. We believe that our payment rates 
generally reflect the costs that are associated with providing care to 
Medicare beneficiaries, and we believe that our payment rates are 
adequate to ensure access to services (80 FR 70374).
    For many emerging technologies, there is a transitional period 
during which utilization may be low, often because providers are first 
learning about the techniques and their clinical utility. Quite often, 
parties request that Medicare make higher payment amounts under the New 
Technology APCs for new procedures in that transitional phase. These 
requests, and their accompanying estimates for expected total patient 
utilization, often reflect very low rates of patient use of expensive 
equipment, resulting in high per use costs for which requesters believe 
Medicare should make full payment. Medicare does not, and we believe 
should not, assume responsibility for more than its share of the costs 
of procedures based on projected utilization for Medicare beneficiaries 
and does not set its payment rates based on initial projections of low 
utilization for services that require expensive capital equipment. For 
the OPPS, we rely on hospitals to make informed business decisions 
regarding the acquisition of high cost capital equipment, taking into 
consideration their knowledge about their entire patient base (Medicare 
beneficiaries included) and an understanding of Medicare's and other 
payers' payment policies. (We refer readers to the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68314) for further discussion 
regarding this payment policy.)
    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 (77 FR 68314).
2. Additional New Technology APC Groups
    As stated above, for the CY 2017 update, there are 48 levels of New 
Technology APC groups with two parallel status indicators; one set with 
a status indicator of ``S'' and the other set with a status indicator 
of ``T.'' To improve our ability to pay appropriately for new 
technology services and procedures, in the CY 2017 OPPS/ASC proposed 
rule (81 FR 45646), we proposed to expand the New Technology APC groups 
by adding 3 more levels, specifically, adding New Technology Levels 49 
through 51. We proposed this expansion to accommodate the assignment of 
retinal prosthesis implantation procedures to a New Technology APC, 
which is discussed in section III.C.3. of this final rule with comment 
period. Therefore, for the CY 2017 OPPS update, we proposed to 
establish 6 new groups of New Technology APCs, APCs 1901 through 1906 
(for New Technology APC Levels 49 through 51), with procedures assigned 
to both OPPS status indicators ``S'' and ``T.'' These new groups of 
APCs have the same payment levels with one set subject to the multiple 
procedure payment reduction (procedures assigned to status indicator 
``T'') and the other set not subject to the multiple procedure

[[Page 79615]]

payment reduction (procedures assigned to status indicator ``S''). Each 
proposed set of New Technology APC groups has identical group titles, 
payment rates, and minimum unadjusted copayments, but a different 
status indicator assignment. Table 10 of the CY 2017 OPPS/ASC proposed 
rule included the complete list of the proposed additional 6 New 
Technology APC groups for CY 2017 (81 FR 45646).
    We did not receive any public comments on the proposed expansion of 
the New Technology APC groups, specifically, adding New Technology 
Levels 49 through 51 for New Technology APCs 1901 through 1906. 
Therefore, we are finalizing our proposal, without modification. Table 
10 lists the final CY 2017 New Technology APCs and the group titles for 
New Technology Levels 49 through 51. The payment rates for New 
Technology APCs 1901 through 1906 can be found in Addendum A to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site).

      Table 10--Final CY 2017 Additional New Technology APC Groups
------------------------------------------------------------------------
                                                          Final  CY 2017
        New CY 2017 APC             CY 2017 APC title           SI
------------------------------------------------------------------------
1901...........................  New Technology--Level                S
                                  49 ($100,001-
                                  $120,000).
1902...........................  New Technology--Level                T
                                  49 ($100,001-
                                  $120,000).
1903...........................  New Technology--Level                S
                                  50 ($120,001-
                                  $140,000).
1904...........................  New Technology--Level                T
                                  50 ($120,001-
                                  $140,000).
1905...........................  New Technology--Level                S
                                  51 ($140,001-
                                  $160,000).
1906...........................  New Technology--Level                T
                                  51 ($140,001-
                                  $160,000).
------------------------------------------------------------------------

3. Procedures Assigned to New Technology APC Groups for CY 2017
a. Overall Proposal
    As we explained in the CY 2002 OPPS final rule with comment period 
(66 FR 59902), we generally retain a procedure in the New Technology 
APC to which it is initially assigned until we have obtained sufficient 
claims data to justify reassignment of the procedure to a clinically 
appropriate APC. However, in cases where we find that our initial New 
Technology APC assignment was based on inaccurate or inadequate 
information (although it was the best information available at the 
time), or we obtain new information that was not available at the time 
of our initial New Technology APC assignment, or where the New 
Technology APCs are restructured, we may, based on more recent resource 
utilization information (including claims data) or the availability of 
refined New Technology APC cost bands, reassign the procedure or 
service to a different New Technology APC that more appropriately 
reflects its cost (66 FR 59903).
    Consistent with our current policy, for CY 2017, in the CY 2017 
OPPS/ASC proposed rule (81 FR 45646), we proposed to retain services 
within New Technology APC groups until we obtain sufficient claims data 
to justify reassignment of the service to a clinically appropriate APC. 
The flexibility associated with this policy allows us to reassign a 
service from a New Technology APC in less than 2 years if sufficient 
claims data are available. It also allows us to retain a service in a 
New Technology APC for more than 2 years if sufficient claims data upon 
which to base a decision for reassignment have not been obtained (66 FR 
59902).
    For CY 2016, only two procedure codes, specifically, HCPCS codes 
C9740 (Cystourethroscopy, with insertion of transprostatic implant; 4 
or more implants) and 0100T (Placement of a subconjunctival retinal 
prosthesis receiver and pulse generator, and implantation of intra-
ocular retinal electrode array, with vitrectomy) received payment 
through a New Technology APC. In the CY 2017 OPPS/ASC proposed rule (81 
FR 45646 through 45648), we proposed to reassign HCPCS code C9740 from 
APC 1565 (New Technology--Level 28 ($5000-$5500)) to APC 5376 (Level 6 
Urology and Related Services), and to reassign CPT code 0100T from APC 
1599 (New Technology--Level 48 ($90,000-$100,000)) to APC 1906 (New 
Technology--Level 51 ($140,001-$160,000)). We received public comments 
on the proposed APC assignment revisions for both procedure codes. 
Below in section III.C.3.b. of this final rule with comment period, we 
discuss the public comments we received, our responses, and our final 
policy for CY 2017 for CPT code 0100T on the retinal prosthesis implant 
procedure. In section III.D.4.a. of this final rule with comment 
period, we discuss the public comments we received, our responses, and 
our final policy for CY 2017 for HCPCS code C9740 on cystourethroscopy.
b. Retinal Prosthesis Implant Procedure
    As stated above, in the CY 2017 OPPS/ASC proposed rule, we proposed 
to revise the APC assignment for CPT code 0100T from New Technology APC 
1599 to New Technology APC 1906. CPT code 0100T describes the 
implantation of a retinal prosthesis, specifically, a procedure 
involving use of the Argus[supreg] II Retinal Prosthesis System. This 
first retinal prosthesis was approved by the FDA in 2013 for adult 
patients diagnosed with advanced retinitis pigmentosa. Pass-through 
payment status was granted for the Argus[supreg] II device under HCPCS 
code C1841 (Retinal prosthesis, includes all internal and external 
components) beginning October 1, 2013, and expired on December 31, 
2015. We note that after pass-through payment status expires for a 
medical device, the payment for the device is packaged into the payment 
for the associated surgical procedure. Consequently, for CY 2016, the 
device described by HCPCS code C1841 was assigned to OPPS status 
indicator ``N'' to indicate that payment for the device is packaged and 
included in the payment rate for the surgical procedure described by 
CPT code 0100T. For CY 2016, CPT code 0100T is assigned to APC 1599 
with a payment rate of $95,000. This payment includes both the surgical 
procedure (CPT code 0100T) and the use of the Argus[supreg] II device 
(HCPCS code C1841). However, stakeholders (including the device 
manufacturer and hospitals) believe that the CY 2016 payment rate for 
the procedure involving the Argus[supreg] II System is insufficient to 
cover the hospital cost of performing the procedure, which includes the 
cost of the retinal prosthesis, which has a retail price of 
approximately $145,000.
    For the CY 2017 update, analysis of the CY 2015 OPPS claims data 
used for the CY 2017 proposed rule showed 5 single claims (out of 7 
total claims) for CPT code 0100T, with a geometric mean

[[Page 79616]]

cost of approximately $141,900 based on claims submitted between 
January 1, 2015, through December 31, 2015, and processed through 
December 31, 2015. In the proposed rule, we noted that the final 
payment rate in the CY 2017 OPPS/ASC final rule with comment period 
would be based on claims submitted between January 1, 2015, and 
December 31, 2015, and processed through June 30, 2016.
    Based on the CY 2015 OPPS claims data available for the proposed 
rule and our understanding of the Argus[supreg] II procedure, we 
proposed to reassign CPT code 0100T from APC 1599 to APC 1906 with a 
proposed payment rate of approximately $150,000 for CY 2017. We stated 
that we believe that APC 1906 is the most appropriate APC assignment 
for the Argus[supreg] II procedure. We noted that this payment rate 
includes the cost of both the surgical procedure (CPT code 0100T) and 
the retinal prosthesis device (HCPCS code C1841).
    Comment: Several commenters supported CMS' proposal to reassign CPT 
code 0100T from APC 1599 to APC 1906, which had a proposed CY 2017 
payment rate of $150,000, and stated that the proposed payment better 
aligns with the cost of providing the service. However, one commenter 
stated that, while this change may benefit some hospitals, it does not 
help hospitals with a low wage-index value because the cost of the 
technology itself is not affected by the hospital's wages relative to 
other hospitals. The commenter further stated that the use of such new 
technologies as the Argus[supreg] II procedure underpays hospitals in 
less costly wage areas and, therefore, limit its use. Consequently, the 
commenter suggested that CMS consider the effect of setting new 
technology payments for hospitals assigned to less costly wage areas.
    Response: We appreciate the commenters' support. Based on the 
updated CY 2015 hospital outpatient claims data used for this final 
rule with comment period, which is based on claims submitted between 
January 1, 2015, and December 31, 2015, and processed through June 30, 
2016, we believe that APC 1906 remains the most appropriate APC 
assignment for CPT code 0100T. The latest claims data showed 9 single 
claims (out of 13 total claims) for CPT code 0100T, with a geometric 
mean cost of approximately $142,003. We believe that the payment for 
APC 1906 appropriately captures the cost of providing the service 
associated with the Argus[supreg] II procedure.
    With respect to the issue of hospitals with a low wage index, we 
appreciate the commenter's interest in refining the methodology for new 
technology APCs under the OPPS. Because we did not propose a change to 
hospitals with a low wage index values, we will take this comment into 
consideration in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to reassign CPT code 
0100T from APC 1599 (New Technology--Level 48 ($90,001-$100,000)) to 
APC 1906 (New Technology--Level 51 ($140,001-$160,000)), which has a 
final payment rate of $150,000.50 for CY 2017. We note this payment 
includes both the surgical procedure (CPT code 0100T) and the use of 
the Argus[supreg] II device (HCPCS code C1841).

D. OPPS APC-Specific Policies

1. Cardiovascular Procedures/Services
a. Cardiac Event Recorder (APC 5071)
    We proposed to assign procedures described by CPT code 33284 
(Removal of an implantable, patient-activated cardiac event recorder) 
to APC 5071 (Level 1 Excision/Biopsy/Incision and Drainage) for CY 
2017. Based on the CY 2015 claims data used for the proposed rule, the 
geometric mean cost of procedures described by CPT code 33284 was 
approximately $733 (2,650 single claims), and the geometric mean cost 
of APC 5071 was approximately $555. In addition, CPT code 33284 is 
assigned to status indicator ``Q2,'' which indicates that the service 
is conditionally packaged under the OPPS. Therefore, when this 
procedure is performed in conjunction with a revision or replacement 
procedure, the payment for the procedure described by CPT code 33284 is 
packaged under the OPPS.
    Comment: One commenter requested that CMS assign procedures 
described by CPT code 33284 to a higher paying APC. In particular, the 
commenter requested that procedures described by CPT code 33284 be 
assigned to APC 5211 (Level 1 Electrophysiologic Procedures) instead of 
APC 5071. The commenter believed that the procedure described by CPT 
code 33284 is more similar clinically and in terms of resource use to 
the services assigned to APC 5211 than to those assigned to APC 5071.
    Response: We disagree with the commenter. We believe that the 
procedures described by CPT code 33284 are appropriately assigned to 
APC 5071. Based on updated claims data used for the final rule, the 
geometric mean cost of CPT code 33284 (approximately $715) is more 
comparable to the geometric mean cost of APC 5071 (approximately $554) 
than to the geometric mean cost of APC 5072 (approximately $1,271). 
Therefore, we do not believe that it would be appropriate to assign 
procedures described by CPT code 33284 to a higher level within the 
Excision/Biopsy/Incision and Drainage APC series. In addition, the 
procedures described by CPT code 33284 are not electrophysiology 
services and, therefore, do not appropriately correlate with the 
services assigned to APC 5211. Therefore, we are finalizing our CY 2017 
proposal to assign the procedures described by CPT code 33284 to APC 
5071.
b. Cardiac Telemetry (APC 5733)
    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we 
proposed to reassign CPT code 93229 (External mobile cardiovascular 
telemetry with electrocardiographic recording, concurrent computerized 
real time data analysis and greater than 24 hours of accessible ecg 
data storage (retrievable with query) with ecg triggered and patient 
selected events transmitted to a remote attended surveillance center 
for up to 30 days; technical support for connection and patient 
instructions for use, attended surveillance, analysis and transmission 
of daily and emergent data reports as prescribed by a physician or 
other qualified health care professional) from APC 5722 (Level 2 
Diagnostic Tests and Related Services) to APC 5734 (Level 4 Minor 
Procedures), with a proposed payment rate of $95.66.
    Comment: One commenter disagreed with the proposed reassignment of 
CPT code 93229 to APC 5734, and stated that the proposed payment rate 
represents a 60-percent decrease from the CY 2016 payment rate of 
$220.35. The commenter indicated that the proposed underpayment of 
$95.66 does not reflect the significant costs involved in providing the 
service. The commenter added that the wearable device used by the 
beneficiary costs over $21,000. The commenter explained that because of 
the significant resource costs associated with performing the service 
described by CPT code 93229, most hospital outpatient facilities that 
provide this service contract the work to a remote cardiac monitoring 
service company because HOPDs do not have the devices, technology, or 
infrastructure in place to provide the service in-house. In addition, 
the commenter believed that hospitals are still confused about how to 
code for remote cardiac diagnostic tests, and indicated that the 
proposed payment rate of $95.66 for CPT code 93229 is the result of 
hospitals

[[Page 79617]]

miscoding the service on claims. The commenter believed that the coding 
education provided in the April 2015 edition of the Coding Clinic for 
HCPCS will assist hospitals in coding appropriately for the service. 
However, until the coding education effort effectuates changes in 
coding practices, the commenter believed that the true cost of 
furnishing the service described by CPT code 93229 is more comparable 
to the OPPS payment rate of approximately $795 made in CY 2012, and 
recommended that CMS reassign this service to APC 5724 (Level 4 
Diagnostic Tests and Related Services), with a proposed payment rate of 
$870.62. Alternatively, if CMS is unable to reassign the service to APC 
5724, the commenter suggested that CMS continue the CY 2016 APC 
assignment for CPT code 93229 to APC 5722, with a payment rate of 
$220.35. The commenter further stated that when the service described 
by CPT code 93229 is provided under the MPFS, the payment rate for 
performing this service is $732.68. The commenter believed that 
continuing to assign CPT code 93229 to APC 5722 for CY 2017 will 
provide payment stability for this service while coding education 
efforts continue.
    Response: Based on our analysis of the CY 2015 claims data used for 
the proposed rule, we proposed to reassign CPT code 93229 to APC 5734. 
Specifically, our analysis showed a geometric mean cost of 
approximately $77 based on 1,847 single claims (out of 3,747 total 
claims). Based on its clinical and resource homogeneity to the other 
services, we proposed to reassign the service described by CPT code 
93229 to APC 5734, whose geometric mean cost was approximately $100. We 
did not propose to continue to assign CPT code 93229 to APC 5722 
because the geometric mean cost for this APC was approximately $242, 
which would result in a significant overpayment for the service. 
However, based on our review of the updated CY 2015 claims data used 
for this final rule with comment period, we found the geometric mean 
cost for CPT code 93229 to be lower than the proposed rule geometric 
mean cost. We note that the proposed rule claims data were based on 
claims submitted from January 1, 2015, through December 31, 2015, and 
processed through December 31, 2015, while the final rule with comment 
period claims data are based on claims submitted from January 1, 2015, 
through December 31, 2015, and processed through June 30, 2016. Based 
on our analysis of the final rule with comment period claims data, we 
found a geometric mean cost of approximately $71 for the service 
described by CPT code 93229 based on 2,323 single claims (out of 4,495 
total claims). The geometric mean cost for the service described by CPT 
code 93229 is more similar to that of APC 5733 (Level 3 Minor 
Procedures), which has a geometric mean cost of approximately $56, than 
to the geometric mean cost of approximately $103 for APC 5734. 
Consequently, we believe that CPT code 93229 should be reassigned to 
APC 5733, rather than APC 5734.
    Also, as we have stated repeatedly, beyond our standard OPPS 
trimming methodology that we apply to those claims that have passed 
various types of claims processing edits, it is not our general policy 
to judge the accuracy of hospital coding and charging for purposes of 
ratesetting. (We refer readers to the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71838) for further discussion.) Hospitals are 
responsible for accurately coding the performance of procedures and 
services and the items furnished to beneficiaries.
    In summary, after evaluating the public comment we received and our 
subsequent analysis of the updated claims data for this final rule with 
comment period, we are modifying our proposal and reassigning the 
service described by CPT code 93229 to APC 5733 for CY 2017. The final 
payment rate for this code can be found in Addendum B to this final 
rule with comment period (which is available via the Internet on the 
CMS Web site).
2. Eye-Related Services
    Comment: A few commenters requested that CMS assign new CPT code 
0465T (Suprachoroidal injection of a pharmacologic agent (does not 
include supply of medication)) to APC 5694 (Level 4 Drug 
Administration) instead of APC 5693 (Level 3 Drug Administration) 
because the commenters believed that the service is clinically similar 
and similar from a resource-use perspective to CPT code 67028 
(Intravitreal injection of a pharmacologic agent (separate procedure), 
which is assigned to APC 5694.
    Response: We agree with the commenters. We are modifying our 
proposal and assigning CPT code 0465T to APC 5694 for CY 2017. Because 
CPT code 0465T is new, we do not have claims data upon which to base an 
initial APC assignment. However, we believe that the clinical and 
resource similarities of the procedure described by CPT code 0465T, 
when compared to the procedure described by CPT code 67028, support 
assigning CPT code 0465T to APC 5694 at this time. When cost and claims 
data become available for CPT code 0465T, we will reevaluate the APC 
assignment.
    Comment: One commenter requested that CMS pay separately for the 
new CPT codes 0444T (Initial placement of a drug-eluting ocular insert 
under one or more eyelids, including fitting, training, and insertion, 
unilateral or bilateral) and 0445T (Subsequent placement of a drug-
eluting ocular insert under one or more eyelids, including re-training, 
and removal of existing insert, unilateral or bilateral) instead of 
unconditionally packaging the payment for these services, as proposed.
    Response: We disagree with the commenters. The procedure to place 
one of these inserts under an eyelid (as described by these procedure 
codes) is a very minor service (not unlike delivering eye drops) that 
requires little time or effort from a nurse or technician. Any 
associated additional cost associated with performing these procedures 
are appropriately packaged with another service.
3. Gastrointestinal Procedures and Services
a. Esophageal Sphincter Augmentation (APC 5362)
    For CY 2017, we proposed to assign the procedures described by new 
CPT code 43284 (Laparoscopy, surgical, esophageal sphincter 
augmentation procedure, placement of sphincter augmentation device, 
including cruroplasty when performed) to APC 5362 (Level 2 Laparoscopy 
and Related Services), with a geometric mean cost of approximately 
$7,183. CPT code 43284 replaces CPT code 0392T, which replaced HCPCS 
code C9737. HCPCS code C9737 was in effect for the first half of CY 
2015, and CPT code 0392T became effective beginning in the second half 
of CY 2015 and will be deleted at the end of CY 2016. Based on the 
claims data used for the proposed rule, the geometric mean cost for the 
procedure described by HCPCS code C9737 was approximately $10,260 (45 
single claims) and the geometric mean cost for the procedure described 
by CPT code 0392T was approximately $8,453 (19 single claims).
    Comment: One commenter disagreed with the proposed APC assignment 
for procedures described by CPT code 43284 to APC 5362. The commenter 
stated that the proposed payment rate for APC 5362 does not accurately 
reflect the anticipated cost of providing the services described by CPT 
code 43284. The commenter suggested that CMS create a new Level 3 APC 
within the laparoscopy and related services APC

[[Page 79618]]

series that would contain the 20 most costly procedures that are 
currently assigned to APC 5362. According to the commenter, the 
creation of this new Level 3 Laparoscopy APC would be more 
representative of the resource costs for services described by CPT code 
43284.
    Response: Based on updated claims data for the final rule, we 
compared the geometric mean cost for procedures described by CPT code 
0392T (the predecessor code for CPT code 43284) to the geometric mean 
cost of APC 5362. The geometric mean cost for procedures described by 
CPT code 0392T is $8,715 based on 24 single claims, which is $1,551 
greater than the geometric mean cost for APC 5362 of $7,164. 
Furthermore, since CPT code 0392T replaced HCPCS code C9737, the cost 
of this service has decreased from $10,388 for HCPCS code C9737 to 
$8,715 for CPT code 0392T. The commenter identified 9,276 single claims 
using data published with the proposed rule that could be used to 
create a new Level 3 Laparoscopy and Related Services APC. However, 
this subgroup of procedures from APC 5362 only contains two significant 
procedures, and 23 percent of the 40,035 single claims from APC 5362. 
The services for the suggested Level 3 Laparoscopy and Related Services 
APC have both sufficient clinical and resource homogeneity to the other 
procedures assigned to APC 5362. Therefore, we do not believe that 
there is a need to create another APC for these services.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to assign procedures 
described by CPT code 43284 to APC 5362, effective January 1, 2017. The 
final payment rate for CPT code 43284 can be found in Addendum B to 
this final rule with comment period, which is available via the 
Internet on the CMS Web site.
b. Esophagogastroduodenoscopy: Transmural Drainage of Pseudocyst (APC 
5303)
    For CY 2017, we proposed to assign CPT code 43240 
(Esophagogastroduodenoscopy, flexible, transoral; with transmural 
drainage of pseudocyst (includes placement of transmural drainage 
catheter(s)/stent(s), when performed, and endoscopic ultrasound, when 
performed)) to APC 5303 (Level 3 Upper GI Procedures), for which we 
proposed a CY 2017 geometric mean cost of approximately $2,598.
    Comment: Commenters disagreed with CMS' proposal to assign CPT code 
43240 to APC 5303. The commenters believed that CPT code 43240 would be 
more appropriately assigned to APC 5331 (Complex GI Procedures), for 
which we proposed a CY 2017 geometric mean cost of approximately, based 
upon the procedure's clinical similarity to other endoscopy procedures 
involving stent placement currently assigned to APC 5331. Additionally, 
commenters stated that the proposed CY 2017 geometric mean cost of 
$2,578 may underrepresent the true costs of the procedure because of 
underreporting of the C-code for stents.
    Response: We disagree with the commenters' assertion that CPT code 
43240 would be more appropriately assigned to APC 5331. While we 
acknowledge that a number of endoscopy procedures involving stent 
placement are currently assigned to APC 5331, we continue to believe 
that based on our claims data available for CY 2017 ratesetting, the 
proposed assignment of CPT code 43240 to APC 5303 is appropriate.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to assign CPT code 43240 
to APC 5303, which has a final CY 2017 APC geometric mean cost of 
approximately $2,581. The final payment rate for this code can be found 
in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site).
    Comment: One commenter requested that we create a new APC and 
assign the following four codes to this new APC: (1) HCPCS code G0105 
(Colorectal cancer screening; colonoscopy on individual at high risk); 
(2) HCPCS code G0121 (Colorectal cancer screening; colonoscopy on 
individual not meeting criteria for high risk); (3) CPT code 44388 
(Colonoscopy through stoma; diagnostic, including collection of 
specimen(s) by brushing or washing, when performed (separate 
procedure)); and (4) CPT code 45378 (Colonoscopy, flexible; diagnostic, 
including collection of specimen(s) by brushing or washing, when 
performed (separate procedure)). The commenters emphasized the clinical 
importance of colonoscopy in the detection and treatment of colon 
cancer as a motivation for the creation of this new APC.
    Response: We recognize the importance of colonoscopies to Medicare 
beneficiaries and believe that the OPPS and ASC payment policies for 
colonoscopies allow full access to these services. As a part of our 
multi-year review, which includes restructuring and reorganization and 
consolidation of the OPPS APCs, we have been creating larger APCs based 
on simpler and more intuitive clinical groupings. We believe that APC 
5311 (Level 1 Lower GI Procedures) is an appropriate APC assignment for 
these four codes from a clinical and resource perspective. We also fail 
to recognize any particular advantage of creating the suggested new APC 
that would contain only four codes. The geometric mean cost of CPT code 
45378 drives the payment rate for APC 5311 because it represents 81 
percent of the single claims in this APC. As we discuss later in the 
section on the imaging APCs, we are reassigning HCPCS codes G0105 and 
G0121 to APC 5311. We believe that all four of these codes are 
clinically similar (all are similar colonoscopy services) and are 
similar in terms of resource costs based on their geometric mean costs. 
We are finalizing the proposal to assign HCPCS codes G0105 and G0121, 
and CPT codes 44388 and 45378 to APC 5311 for CY 2017.
    Comment: One commenter believed that some of the tube and catheter 
placement procedure codes (for example, CPT code 32561 
(Installation(s), via chest tube/catheter agent for fibrinolysis (e.g., 
fibrinolytic agent for break up of multiloculated effusion); initial 
day) that were assigned to APC 5301 (Level 1 Upper GI Procedures) in 
the proposed rule are not clinically similar to the endoscopy 
procedures that have traditionally been grouped together in APC 5301 
(or its predecessor APC). The commenter requested that CMS reassign the 
catheter and tube placement procedure codes to other APCs that would be 
more clinically suitable.
    Response: Upon further review of the procedure codes assigned to 
APC 5301, we agree with the commenter. Table 11 below shows the final 
APC reassignments for the tube and catheter placement and removal 
procedure codes that were assigned to APC 5301 in the proposed rule.

[[Page 79619]]



       Table 11--Tube and Catheter Codes Reassigned from APC 5301
------------------------------------------------------------------------
                                         Final  CY 2017   Final  CY 2017
      CPT code            Descriptor           APC              SI
------------------------------------------------------------------------
32552...............  Removal of                   5181              Q2
                       indwelling
                       tunneled pleural
                       catheter with
                       cuff.
32554...............  Thoracentesis,               5181               T
                       needle or
                       catheter,
                       aspiration of
                       the pleural
                       space; without
                       imaging guidance.
32555...............  Thoracentesis,               5181               T
                       needle or
                       catheter,
                       aspiration of
                       the pleural
                       space; with
                       imaging guidance.
32560...............  Instillation, via            5181               T
                       chest tube/
                       catheter, agent
                       for pleurodesis
                       (e.g., talc for
                       recurrent or
                       persistent
                       pneumothorax).
32561...............  Installation(s),             5181               T
                       via chest tube/
                       catheter agent
                       for fibrinolysis
                       (e.g.,
                       fibrinolytic
                       agent for break
                       up of
                       multiloculated
                       effusion);
                       initial day.
32562...............  (Installation(s),            5181               T
                       via chest tube/
                       catheter agent
                       for fibrinolysis
                       (e.g.,
                       fibrinolytic
                       agent for break
                       up of
                       multiloculated
                       effusion);
                       subsequent day.
32960...............  Pneumothorax,                5181               T
                       therapeutic,
                       intrapleural
                       injection of air.
36575...............  Repair of                    5181               T
                       tunneled or non-
                       tunneled central
                       venous access
                       catheter,
                       without
                       subcutaneous
                       port or pump,
                       central or
                       peripheral
                       insertion site.
36589...............  Removal of                   5181              Q2
                       tunneled central
                       venous catheter,
                       without
                       subcutaneous
                       port or pump.
61070...............  Puncture of shunt            5442               T
                       tubing or
                       reservoir for
                       aspiration or
                       injection
                       procedure.
------------------------------------------------------------------------

    We are reassigning all of the procedure codes listed in the above 
table to APC 5181 (Level 1 Vascular Procedures), except for CPT code 
61070 which we are reassigning to APC 5442. We believe that APC 5181 is 
the most appropriate APC assignment because it currently contains 
various catheter insertion and removal codes and similar procedures 
that use catheters. We do not believe that the nine procedures codes 
that we are reassigning to APC 5181 are sufficiently unique that a new 
APC specifically for assignment of these nine codes is warranted. We 
also understand that these codes are at the low end of the cost range 
for the procedures assigned to APC 5181, but APC 5181 is the lowest 
cost APC in this series. We also understand that the lung procedures 
that we are proposing to reassign to APC 5181 are not vascular 
procedures, but we believe that they are generally sufficiently similar 
to vascular catheter insertion procedures such that assignment to APC 
5181 is clinically appropriate, and that a dedicated lung procedures 
APC is not necessary. However, to acknowledge that these APCs includes 
services that are not strictly ``vascular,'' we are renaming the 
Vascular Procedures APCs (5181 through 5183) Levels 1 through 3 to 
``Vascular Procedures & Related Services.''
4. Musculoskeletal Procedures/Services
    Consistent with CMS' statutory requirement under section 
1833(t)(9)(A) of the Act to review and revise APC assignments annually 
and to construct the most appropriate APC groupings, as well as, to the 
extent desirable, correct any 2 times rule violations, we evaluated the 
resource costs and clinical coherence of the procedures associated with 
the Closed Treatment Fracture and Related Services (APCs 5111, 5112, 
and 5113) and Musculoskeletal Procedures APCs (APCs 5121, 5122, 5123, 
5124, and 5125). For the CY 2017 OPPS update, we reviewed the 
procedures assigned to the Closed Treatment Fracture and 
Musculoskeletal Procedures APCs, and consolidated the two APC groups 
into the Musculoskeletal APC group, with six Levels, to improve the 
homogeneity of the procedures within these two APC groups. Based on our 
analysis of the CY 2015 hospital outpatient claims data used for the 
proposed rule, we proposed some modifications to these groups as 
reflected in Addendum B to the CY 2017 OPPS/ASC proposed rule. 
Specifically, we proposed to reassign certain procedures from one level 
within an APC to another; either from a lower-level paying APC to a 
higher-level paying APC, or from a higher-level paying APC to a lower-
level paying APC, depending on the geometric mean cost for each 
procedure code. In addition, we proposed to revise the APC group title 
from ``Closed Treatment Fracture and Related Services'' to 
``Musculoskeletal Procedures,'' and also proposed to establish a new 
level within the APC, specifically, Level 6, for the assignment of 
musculoskeletal procedures. We believe that the proposed restructuring 
and consolidation of the musculoskeletal APCs more appropriately group 
the musculoskeletal services according to their current resource costs, 
as well as their clinical characteristics.
    Comment: Some commenters supported the reorganization and the 
increase in the number of musculoskeletal APC levels from five to six. 
One commenter expressed approval for the number of procedures assigned 
to Level 6 within the APC and stated that the methodology for assigning 
procedures to this level is logical, consistent with other APCs, and 
leads to more appropriate hospital payments. One commenter also stated 
that the change will help correct the problem associated with those 
musculoskeletal procedures that had previously shifted to the more 
costly inpatient setting because of inadequate payments under the 
hospital OPPS. Consequently, these commenters requested that CMS 
finalize the proposal.
    Response: We appreciate the commenters' support.
    Comment: One commenter requested that CMS reevaluate the procedure 
codes assigned to Level 4 within the Musculoskeletal Procedures APC to 
ensure that these services are paid appropriately. The commenter 
expressed concern with the range of costs for the procedures assigned 
to Level 4 and 5, and stated that the current proposal underpays for 
some of the procedures assigned to Level 4. To correct the variation of 
costs between Level 4 and 5, the commenter suggested reassigning some 
of the procedures from Level 4 to Level 5, or alternatively, 
establishing a new, intermediate level APC whose geometric mean cost is 
between Level 4 and 5.
    Response: We appreciate the commenter's suggestion. However, we 
believe that the proposed structure of the musculoskeletal APCs with 
six levels, compared to last year's five levels, improves the 
homogeneity of the procedures within the musculoskeletal APC group. As 
we do annually, we will again review and evaluate the APC assignments 
for all items, procedures, and services paid under the hospital OPPS 
for the CY 2018 rulemaking.
    We also received several public comments concerning the proposed 
reassignment of certain procedures assigned to the Musculoskeletal 
Procedures APCs. A summary of the

[[Page 79620]]

public comments and our responses follow.
a. Auditory Osseointegrated Implants/Bone-Anchored Hearing Systems 
(APCs 5114, 5115, and 5116)
    In Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to 
reassign four auditory osseointegrated implant procedures. 
Specifically, as listed in Table 12 below, we proposed to reassign CPT 
code 69714 from APC 5125 (Level 5--Musculoskeletal Procedures) to APC 
5115 (Level 5--Musculoskeletal Procedures), CPT code 69715 from APC 
5125 to APC 5116 (Level 6--Musculoskeletal Procedures), CPT code 69717 
from APC 5123 (Level 3--Musculoskeletal Procedures) to APC 5114 (Level 
4--Musculoskeletal Procedures), and CPT code 69718 from APC 5124 (Level 
4--Musculoskeletal Procedures) to APC 5115.

            Table 12--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Auditory Osseointegrated Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                                                                                                       CY 2016    Proposed  CY    Proposed     CY 2017
               CPT code                         Long descriptors             CY 2016      CY 2016        OPPS      2017  OPPS     CY 2017        OPPS
                                                                             OPPS SI      OPPS APC     payment         SI         OPPS APC     payment
                                                                                                         rate                                    rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
69714................................  Implantation, osseointegrated               J1          5125   $10,537.90           J1          5115    $9,491.00
                                        implant, temporal bone, with
                                        percutaneous attachment to
                                        external speech processor/
                                        cochlear stimulator; without
                                        mastoidectomy.
69715................................  Implantation, osseointegrated               J1          5125    10,537.90           J1          5116    14,444.00
                                        implant, temporal bone, with
                                        percutaneous attachment to
                                        external speech processor/
                                        cochlear stimulator; with
                                        mastoidectomy.
69717................................  Replacement (including removal of           J1          5123     4,969.26           J1          5114     5,199.03
                                        existing device),
                                        osseointegrated implant,
                                        temporal bone, with percutaneous
                                        attachment to external speech
                                        processor/cochlear stimulator;
                                        without mastoidectomy.
69718................................  Replacement (including removal of           J1          5124     7,064.07           J1          5115     9,491.00
                                        existing device),
                                        osseointegrated implant,
                                        temporal bone, with percutaneous
                                        attachment to external speech
                                        processor/cochlear stimulator;
                                        with mastoidectomy.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: One commenter expressed appreciation for the proposed 
payment increase for CPT codes 69715, 69717, and 69718. However, 
several commenters opposed the proposed payment decrease for CPT code 
69714. The commenters who disagreed with the APC reassignment indicated 
that the data used by CMS are flawed and do not accurately capture the 
cost of performing an osseointegrated implant surgery. Some commenters 
stated that the proposed payment rate for CPT code 69714 would be 
inadequate to cover the cost of the procedure. These commenters noted 
that the list price for a CochlearTM Baha[supreg] Implant 
System ranges from $6,887 to $8,435. Consequently, several commenters 
requested that CMS not finalize the proposed payment reduction for CPT 
code 69714 pending the collection of accurate claims data.
    Response: As stated above, section 1833(t)(9)(A) of the Act 
requires the Secretary to review certain components of the OPPS, not 
less often than annually, and to revise the groups, relative payment 
weights, and other adjustments that take into account changes in 
medical practices, changes in technologies, and the addition of new 
services, new cost data, and other relevant information and factors. As 
such, we review on an annual basis all APC assignments for both general 
appropriateness and for violations of the 2 times rule, and when 
necessary, reassign CPT codes to more appropriate APCs. Although there 
was no violation of the 2 times rule within the Closed Treatment 
Fracture and Related Services and Musculoskeletal Procedures APCs, 
based on our review of the updated CY 2015 claims data used for this CY 
2017 OPPS/ASC final rule with comment period, we believe that revising 
the Musculoskeletal Procedure APC structure is necessary to maintain 
the clinical homogeneity and resource characteristics of the procedures 
within this APC group.
    In addition, review of the latest hospital outpatient claims data 
used for this final rule with comment period shows the geometric mean 
cost for CPT code 69714 is approximately $9,407 based on 703 single 
claims (out of 713 total claims), which is relatively similar to and 
slightly less than the final rule geometric mean cost of $9,828 for APC 
5115. Therefore, we continue to believe that the procedure described by 
CPT code 69714 is appropriately placed in APC 5115 based on resource 
and clinical homogeneity to other procedures currently assigned to APC 
5115.
    Further, as we do every year, we evaluate our claims data to 
determine the appropriateness of the APC assignments for all payable 
services and items under the hospital OPPS. For the CY 2017 OPPS 
update, based on our review, we proposed to revise the APC assignments 
for four auditory osseointegrated implant procedures, specifically, CPT 
codes 69714, 69715, 69717, and 69718. As a result of our APC review for 
the CY 2017 OPPS update, we note that, based on our review of the final 
rule with comment period claims data, three of the four procedures, 
specifically, CPT codes 69715, 69717, and 69718, will receive an 
increase in payment for CY 2017 under the hospital OPPS.

[[Page 79621]]

    Comment: Some commenters believed that the proposed payment 
reduction for CPT code 69714 would restrict Medicare beneficiary access 
to the procedure.
    Response: We disagree with the commenters. We do not believe that 
the revised payment for CPT code 69714 will affect beneficiaries' 
access to reasonable and appropriate care. Moreover, we believe that 
providers will continue to perform this procedure when medically 
necessary.
    After consideration of the public comments we received, we are 
finalizing our CY 2017 proposal, without modification, to reassign CPT 
codes 69714, 69715, 69717 and 69718 to APCs 5115, 5116, 5114, and 5115, 
respectively. Table 13 below lists the final status indicator and APC 
assignments, and payment rates for the four auditory osseointegrated 
procedures.

              Table 13--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Auditory Osseointegrated Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016                                Final  CY
                                                                          CY 2016 OPPS    CY 2016        OPPS       Final  CY    Final  CY    2017  OPPS
               CPT code                         Long descriptors               SI         OPPS APC     payment     2017  OPPS    2017  OPPS    payment
                                                                                                         rate          SI           APC          rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
69714................................  Implantation, osseointegrated               J1          5125   $10,537.90           J1          5115    $9,557.20
                                        implant, temporal bone, with
                                        percutaneous attachment to
                                        external speech processor/
                                        cochlear stimulator; without
                                        mastoidectomy.
69715................................  Implantation, osseointegrated               J1          5125    10,537.90           J1          5116    14,697.92
                                        implant, temporal bone, with
                                        percutaneous attachment to
                                        external speech processor/
                                        cochlear stimulator; with
                                        mastoidectomy.
69717................................  Replacement (including removal of           J1          5123     4,969.26           J1          5114     5,219.36
                                        existing device),
                                        osseointegrated implant,
                                        temporal bone, with percutaneous
                                        attachment to external speech
                                        processor/cochlear stimulator;
                                        without mastoidectomy.
69718................................  Replacement (including removal of           J1          5124     7,064.07           J1          5115     9,557.20
                                        existing device),
                                        osseointegrated implant,
                                        temporal bone, with percutaneous
                                        attachment to external speech
                                        processor/cochlear stimulator;
                                        with mastoidectomy.
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Bunion Correction/Foot Fusion (APC 5114)
    In Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to 
reassign CPT codes 28297 (Correction, hallux valgus (bunion), with or 
without sesamoidectoy; lapidus-type) and 28740 (Arthrodesis, midtarsal 
or tarsometatarsal, single joint) to APC 5114 (Level 4--Musculoskeletal 
Procedures) with status indicator ``J1.'' Both CPT codes 28297 and 
28740 have a CY 2016 payment rate of approximately $7,064 and a 
proposed CY 2017 payment rate of approximately $5,199.
    Comment: One commenter expressed concern with the reassignment of 
CPT codes 28297 and 28740 to C-APC 5114, and stated that the proposed 
payment would result in a significantly lower payment rate for these 
services. The commenter indicated that its invoices document the total 
equipment cost at approximately $7,490, which is more than the proposed 
payment rate for C-APC 5114. The commenter also believed that CPT codes 
28297 and 28740 are inappropriately assigned to C-APC 5114 because this 
APC does not reflect the resource or clinical complexity of these 
procedures. In addition, the commenter stated that the Musculoskeletal 
APCs are not granular enough to account for the costs associated with 
the broad range of orthopedic procedures performed in the hospital 
outpatient setting. Finally, this same commenter recommended that CMS 
establish an additional APC level that is not designated as a 
comprehensive APC for musculoskeletal procedures whose costs are in the 
range of $7,000 to $7,999. The commenter requested that CMS reassign 
CPT codes 28297 and 28740 to this new APC level, with a payment rate of 
approximately $7,500. If CMS is unable to establish an additional APC, 
the commenter recommended that CMS retain the CY 2016 Musculoskeletal 
APC structure and payment levels. However, if CMS finalizes the 
proposal, the commenter requested that CMS ensure that all hospital 
costs for CPT codes 28297 and 28740 are captured appropriately and that 
the payment rate for C-APC 5114 is adjusted to reflect the cost of 
providing these services.
    Response: We do not believe that it is necessary to create an 
additional APC level for these musculoskeletal procedures. We believe 
that CPT codes 28297 and 28740 are clinically similar to the other 
procedures assigned to C-APC 5114 with similar resource costs. As the 
commenter observed, the musculoskeletal APCs include various orthopedic 
procedures representing a range of costs from $3,774 (CPT code 27385) 
to $7,283 (CPT code 28740). The payment for procedures assigned to C-
APC 5114 is based on the weighted average geometric mean cost for all 
of the procedures assigned to C-APC 5114. As with most other APCs, 
because the payment is based on an average of the costs of all of the 
procedures assigned to the APC, the payment rate can be either above or 
below the cost of a specific procedure. We believe that the assignment 
of CPT codes 28297 and 28740 to C-APC 5114 satisfies both the 
requirement for clinical similarity and resource similarity. There are 
several other similar foot surgical procedures assigned to C-APC 5114. 
Further, our claims data do not reveal any 2 times

[[Page 79622]]

rule violations in C-APC 5114. We also note that certain complex multi-
procedure cases, including cases involving the procedures described by 
both CPT code 28297 and 28740, receive a complexity adjustment and 
reassignment to C-APC 5115, which results in a significantly higher 
payment for these more costly cases. For CY 2017, the payment rate for 
C-APC 5115 is approximately $9,557. We remind hospitals that, as we do 
every year, we will again review the APC assignments for all services 
under the hospital OPPS for the CY 2018 rulemaking.
    After consideration of the public comments received, we are 
finalizing our CY 2017 proposal, without modification, to reassign CPT 
codes 28297 and 28740 to C-APC 5114. Table 14 below lists the final CY 
2017 OPPS status indicator and APC assignments, and payment rates for 
CPT codes 28297 and 28740. We refer readers to Addendum B of this final 
rule with comment period for the payment rates for all codes reportable 
under the OPPS. Addendum B is available via the Internet on the CMS Web 
site. In addition, the list of codes that qualify for complexity 
adjustments can be found in Addendum J to this final rule with comment 
period (which is available via the Internet on the CMS Web site). 
Addendum J to this final rule with comment period also contains the 
summary cost statistics for each of the code combinations that describe 
a complex code combination that qualify for a complexity adjustment and 
are reassigned to the next higher cost C-APC within the clinical 
family.

                     Table 14--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for CPT Codes 28297 and 28740
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016                                Final  CY
                                                                          CY 2016 OPPS    CY 2016        OPPS       Final  CY    Final  CY    2017  OPPS
               CPT code                         Long descriptors               SI         OPPS APC     payment     2017  OPPS    2017  OPPS    payment
                                                                                                         rate          SI           APC          rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
28297................................  Correction, hallux valgus                   J1          5124    $7,064.07           J1          5114    $5,219.36
                                        (bunion), with or without
                                        sesamoidectomy; lapidus-type
                                        procedure.
28740................................  Arthrodesis, midtarsal or                   J1          5124     7,064.07           J1          5114     5,219.36
                                        tarsometatarsal, single joint.
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Intervertebral Biomechanical Devices
    For CY 2017, the AMA CPT Editorial Panel deleted CPT code 22851 and 
replaced it with three new codes, effective January 1, 2017. Table 15 
below lists the long descriptor for the procedure described by CPT code 
22851, as well as the replacement codes, specifically, CPT codes 22853, 
22854, and 22859. We note that the deleted and replacement codes were 
listed in Addendum B and Addendum O to the CY 2017 OPPS/ASC proposed 
rule. Addendum B listed the proposed status indicator assignments for 
the replacement codes, which are assigned to comment indicator ``NP'' 
(New code for the next calendar year or existing code with substantial 
revision to its code descriptor in the next calendar year as compared 
to current calendar year, proposed APC assignment; comments will be 
accepted on the proposed APC assignment for the new code.), while 
Addendum O listed the placeholder/proposed CY 2017 CPT codes and their 
long descriptors.

     Table 15--CY 2017 Status Indicator (SI) Assignments for the Application/Insertion of the Intervertebral
                                              Biomechanical Devices
----------------------------------------------------------------------------------------------------------------
                                                                                  Proposed CY     Final CY 2017
 Proposed CY 2017 CPT code    Final CY 2017 CPT code       Long descriptors       2017 OPPS SI       OPPS SI
----------------------------------------------------------------------------------------------------------------
22851.....................  22851.....................  Application of                       D                D
                                                         intervertebral
                                                         biomechanical
                                                         device(s) (e.g.,
                                                         synthetic cage(s),
                                                         methylmethacrylate)
                                                         to vertebral defect
                                                         or interspace (List
                                                         separately in
                                                         addition to code for
                                                         primary procedure).
22X81.....................  22853.....................  Insertion of interbody               N                N
                                                         biomechanical
                                                         device(s) (e.g.,
                                                         synthetic cage, mesh)
                                                         with integral
                                                         anterior
                                                         instrumentation for
                                                         device anchoring
                                                         (e.g., screws,
                                                         flanges), when
                                                         performed, to
                                                         intervertebral disc
                                                         space in conjunction
                                                         with interbody
                                                         arthrodesis, each
                                                         interspace (List
                                                         separately in
                                                         addition to code for
                                                         primary procedure).
22X82.....................  22854.....................  Insertion of                         N                N
                                                         intervertebral
                                                         biomechanical
                                                         device(s) (e.g.,
                                                         synthetic cage, mesh)
                                                         with integral
                                                         anterior
                                                         instrumentation for
                                                         device anchoring
                                                         (e.g., screws,
                                                         flanges), when
                                                         performed, to
                                                         vertebral
                                                         corpectomy(ies)
                                                         (vertebral body
                                                         resection, partial or
                                                         complete) defect, in
                                                         conjunction with
                                                         interbody
                                                         arthrodesis, each
                                                         contiguous defect
                                                         (List separately in
                                                         addition to code for
                                                         primary procedure).
22X83.....................  22859.....................  Insertion of                         N                N
                                                         intervertebral
                                                         biomechanical
                                                         device(s) (e.g.,
                                                         synthetic cage, mesh,
                                                         methylmethacrylate)
                                                         to intervertebral
                                                         disc space or
                                                         vertebral body defect
                                                         without interbody
                                                         arthrodesis, each
                                                         contiguous defect
                                                         (List separately in
                                                         addition to code for
                                                         primary procedure).
----------------------------------------------------------------------------------------------------------------

    Comment: One commenter suggested that CMS pay separately for the 
replacement CPT codes 22X81, 22X82, and 22X83 and assign the new codes 
to New Technology APCs to enable CMS to collect cost information and 
determine

[[Page 79623]]

whether to pay separately or package the procedures in the future. The 
commenter explained that the cost of providing the procedures 
associated with these new spine instrumentation codes are costly and 
include high-cost implants. The commenter also believed that, while CMS 
has a policy for packaging payment for procedures described by add-on 
codes under the hospital OPPS, it is not required to do so because its 
regulation refers only to packaging of certain services described by 
add-on codes.
    Response: We do not agree with the commenter that the spine 
instrumentation procedures described by proposed CPT codes 22X81, 
22X82, and 22X83 (replacement CPT codes 22853, 22854, and 22859) are 
new technology procedures that warrant an assignment to a new 
technology APC. These procedures have been performed for some time now 
in the hospital outpatient setting, and as evidenced by the predecessor 
code, CPT code 22851 which was established in 1996, these procedures 
are not new. In addition, we do not agree with the commenter that we 
should pay separately for replacement CPT codes 22853, 22854, and 22859 
because these codes describe add-on services. Since January 1, 2014, 
payment for procedures described by add-on codes have been packaged 
under the hospital OPPS. Because the predecessor CPT code 22851 was 
assigned to a packaged status indicator under the hospital OPPS, we are 
assigning CPT codes 22853, 22854, and 22859 to status indicator ``N'' 
to indicate that payment for these services are packaged under the 
hospital OPPS for CY 2017.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to assign CPT codes 
22853, 22854, and 22859 to status indicator ``N'' for CY 2017.
d. Percutaneous Vertebral Augmentation/Kyphoplasty (APC 5114)
    In Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to 
reassign CPT codes 22513 (Percutaneous vertebral augmentation, 
including cavity creation (fracture reduction and bone biopsy included 
when performed) using mechanical device (e.g., kyphoplasty), 1 
vertebral body, unilateral or bilateral cannulation, inclusive of all 
imaging guidance; thoracic) and 22514 (Percutaneous vertebral 
augmentation, including cavity creation (fracture reduction and bone 
biopsy included when performed) using mechanical device (e.g., 
kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation, 
inclusive of all imaging guidance; lumbar) from APC 5124 (Level 4 
Musculoskeletal Procedures) to APC 5114 (Level 4 Musculoskeletal 
Procedures). Both CPT codes have a CY 2016 payment rate of 
approximately $7,064 and a proposed CY 2017 payment rate of 
approximately $5,199. Because CPT code 22515 (Percutaneous vertebral 
augmentation, including cavity creation (fracture reduction and bone 
biopsy included when performed) using mechanical device (e.g., 
kyphoplasty), 1 vertebral body, unilateral or bilateral cannulation, 
inclusive of all imaging guidance; each additional thoracic or lumbar 
vertebral body (list separately in addition to code for primary 
procedure) is an add-on code, we proposed to continue its packaged 
status.
    Based on the CY 2015 hospital outpatient claims data available for 
the proposed rule, our analysis revealed a geometric mean cost of 
approximately $5,434 for APC 5114, while the geometric mean cost for 
CPT codes 22513 and 22514 is approximately $6,664 and $6,672, 
respectively. Because the proposed geometric mean cost for APC 5115, 
which is the Level 5 Musculoskeletal Procedures APC, is significantly 
higher at $9,920 compared to the geometric mean cost for CPT codes 
22513 and 22514, we proposed to assign CPT codes 22513 and 22514 to APC 
5114 for CY 2017.
    At the August 22, 2016 HOP Panel meeting, a presenter requested the 
reassessment of the proposed revised Musculoskeletal APC groupings that 
result in payment reductions for CPT codes 22513 and 22514. 
Specifically, the commenter observed that the proposed modification to 
the musculoskeletal APCs reduces the payment for these procedures by 26 
percent for CY 2017. During the Panel discussion, CMS indicated that, 
in the CY 2016 OPPS/ASC proposed rule, the Agency initially proposed to 
establish four levels of the musculoskeletal APCs. However, based on 
the comments received on the CY 2016 proposal, CMS agreed with the 
request to establish a new level, specifically, Level 5 Musculoskeletal 
Procedures APC, for the CY 2016 update. In addition, during the 
discussion at the August 2016 Panel meeting, CMS informed the Panel 
that, for the CY 2017 update, CMS proposed to establish an additional 
level, specifically, Level 6 Musculoskeletal Procedures APC, for the 
musculoskeletal procedures. At the August 2016 HOP meeting, despite the 
request from the presenter, the Panel made no recommendation related to 
this issue.
    Comment: Several commenters disagreed with the proposal and stated 
that the proposed reassignment of these procedures to APC 5114 would 
result in significant underpayment for these services. Some commenters 
noted that the proposed CY 2017 payment rate of $5,199.03 for CPT codes 
22513 and 22514 is lower than the geometric mean costs of $6,664 for 
CPT code 22513 and $6,672 for CPT code 22514. These commenters 
requested that CMS reassign CPT codes 22513 and 22514 to APC 5115 
(Level 5 Musculoskeletal Procedures APC), whose proposed CY 2017 
payment rate is $9,491.
    Response: We do not agree with the commenters that we should 
reassign these procedures to APC 5115. Based on the updated CY 2015 
hospital outpatient claims data used for this final rule with comment 
period, our analysis reveals a geometric mean cost of approximately 
$5,367 for APC 5114, which is lower than the geometric mean cost of 
approximately $6,674 for CPT code 22513 based on 8,553 single (out of 
8,665 total claims), or the geometric mean cost of approximately $6,643 
for CPT code 22514 based on 10,451 single claims (out of 10,609 total 
claims). Because the difference between the geometric mean cost for APC 
5115 ($9,828) and the geometric mean costs of CPT code 22513 ($6,674) 
and CPT code 22514 ($6,643) is significantly greater than the 
difference between the geometric mean cost of CPT codes 22513 and 22514 
and the geometric mean cost of APC 5114 ($5,367), we believe these 
procedures should be assigned to APC 5114.
    In addition, we do not agree with the commenters' assertion that 
the current assignment of CPT codes 22513 and 22514 in APC 5114 would 
result in significant underpayment for these services. OPPS payments 
are based on the geometric mean costs of all of the services assigned 
to the APC. By definition the costs of some services must be below the 
geometric mean and others must be above the geometric mean. As we have 
stated in the past (72 FR 66639), in some cases, payment exceeds the 
average cost of the CPT code, and in other cases, payment is less than 
the average cost of the CPT code.
    Comment: One commenter stated that procedures described by add-on 
codes are paid separately in physician offices. However, payment for 
these services are packaged under the hospital OPPS. This difference 
results in higher payments for percutaneous vertebral augment/
kyphoplasty procedures performed in the office setting compared to the 
HOPD setting. The commenter further noted that this discrepancy 
indicates that CMS

[[Page 79624]]

may be using a flawed methodology, similar to the CPT Committee and 
RUC, in determining payment rates for services under the hospital OPPS. 
Finally, the commenter requested that CMS increase the payment rate for 
CPT codes 22513 and 22514 to equalize payment for these procedures 
across all settings.
    Response: The hospital OPPS and the MPFS that applies to 
physician's office services are fundamentally different payment systems 
with essential differences in their payment policies and structures. 
Specifically, the hospital 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 hospital OPPS 
according to prospectively established payment rates that are related 
to the relative costs of hospital resources for services. The MPFS is a 
fee schedule based on the relative value of each individual component 
of services. Furthermore, physician fee schedule payments include 
payment for physician professional work, which is not a part of the 
OPPS payment to hospitals.
    In addition, consistent with our general add-on code packaging 
policy, we package payment for certain procedures described by add-on 
codes under the hospital OPPS. Because CPT code 22515 is an add-on 
code, we have assigned this code to a packaged payment status. We 
believe that the procedure is a service that is always furnished in 
addition to another procedure (in this case, either CPT code 22513 or 
22514) and cannot be performed independently. Under the MPFS approach, 
separate payment is made for add-on procedures provided in the 
physician's office, but the OPPS packages payment for add-on codes into 
the associated procedure code payment for the APC group. We recognize 
that the MPFS pays separately for CPT code 22515, as it does for other 
add-on codes. However, the MPFS and the OPPS are very different payment 
systems. Each is established under a different set of statutory and 
regulatory principles and the policies established under the MPFS do 
not have bearing on the payment policies under the OPPS. Given the 
fundamental difference between the MPFS payment mechanism and the OPPS 
payment mechanism, differences in the degrees of packaged payment and 
separate payment between these two systems are to be expected.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to reassign CPT codes 
22513 and 22514 to APC 5114. Table 16 below lists the final OPPS status 
indicator and APC assignments and payment rates for CPT codes 22513 and 
22514 for CY 2017.

  Table 16--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Percutaneous Vertebral Augmentation/Kyphoplasty Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016                                Final  CY
                                                                          CY 2016 OPPS    CY 2016        OPPS       Final  CY    Final  CY    2017  OPPS
               CPT code                         Long descriptors               SI         OPPS APC     payment     2017  OPPS    2017  OPPS    payment
                                                                                                         rate          SI           APC          rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
22513................................  Percutaneous vertebral                      J1          5124    $7,064.07           J1          5114   $5,219.36.
                                        augmentation, including cavity
                                        creation (fracture reduction and
                                        bone biopsy included when
                                        performed) using mechanical
                                        device (e.g., kyphoplasty), 1
                                        vertebral body, unilateral or
                                        bilateral cannulation, inclusive
                                        of all imaging guidance;
                                        thoracic.
22514................................  Percutaneous vertebral                      J1          5124     7,064.07           J1          5114    5,219.36.
                                        augmentation, including cavity
                                        creation (fracture reduction and
                                        bone biopsy included when
                                        performed) using mechanical
                                        device (e.g., kyphoplasty), 1
                                        vertebral body, unilateral or
                                        bilateral cannulation, inclusive
                                        of all imaging guidance; lumbar.
22515................................  Percutaneous vertebral                       N           N/A     Packaged            N           N/A    Packaged.
                                        augmentation, including cavity
                                        creation (fracture reduction and
                                        bone biopsy included when
                                        performed) using mechanical
                                        device (e.g., kyphoplasty), 1
                                        vertebral body, unilateral or
                                        bilateral cannulation, inclusive
                                        of all imaging guidance; each
                                        additional thoracic or lumbar
                                        vertebral body (list separately
                                        in addition to code for primary
                                        procedure).
--------------------------------------------------------------------------------------------------------------------------------------------------------

e. Strapping and Casting Applications (APCs 5101 and 5102)
    For the CY 2016 update, APCs 5101 (Level 1 Strapping and Cast 
Application) and 5102 (Level 2 Strapping and Cast Application) are 
assigned to OPPS status indicator ``S'' (Procedure or Service, Not 
Discounted When Multiple; Paid under OPPS; separate APC payment) to 
indicate that the procedures and/or services assigned to these APCs are 
not discounted when two or more services are billed on the same date of 
service.
    For the CY 2017 update, based on our analysis of the procedures 
assigned to APCs 5101 and 5102, in the CY 2017 OPPS/ASC proposed rule 
(81 FR 45648), we proposed to revise the status indicator assignment 
for these procedures from ``S'' to ``T'' (Procedure or Service, 
Multiple Procedure

[[Page 79625]]

Reduction Applies; Paid under OPPS; separate APC payment) to indicate 
that the services are paid separately under the OPPS, but a multiple 
procedure payment reduction applies when two or more services assigned 
to status indicator ``T'' are billed on the same date of service. 
Because the procedures assigned to APCs 5101 and 5102 are often 
associated with surgical treatments, we stated that we believe that the 
proposed reassignment of these procedures to status indicator ``T'' is 
appropriate and ensures adequate payment for the procedures, even when 
the multiple procedure discounting policy applies. Also, there is no 
payment reduction unless there is another status indicator ``T'' 
procedure reported on the claim describing cast/splint/strap services. 
Consequently, we also proposed to revise the status indicator 
assignment for APCs 5101 and 5102 from ``S'' to ``T'' for the CY 2017 
OPPS update to appropriately categorize the procedures assigned to 
these two APCs.
    Comment: Several commenters opposed the status indicator 
reassignment from ``S'' to ``T'' for APCs 5101 and 5102, and stated 
that CMS did not provide substantive information for the proposed 
change, making it difficult for stakeholders to properly analyze the 
effects of the proposed change. Other commenters indicated that such a 
change contradicts current coding guidelines.
    Response: As stated above, as part of our annual review, we examine 
the APC assignments for all items and services under the OPPS, which 
include review of status indicators, for appropriate placements in the 
context of our proposed policies for the update year. Although not 
every code, status indicator, or APC revision is discussed in the 
preamble of the proposed rule, they are nonetheless listed in Addendum 
B of the proposed rule. We note that Addendum B of the proposed rule is 
an Excel file that is arranged in CPT/HCPCS code order and shows the 
proposed OPPS status indicator and APC assignments, relative payment 
weights, and payment rates for every procedure code reported under the 
hospital OPPS.
    Comment: Some commenters indicated that the National Correct Coding 
Initiative (NCCI) guidelines prevent the reporting of casting/strapping 
services when performed as part of a surgical procedure. Other 
commenters stated that the AMA CPT code instructions indicate that CPT 
codes 29700 through 29799 are only reported when the service is for a 
replacement procedure following a period of follow-up, or when the 
service is performed as the primary treatment without an associated 
restorative treatment or procedure(s). The commenters urged CMS not to 
finalize the proposal.
    Response: We do not believe that the commenters completely 
understand the NCCI or CPT coding guidelines associated with the 
strapping and casting services. While it is true that strapping and 
casting services cannot be reported separately when performed as part 
of a surgical procedure, there are certain circumstances when strapping 
and casting services can be performed separate from a surgical 
procedure. It should be noted that Chapter IV (Surgery: Musculoskeletal 
System) of the 2016 NCCI Policy Manual for Medicare Services states 
that hospitals paid under the OPPS should report the appropriate 
casting, splinting, or strapping code in certain instances. 
Specifically, the NCCI Policy Manual specifies that for payment under 
the OPPS, if a hospital treats a fracture, dislocation, or injury with 
a cast, splint, or strap as an initial service without any other 
definitive procedure or treatment, the hospital should report the 
appropriate casting/splinting/strapping CPT code. In addition, while it 
is true that the procedures described by CPT codes 29700 through 29799 
are only reported when the service is for a replacement procedure 
following a period of follow-up, or when the service is performed as 
the primary treatment without an associated restorative treatment or 
procedure(s), the CPT guidelines also elaborate that these removal/
repair codes can be reported separately if the initial application of 
the cast, splint, or strapping was performed by a different entity.
    Comment: Some commenters stated that casting and strapping services 
are performed in the emergency department for Medicare patients 
following a fall or injury, and these patients often require an 
extended period of observation before they are discharged. These 
commenters stated that revising the status indicator assignment for 
APCs 5101 and 5102 from ``S'' to ``T'' would no longer qualify 
hospitals for comprehensive observation service APC payments.
    Response: We do not anticipate that this will be a significant 
issue because all observation services that are less than 8 hours are 
packaged into the payment for the emergency department visit. We do not 
believe that most Medicare beneficiaries would require long periods of 
observation after receiving cast/splint/strap services in the emergency 
room. Instead, we believe that physicians would appropriately assess 
the patient and determine whether the patient should be discharged to 
home or admitted as an inpatient.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to revise the status 
indicator assignment for APCs 5101 and 5102 from ``S'' to ``T'' for CY 
2017.
5. Nervous System Procedures/Services
a. Transcranial Magnetic Stimulation Therapy (TMS) (APCs 5721 and 5722)
    Currently, three CPT codes exist to describe TMS therapy, 
specifically, CPT codes 90867, 90868, and 90869. As shown on Table 17 
below, for CY 2016, we proposed to assign these codes to APC 5722 
(Level 2 Diagnostic Tests and Related Services).

   Table 17--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Transcranial Magnetic Stimulation Therapy (TMS) Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016                               Proposed CY
                                                                          CY 2016 OPPS    CY 2016        OPPS      Proposed CY  Proposed CY   2017 OPPS
               CPT code                         Long descriptors               SI         OPPS APC     payment    2017 OPPS SI   2017 OPPS     payment
                                                                                                         rate                       APC          rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
90867................................  Therapeutic repetitive                       S          5722      $220.35            S          5722      $231.67
                                        transcranial magnetic
                                        stimulation (tms) treatment;
                                        initial, including cortical
                                        mapping, motor threshold
                                        determination, delivery and
                                        management.

[[Page 79626]]

 
90868................................  Therapeutic repetitive                       S          5722       220.35            S          5722       231.67
                                        transcranial magnetic
                                        stimulation (tms) treatment;
                                        subsequent delivery and
                                        management, per session.
90869................................  Therapeutic repetitive                       S          5722       220.35            S          5721       127.42
                                        transcranial magnetic
                                        stimulation (tms) treatment;
                                        subsequent motor threshold re-
                                        determination with delivery and
                                        management.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As we do every year, we review the APC assignments for all services 
under the hospital OPPS based on the latest claims data. For CY 2017, 
we did not propose to make any changes to the APC assignment for CPT 
codes 90867 and 90868, and proposed to continue to assign the 
procedures described by these procedure codes to APC 5722 because the 
geometric mean cost for these procedures were within the range of the 
geometric mean costs for procedures assigned to APC 5722. Specifically, 
our proposed rule claims data showed a geometric mean cost of 
approximately $196 based on 136 single claims (out of 136 total claims) 
for CPT code 90867, and approximately $187 for CPT code 90868 based on 
5,239 single claims (out of 5,287 total claims). Because the geometric 
mean cost of $196 and $187 are relatively similar to the geometric mean 
cost of $242 for APC 5722, we proposed to continue to assign CPT codes 
90867 and 90868 to APC 5722. However, for CPT code 90869, we proposed 
to reassign CPT code 90869 to APC 5721 (Level 1 Diagnostic Tests and 
Related Services) based on the latest claims data used for the proposed 
rule. Specifically, our claims data showed a geometric mean cost of 
approximately $119 based on 47 single claims (out of 47 total claims). 
Because the geometric mean cost of $133 for APC 5721 is relatively 
similar to the geometric mean cost of $119 for CPT code 90869, we 
proposed to reassign the procedure code to APC 5721.
    Comment: One commenter disagreed with the proposal to reassign CPT 
code 90869 to APC 5721, and requested that CMS continue to assign the 
procedure to APC 5722. The commenter believed that the proposed CY 2017 
payment rate of $127.42 is the result of low-volume and incorrect 
revenue code reporting. The commenter noted that, based on its analysis 
of the claims data, one hospital's inappropriate revenue code 
assignment resulted in a low cost-to-charge ratio, thereby decreasing 
the proposed payment rate. In addition, the commenter believed that the 
proposed payment rate for CPT code 90869, which involves a 
redetermination and TMS delivery and management services, should be 
higher than the proposed payment rate for CPT code 90868, which 
involves only TMS delivery and management services.
    Response: As we have stated in section 20.5 (Clarification of HCPCS 
Code to Revenue Code Reporting) of Chapter 4 of the Medicare Claims 
Processing Manual, hospitals are responsible for reporting the correct 
revenue code on the claim form. Specifically, we state that we do not 
instruct hospitals on how to report the assignment of HCPCS codes to 
revenue codes for services provided under OPPS because hospitals' costs 
vary. Where explicit instructions are not provided, providers 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 note that the 
Medicare cost report form allows hospitals to report in a manner that 
is consistent with their own financial accounting systems and, 
therefore, should be accurate for each individual hospital. Moreover, 
we believe that the cost report data and their use in the OPPS cost 
estimation and payment rate development process, combined with 
potential penalties for inaccurate reporting, provide financial 
incentive for hospitals to report costs accurately. Furthermore, as we 
have stated repeatedly, beyond our standard OPPS trimming methodology 
that we apply to those claims that have passed various types of claims 
processing edits, it is not our general policy to judge the accuracy of 
hospital coding and charging for purposes of ratesetting. (We refer 
readers to the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71838) for further discussion.) Therefore, we will not question the 
accuracy of the coding and charging practices in this case.
    In addition, based on the latest hospital outpatient claims data 
used for the final rule with comment period, we believe that APC 5721 
is the most appropriate APC assignment for CPT code 90869. 
Specifically, our claims data show a geometric mean cost of 
approximately $107 for CPT code 90869 based on 54 single claims (out of 
54 total claims), which is similar to the geometric mean cost of 
approximately $131 for APC 5721. We do not agree with the commenter 
that maintaining the assignment for CPT code 90869 to APC 5722 is 
appropriate because its geometric mean cost of approximately $239 is 
significantly higher than the geometric mean cost of $107 for CPT code 
90869. Compared to the geometric mean cost of approximately $239 for 
APC 5722, we believe that APC 5721 is the most appropriate assignment 
for CPT code 90869 based on clinical and resource homogeneity with 
other procedures and services in the APC.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to assign CPT code 90869 
to APC 5721 for CY 2017. In addition, we are adopting as final, without 
modification, the proposed APC assignments for CPT codes 90867 and 
90868 for CY 2017. Table 18 below lists the final status indicator and 
APC assignments and payment rates for the three TMS CPT codes for CY 
2017. We refer readers to Addendum B of this final rule with comment 
period for the payment rates for all codes reportable under the OPPS. 
Addendum B is available via the Internet on the CMS Web site.

[[Page 79627]]



     Table 18--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Transcranial Magnetic Stimulation Therapy (TMS) Codes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016                                 Final CY
                                                                          CY 2016 OPPS    CY 2016        OPPS       Final  CY    Final  CY    2017  OPPS
               CPT code                         Long descriptors               SI         OPPS APC     payment     2017  OPPS    2017  OPPS    payment
                                                                                                         rate          SI           APC          rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
90867................................  Therapeutic repetitive                       S          5722      $220.35            S          5722      $232.21
                                        transcranial magnetic
                                        stimulation (tms) treatment;
                                        initial, including cortical
                                        mapping, motor threshold
                                        determination, delivery and
                                        management.
90868................................  Therapeutic repetitive                       S          5722       220.35            S          5722       232.21
                                        transcranial magnetic
                                        stimulation (tms) treatment;
                                        subsequent delivery and
                                        management, per session.
90869................................  Therapeutic repetitive                       S          5722       220.35            S          5721       127.05
                                        transcranial magnetic
                                        stimulation (tms) treatment;
                                        subsequent motor threshold re-
                                        determination with delivery and
                                        management.
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Percutaneous Epidural Adhesiolysis (APC 5443)
    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we 
proposed to continue to assign CPT codes 62263 (Percutaneous lysis of 
epidural adhesions using solution injection (e.g., hypertonic saline, 
enzyme) or mechanical means (e.g., catheter) including radiologic 
localization (includes contrast when administered), multiple 
adhesiolysis sessions; 2 or more days) and 62264 (Percutaneous lysis of 
epidural adhesions using solution injection (e.g., hypertonic saline, 
enzyme) or mechanical means (e.g., catheter) including radiologic 
localization (includes contrast when administered), multiple 
adhesiolysis sessions; 1 day) to APC 5443 (Level 3 Nerve Injections), 
with a proposed CY 2017 payment rate of approximately $711.
    Comment: One commenter expressed concern with the proposed payment 
rate for CPT codes 62263 and 62264. The commenter stated that these 
codes were paid for appropriately in CY 2014 and CY 2015. However, the 
commenter believed that the payment for these procedures has declined 
beginning in CY 2016. The commenter also suggested that CMS reevaluate 
the APC structure and consider reinstating the APC classification that 
was in place during CY 2014 and CY 2015 in which the percutaneous 
adhesiolysis and radiofrequency neurotomy procedures were combined in 
the same APC. The commenter stated that the payment rate for the 
percutaneous adhesiolysis procedures should be the same as the 
radiofrequency neurotomy procedures, which are assigned to APC 5431 
(Level 1 Nerve Procedures), with a proposed payment rate of 
approximately $1,557.
    Response: Based on our analysis of the claims data used for the 
proposed rule, APC 5443 is the most appropriate APC assignment for CPT 
codes 62263 and 62264 based on its clinical and resource similarity to 
the procedures within this APC. Specifically, our analysis revealed a 
geometric mean cost of approximately $1,149 for CPT code 62263 based on 
97 single claims (out of 107 total claims), and a geometric mean cost 
of approximately $839 for CPT code 62264 based on 2,188 single claims 
(out of 3,726 total claims). We believe that the geometric mean costs 
of CPT codes 62263 and 62264 are more similar to the geometric mean 
cost of approximately $743 for APC 5443. We believe that APC 5431 is 
not a more appropriate APC for CPT codes 62263 and 62264 because the 
geometric mean cost for this APC is approximately $1,627.
    We also note that we reviewed the updated CY 2015 claims data used 
for this final rule with comment period. The proposed rule claims data 
were based on claims submitted from January 1, 2015 through December 
31, 2015 and processed through December 31, 2015, while the final rule 
with comment period claims data are based on claims submitted from 
January 1, 2015 through December 31, 2015 and processed through June 
30, 2016. Based on our analysis of the final rule with comment period 
claims data, we found a similar pattern for CPT codes 62263 and 62264. 
Specifically, we found a geometric mean cost of approximately $1,138 
for CPT code 62263 based on 109 single claims (out of 121 total 
claims), and a geometric mean cost of approximately $842 for CPT code 
62264 based on 2,243 single claims (out of 3,972 total claims). We note 
that the geometric mean costs for the significant procedures within APC 
5443 range between $603 (CPT code 62310) and $1,083 (CPT code 64640). 
Because the geometric mean cost for APC 5431 is approximately $1,607, 
which is greater than the geometric mean cost for either CPT code 62263 
or 62264, we believe that APC 5443 is the more appropriate APC 
assignment for these procedures.
    After consideration of the public comment we received, we are 
adopting as final, without modification, the APC assignment to APC 5443 
for CPT codes 62263 and 62264 for CY 2017. The final payment rates for 
these codes can be found in Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site).
c. Neurostimulator (APC 5463)
    For CY 2017, we proposed to assign CPT code 0268T (Implantation or 
replacement of a carotid sinus baroreflex activation device; pulse 
generator only (includes intraoperative interrogation, programming, and 
repositioning when performed)) to APC 5463 (Level 3 Neurostimulator and 
Related Procedures), for which we proposed a CY 2017 geometric mean 
cost of approximately $18,325.
    Comment: Commenters disagreed with CMS' proposal to assign CPT code 
0268T to APC 5463. The commenters believed that CPT code 0268T would be 
more appropriately assigned to APC 5464 (Level 4 Neurostimulator and 
Related Procedures), for which we proposed a CY 2017 geometric mean 
cost of approximately $27,907. The commenters stated that the 
relatively

[[Page 79628]]

few claims submitted to CMS that are eligible for CY 2017 ratesetting 
do not accurately reflect the cost of performing this procedure.
    Response: We disagree with commenters' assertion that CPT code 
0268T would be more appropriately assigned to APC 5464, which has a 
final CY 2017 APC geometric mean cost of approximately $27,802. Based 
on available claims data used for CY 2017 ratesetting, the proposed 
assignment of CPT code 0268T, which has a final CY 2017 geometric mean 
cost of approximately $21,794, to APC 5463 is appropriate. After 
consideration of the public comments we received, we are finalizing our 
proposal, without modification, to assign CPT code 0268T to APC 5463, 
which has a final CY 2017 APC geometric mean cost of 
approximately$18,300. The final payment rate for CPT code 0268T can be 
found in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site).
6. Radiologic Procedures and Services
a. Imaging APCs
    As a part of our CY 2016 comprehensive review of the structure of 
the APCs and procedure code assignments, we restructured the APCs that 
contain imaging services (80 FR 70392). The purpose of this 
restructuring of the OPPS APC groupings for imaging services was to 
improve the clinical and resource homogeneity of the services 
classified within the imaging APCs. Recently some stakeholders that 
provide imaging services in hospitals recommended some further 
restructuring of the OPPS imaging APCs, again for the purpose of 
improving the clinical and resource homogeneity of the services 
classified within these APCs. After reviewing the stakeholder 
recommendations, we agreed that further improvements can be achieved by 
making further changes to the structure of the APC groupings of the 
imaging services classified within the imaging APCs. Therefore, in the 
CY 2017 OPPS/ASC proposed rule (81 FR 45647), for CY 2017, we proposed 
to make further changes to the structure of the imaging APCs. In Table 
11 of the proposed rule, we listed the CY 2016 imaging APCs, and in 
Table 12 of the proposed rule we listed our proposed CY 2017 changes to 
the imaging APCs. This proposal would consolidate the imaging APCs from 
17 APCs in CY 2016 to 8 in CY 2017. The specific APC assignments for 
each service grouping were listed in Addendum B to the proposed rule, 
which is available via the Internet on the CMS Web site. We noted in 
the proposed rule that some of the imaging procedures are assigned to 
APCs that are not listed in the tables of the proposed rule (for 
example, the vascular procedures APCs). Also, the nuclear medicine 
services APCs were not included in this proposed APC restructuring. We 
invited public comments on our proposal to consolidate the imaging APCs 
from 17 APCs in CY 2016 to 8 in CY 2017.
    Comment: One of the stakeholders mentioned above who suggested 
further restructuring of the OPPS imaging services earlier this year 
expressed concern with CMS' proposed restructured imaging APCs. In 
particular, the stakeholder was disappointed that the proposed 
restructured imaging APCs differed from its specific recommendations. 
The stakeholder supported, in part, CMS' proposal; in particular, the 
reassignment of the interventional radiology procedures from imaging 
APCs to vascular procedure APCs and the maintenance of separate APCs 
for nuclear medicine procedures. In addition, several other commenters 
also agreed with CMS' proposal to not change the nuclear medicine APCs. 
Further, the stakeholder and other commenters requested that CMS 
provide additional explanation regarding the clinical similarity of the 
services assigned to the proposed restructured APCs. These commenters 
also were displeased that CMS assigned procedures that are primarily 
performed by cardiologists (for example, echocardiography) to APCs that 
also include imaging tests that are primarily interpreted by 
radiologists. They requested that CMS separate echocardiography 
services from other imaging tests. They also pointed out that the 
proposed groupings are broader than the APC title (that use the term 
``Diagnostic Radiology'') descriptions because the proposed APC 
groupings include imaging tests that are interpreted by physicians 
other than radiologists. They also suggested additional APC and HCPCS 
code-specific assignments that are addressed below. The stakeholder and 
other commenters asked that CMS not adopt the proposed restructuring, 
and instead adopt their suggested APC structure, which would 
consolidate the imaging APCs, but would maintain separate APCs for 
echocardiography services that do not include x-ray, CT, and MRI 
services. Other commenters also requested that CMS not adopt the 
restructured imaging APCs. Some of these commenters suggested 
alternatives, such as maintaining separate APCs for ultrasound tests, 
but the commenters' primary focus was the payment rates and APC 
assignments of specific codes, which we discuss in detail below.
    Response: We appreciate the stakeholder's and the commenters' 
support. We agree with the stakeholder that the term ``Imaging'' is 
more accurate for the titles for this series of APCs instead of the 
term ``Diagnostic Radiology.'' Therefore, we are modifying our proposal 
and changing the titles of this diagnostic radiology series of APCs to 
``Level X Imaging'' (either without contrast or with contrast). 
Regarding the commenters' request for further explanation on the 
clinical similarity of the services assigned to the imaging APCs, we 
remind commenters that we proposed to reassign the interventional 
radiology procedures to vascular procedure APCs (APCs 5181, 5182, 
5183), recognizing the greater clinical similarity of the reassigned 
interventional services to the vascular/catheterization procedures that 
are currently assigned to the vascular procedure APCs. The remaining 
services that are assigned to the restructured imaging APCs are all 
diagnostic imaging services that almost all belong to one of the 
following four primary, well-established imaging modalities: x-ray, 
ultrasound, computed tomography (CT), or magnetic resonance (MR). When 
these services are performed in the hospital outpatient department, a 
technician (sometimes aided by a physician) captures the images by 
operating one of the types of equipment used for x-ray, ultrasound, CT, 
or MR. These imaging services are assigned to an APC in either the 
``without contrast'' imaging series or the ``with contrast'' imaging 
series, as required by section 1833(t)(2)(G) of the Act. Assignment of 
an imaging service to a specific APC within each of these two imaging 
series (with or without contrast) depends upon the use (or non-use) of 
a contrast agent and the geometric mean cost of the service, with the 
range of geometric mean costs within an APC governed by the 2 times 
rule. It is not relevant to the structure of the APC groupings that 
physicians of different specialties interpret certain tests (for 
example, cardiologists generally interpret imaging of the heart, 
radiologists interpret most other imaging tests, orthopedic surgeons 
interpret extremity images, and neurologists interpret brain images, 
among others). Furthermore, APC groupings in general do not necessarily 
correspond to groupings of procedures that are performed by a given 
physician

[[Page 79629]]

specialty. Some of the APC groupings resemble to some extent 
traditional physician specialty classifications (for example, the 
urology series of APCs), but many others do not. We believe that 
imaging services, which are diagnostic tests including x-rays, 
ultrasounds (including echocardiography), CT scans, and MRIs are 
sufficiently clinically similar for APC grouping purposes. We also 
believe that there is no special advantage to the current CY 2016 
scheme that subdivides imaging services into subclasses for x-rays, 
ultrasounds, etc. The commenters believed that their suggested 
restructured APCs that were presented to CMS included APCs that grouped 
these four modalities together (except echocardiography). We believe 
that the proposed structure of the imaging services APCs satisfies the 
requirements of section 1833(t)(2)(B) of the Act with greater 
flexibility (versus the current structure) and without unnecessarily 
restrictive groupings limited to clinically insignificant traditional 
modality classifications (for example, CT and x-ray, among others). We 
see no compelling reason to separate echocardiography procedures, an 
imaging test of the heart, from other imaging tests in the APC 
groupings. Furthermore, all other nonimaging diagnostic tests are 
grouped in APCs (APCs 5721 through 5724) that are separate and distinct 
from the imaging services APCs because we believe that these nonimaging 
diagnostic tests are sufficiently clinically dissimilar to imaging 
tests to warrant separate APCs.
    Comment: One commenter objected to the proposed exception to the 2 
times rule for APC 5521 (Level 1 Diagnostic Radiology without 
Contrast), and requested that we explain the basis for the exception 
further. The commenter also requested that CMS reassign CPT code 75571 
from APC 5521 to a higher paying APC for CY 2017.
    Response: We explain the basis for the 2 times rule and the 
proposed exceptions in the CY 2017 OPPS/ASC of the proposed rule (81 FR 
45644 through 45645). Table 9 of the CY 2017 OPPS/ASC of the proposed 
rule listed the proposed APC exceptions to the 2 times rule for CY 2017 
(81 FR 45645). The proposal to grant an exception to the 2 times rule 
for APC 5521 followed from a request made prior to the proposed rule. 
At that time, the request was that CMS reassign CPT code 75571 from APC 
5731 (Level 1 Minor Procedures) to an imaging APC based on greater 
clinical similarity to other CT services assigned to the imaging APCs. 
We agreed with the request and proposed to reassign CPT code 75571 to 
APC 5521, which is the lowest cost imaging APC in the series. Because 
CPT code 75571 has such a low geometric mean cost ($22.87), its 
assignment to any imaging APC, even the lowest cost imaging APC 5521 
(with a geometric mean cost of $61.53), results in a 2 times rule 
violation. We proposed to make an exception to the 2 times rule for APC 
5521 for CY 2017 because we believed that, for clinical reasons, CPT 
code 75571 should be assigned to an imaging APC with the other CT 
services. Therefore, we are finalizing our proposal, without 
modification, to reassign CPT code 75571 to APC 5521 as a result of the 
low geometric mean cost of the procedure. The payment rate for CPT code 
75571 increases from $12.70 in CY 2016 to $59.84 in CY 2017.
    Comment: Several commenters objected to the proposed assignment of 
CPT code 77080 (Dual-energy X-ray absorptiometry (DXA), bone density 
study, 1 or more sites; axial skeleton (e.g., hips, pelvis, spine)) to 
APC 5521. The proposed assignment would reduce the payment rate for 
this procedure from its current CY 2016 payment rate of $100.69 to 
$63.33 in CY 2017. The commenters believed that the payment reduction 
could impair access to this valuable preventive service. The commenters 
requested that CMS assign CPT code 77080 to a higher paying imaging 
APC, along with other services that have greater resource similarity to 
the procedure described by CPT code 77080.
    Response: We agree with the commenters. Therefore, we are modifying 
our proposal, and assigning CPT code 77080 to APC 5522 (Level 2 
Diagnostic Radiology without Contrast) for CY 2017. CPT code 77080 has 
a geometric mean cost of $91.08, which increases the probability of a 2 
times rule violation when compared to the second lowest-cost 
significant procedure assigned to APC 5521, the procedure described by 
CPT code 71010, which has a geometric mean cost of $46.11. We note that 
we are not comparing the geometric mean cost of CPT code 77080 to that 
of CPT code 75571, which is a significant procedure assigned to APC 
5521 and that has a geometric mean cost of $22.87, for a 2 times rule 
violation because as described above, this procedure code assignment 
was the basis for the exception from the 2 times rule for APC 5521 in 
the proposed rule. In summary, we are assigning CPT code 77080 to APC 
5522, with a final payment rate of $112.69 for CY 2017.
    Comment: Several commenters objected to the proposed assignment of 
HCPCS code G0297 (Low dose CT scan (LDCT) for lung cancer screening) to 
APC 5521 because it would reduce the payment rate for this procedure 
from $112.49 in CY 2016 to $63.33 in CY 2017. The commenters expressed 
concern that such a payment reduction could result in fewer Medicare 
beneficiaries receiving this service. The commenters also expressed 
concern about the APC assignment of HCPCS code G0296 (Counseling visit 
to discuss need for lung cancer screening (LDCT) using low dose CT scan 
(service is for eligibility determination and shared decision making)) 
to APC 5821 (Level 1 Health and Behavior Services). The commenters 
believed that the proposed assignment also would result in a payment 
reduction from $69.65 in CY 2016 to $25.09 in CY 2017, and could impair 
access to this cancer screening service. The commenters requested that 
CMS assign these services to higher paying APCs in the CY 2017 final 
rule with comment period.
    Response: We agree, in part, with the commenters. There were no 
claims data for these services in CY 2016. Therefore, the CY 2016 APC 
assignments reflected our best estimate at an appropriate APC 
assignment in the absence of cost information. For CY 2017, we have 
cost information for each of these services from the CY 2015 claims 
data. For HCPCS code G0296, the final rule geometric mean cost is 
$130.44, but with only 21 single claims. Therefore, we believe that 
this service should be assigned to APC 5822 (Level 2 Health and 
Behavior Services), with a payment rate of $70.23. We believe that the 
services in APC 5822 have greater resource similarity to the procedure 
described by HCPCS code G0296 than the services assigned to APC 5821. 
We will reevaluate the APC assignment of this procedure for the CY 2018 
rulemaking. For HCPCS code G0297, the CY 2017 final rule geometric mean 
cost is $49.38. APC 5521, to which we proposed to assign HCPCS code 
G0297, has a geometric mean cost of $65.16. The next higher level APC 
in the imaging without contrast APC series, APC 5522, has a geometric 
mean cost of $119.56. Because the geometric mean cost of HCPCS code 
G0297 is more comparable to the geometric mean cost of APC 5521 than 
APC 5522, we believe that resource homogeneity is better supported by 
the assignment of HCPCS code G0297 to APC 5521. Therefore, in summary, 
we are modifying our proposal and assigning HCPCS code G0296 to APC 
5822. However, we are finalizing our proposal, without modification, to 
assign HCPCS code G0297 to APC 5521 for CY 2017.
    Comment: One commenter requested that CMS not reassign CPT code 
78811

[[Page 79630]]

(Positron emission tomography (PET) imaging; limited area (e.g., chest, 
head/neck) from APC 5594 (Level 4 Nuclear Medicine and Related 
Services) to APC 5593 (Level 3 Nuclear Medicine and Related Services) 
for CY 2017. The commenter believed that the reassignment is premature 
because of the lack of sufficient claims data to support the 
reassignment from the CY 2016 assignment to APC 5594.
    Response: We disagree with the commenter. Although there are only 
117 single claims for this service in the final rule data, we believe 
that this is a sufficient number upon which to base an APC assignment. 
The geometric mean cost of CPT code 78811 has been consistent for the 
past 2 years. In CY 2016 the geometric mean cost was $912.62 (based on 
112 single claims), and the geometric mean cost for CY 2017 is $918.39 
(based on 117 single claims). Furthermore, the geometric mean cost of 
CPT code 78811 is significantly lower than the geometric mean cost of 
APC 5593 ($1,170.73). Therefore, we believe that APC 5593 is the most 
appropriate APC assignment for CPT code 78811.
    Comment: A few commenters requested that CMS maintain the CY 2016 
APC assignment for CPT code 75563 (Cardiac magnetic resonance imaging 
for morphology and function without contrast material(s), followed by 
contrast material(s) and further sequences; with stress imaging) to APC 
5593 (Level 3 Nuclear Medicine and Related Services), instead of its 
proposed assignment to APC 5573 (Level 3 Diagnostic Radiology with 
Contrast). The commenters expressed concern that the proposed payment 
reduction from $1,108 to $777 could reduce access to this imaging test. 
The commenters believed that CPT code 75563 has greater clinical and 
resource similarity to the services in APC 5593 than the services in 
APC 5573. In particular, the commenters asserted that CPT code 75563 is 
similar to CPT code 78452 (Myocardial perfusion imaging, tomographic 
(SPECT) (including attenuation correction, qualitative or quantitative 
wall motion, ejection fraction by first pass or gated technique, 
additional quantification, when performed); multiple studies, at rest 
and/or stress (exercise or pharmacologic) and/or redistribution and/or 
rest reinjection) because both tests are performed under a stress 
protocol. The commenter also requested that CMS reassign CPT code 75557 
(Cardiac magnetic resonance imaging for morphology and function without 
contrast material) from APC 5523 (Level 3 Imaging without Contrast) to 
APC 5591 (Level 1 Nuclear Medicine and Related Services). The commenter 
believed that such a reassignment would improve clinical and resource 
similarity with regard to CPT code 75557. Another commenter requested 
that CMS not assign any non-nuclear medicine services to the nuclear 
medicine APC series.
    Response: We agree with the commenter that requested that we not 
assign any of these magnetic resonance procedure codes to nuclear 
medicine APCs. For instance, APC 5593 contains procedures that describe 
nuclear medicine tests, and CPT code 75563 is a specific type of MRI 
and not a nuclear medicine test. Also, the geometric mean cost of CPT 
code 75563 is $745 and the geometric mean cost of the APC to which it 
is assigned, APC 5573, is $781. These geometric mean costs are very 
similar. However, the geometric mean cost of APC 5593 is $1,171, which 
is significantly higher than the geometric mean cost of CPT code 75563. 
Therefore, assigning CPT code 75563 to APC 5593 would assign the 
procedure to an APC with clinically dissimilar nuclear medicine tests 
and resource dissimilar tests that have a geometric mean cost of $1,171 
(as compared to the $745 geometric mean cost of CPT code 75563). 
Therefore, we are finalizing our proposal, without modification, to 
assign CPT code 75563 to APC 5573. Similarly, the procedure described 
by CPT code 75557 is not a nuclear medicine test and, therefore, should 
not be assigned to a nuclear medicine APC such as APC 5591. The 
geometric mean cost of CPT code 75557 is $266, and the geometric mean 
cost of the APC to which it is assigned (APC 5523) is $223. Therefore, 
we believe that APC 5523 is an appropriate APC assignment for CPT code 
75557 from a resource perspective. Also, there are many other MRI 
procedure codes, like CPT code 75557, assigned to APC 5523. In 
addition, we are reassigning a related code, CPT code 75559 (Cardiac 
magnetic resonance imaging for morphology and function without contrast 
material; with stress imaging), from APC 5592 (Level 2 Nuclear Medicine 
and Related Services) to APC 5523 (Level 3 Imaging without Contrast). 
The geometric mean costs of these two APCs are comparable, but because 
the procedure described by CPT code 75559 is not a nuclear medicine 
test, we believe that APC 5523 is a more appropriate APC assignment 
than APC 5592 for reasons of clinical similarity.
    Comment: One commenter requested that CMS reassign CPT code 70559 
(Magnetic resonance (e.g., proton) imaging, brain (including brain stem 
and skull base), during open intracranial procedure (e.g., to assess 
for residual tumor or residual vascular malformation); without contrast 
material(s), followed by contrast material(s) and further sequences) 
from APC 5181 (Level 1 Vascular Procedures) to an imaging APC because 
the commenter believed that an imaging APC would be more clinically 
appropriate than a vascular procedures APC.
    Response: We agree with the commenter that CPT code 70559 should be 
assigned to an imaging APC because this service is more similar to 
other imaging services than to the procedures assigned to APC 5181. 
Therefore, we are modifying our proposal, and reassigning CPT code 
70559 to APC 5571 (Level 1 Imaging with Contrast).
    Comment: A few commenters requested that CMS reassign four HCPCS/
CPT codes from APC 5572 (Level 2 Diagnostic Radiology with Contrast) to 
APC 5573 (Level 3 Diagnostic Radiology with Contrast):
     HCPCS code C8929 (Transthoracic echocardiography, with 
contrast, or without contrast followed by with contrast, real-time with 
image documentation (2D), includes M-mode recording, when performed, 
complete, with spectral Doppler echocardiography, and with color flow 
Doppler echocardiography);
     CPT code 73722 (Magnetic resonance (e.g., proton) imaging, 
any joint of lower extremity; with contrast material(s));
     CPT code 73222 (Magnetic resonance (e.g., proton) imaging, 
any joint of upper extremity; with contrast material(s)); and
     CPT code 72126 (Computed tomography, cervical spine; with 
contrast material).
    These commenters believed that the procedures described by these 
four codes have greater clinical and resource similarity to the 
procedures assigned to APC 5573.
    Response: We agree, in part, with the commenters. In particular, we 
believe that HCPCS code C8929 belongs in the same APC with the other 
echocardiography with contrast services, which is APC 5573, based on 
clinical and resource similarity resulting from the use of contrast. We 
also believe that the geometric mean costs of CPT code 73722 ($559.13) 
and CPT code 73222 ($606.13) support the assignment of these procedures 
to APC 5573, which has a geometric mean cost of $675.23. However, the 
final rule geometric mean cost for CPT code 72126 is $363.15. 
Therefore, we believe that APC 5572 is the more appropriate APC 
assignment for this procedure.

[[Page 79631]]

    Comment: A few commenters requested that CMS reassign HCPCS codes 
G0105 (Colorectal cancer screening; colonoscopy on individual at high 
risk) and G0121 (Colorectal cancer screening; colonoscopy on individual 
not meeting criteria for high risk) from APC 5525 (Level 5 Diagnostic 
Radiology without Contrast) to a more clinically appropriate 
gastroenterology APC.
    Response: We agree with the commenters that a gastroenterology APC 
would be more clinically appropriate for these colonoscopy services. 
Therefore, we are modifying our proposal, and reassigning HCPCS codes 
G0105 and G0121 to APC 5311 (Level 1 Lower GI Procedures). With the 
reassignment of HCPCS codes G0105 and G0121 from APC 5525 to APC 5311, 
only five procedures remain in APC 5525. We believe that these 
remaining five procedures (four of which are non-contrast 
echocardiography services) can be grouped into APC 5524 (Level 4 
Diagnostic Radiology without Contrast), which will be renamed Level 4 
Imaging without Contrast. APC 5524 contains other clinically similar 
non-contrast echocardiography services and the reassignment of these 
five procedures comports with the provision of the 2 times rule. 
Therefore, we also are reassigning CPT codes 75984, 93312, 93313, 
93315, and 93318 from APC 5525 to APC 5524, and deleting APC 5525.
    Comment: Some commenters requested that several procedures be 
reassigned to the next higher level imaging APC within the APC series. 
The commenters believed that reassignment of these procedures would 
improve resource homogeneity within these APCs. These procedures and 
our responses to this request are listed in Table 19 below.

                                   Table 19--Services Requested To Be Reassigned to the Next Higher Level Imaging APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Proposed  CY  Proposed CY    CMS response  (agree or disagree     Final  CY    Final  CY
            CPT code                    Long descriptor           2017 SI      2017 APC             with commenter)              2017  SI     2017  APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
70545..........................  Magnetic resonance                      S          5571  Disagree...........................            S          5571
                                  angiography, head; with
                                  contrast material(s).
70548..........................  Magnetic resonance                      S          5571  Disagree...........................            S          5571
                                  angiography, head; with
                                  contrast material(s).
70557..........................  Magnetic resonance (e.g.,               S          5523  Disagree...........................            S          5523
                                  proton) imaging, brain
                                  (including brain stem and
                                  skull base), during open
                                  intracranial procedure
                                  (e.g., to assess for
                                  residual tumor or residual
                                  vascular malformation);
                                  without contrast material.
71270..........................  Computed tomography, thorax;           Q3          5571  Disagree...........................           Q3          5571
                                  without contrast material,
                                  followed by contrast
                                  material(s) and further
                                  sections.
76010..........................  Radiologic examination from            Q1          5521  Disagree...........................           Q1          5521
                                  nose to rectum for foreign
                                  body, single view, child.
76498..........................  Unlisted magnetic resonance             S          5521  Disagree...........................            S          5521
                                  procedure (e.g.,
                                  diagnostic, interventional).
76641..........................  Ultrasound, breast,                    Q1          5521  Agree..............................           Q1          5522
                                  unilateral, real time with
                                  image documentation,
                                  including axilla when
                                  performed; complete.
76642..........................  Ultrasound, breast,                    Q1          5521  Disagree...........................           Q1          5521
                                  unilateral, real time with
                                  image documentation,
                                  including axilla when
                                  performed; limited.
76816..........................  Ultrasound, pregnant uterus,           Q1          5521  Agree..............................           Q1          5522
                                  real time with image
                                  documentation, follow-up
                                  (e.g., re-evaluation of
                                  fetal size by measuring
                                  standard growth parameters
                                  and amniotic fluid volume,
                                  re-evaluation of organ
                                  system(s) suspected or
                                  confirmed to be abnormal on
                                  a previous scan),
                                  transabdominal approach,
                                  per fetus.
76821..........................  Doppler velocimetry, fetal;            Q1          5521  Agree..............................           Q1          5522
                                  middle cerebral artery.
76857..........................  Ultrasound, pelvic                     Q3          5521  Agree..............................           Q3          5522
                                  (nonobstetric), real time
                                  with image documentation;
                                  limited or follow-up (e.g.,
                                  for follicles).
C8903..........................  Magnetic resonance imaging             Q3          5571  Disagree...........................           Q3          5571
                                  with contrast, breast;
                                  unilateral.
C8918..........................  Magnetic resonance                     Q3          5571  Disagree...........................           Q3          5571
                                  angiography with contrast,
                                  pelvis.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Response: For the procedures in the above table that we disagreed 
with the commenter regarding the most appropriate APC assignment, the 
geometric mean cost of each of these procedure codes is very similar to 
the geometric mean cost of the APC to which we proposed to reassign the 
procedure in the proposed rule. Therefore, we are finalizing our 
proposal, without modification, to reassign these proposed procedures 
to the proposed APCs indicated. For the procedure codes in the table 
above that we are modifying our proposal to reassign to a different APC 
than that which was proposed, the geometric mean cost of the procedure 
is more consistent with the next higher level APC to which we agree 
supports a more appropriate APC assignment.

[[Page 79632]]

    Comment: One commenter requested that CMS reassign several 
procedures to APCs other than any of the imaging APCs. The commenter 
believed that these procedures are not clinically similar to the other 
imaging services assigned to the imaging APCs. These procedure codes 
and our responses are listed in Table 20 below.
    Response: We refer readers to the table below for the final CY 2017 
APC assignments for the suggested procedure codes. We agree with the 
commenter that all of the suggested procedures should be reassigned to 
a different APC, except for the procedures described by CPT code 62303 
and HCPCS code C9733. We believe that these two procedure codes 
describe imaging tests and, therefore, are properly assigned to an APC 
in the imaging APC series.

                                      Table 20--Additional Services Requested To Be Reassigned to Non-Imaging APCS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Proposed CY  Proposed CY    CMS response (agree or disagree      Final CY      Final CY
        CPT/ HCPCS code                 Long descriptor           2017 SI      2017 APC             with commenter)               2017 SI      2017 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
36002..........................  Injection procedures (e.g.,             S          5524  Agree..............................            T          5181
                                  thrombin) for percutaneous
                                  treatment of extremity
                                  pseudoaneurysm.
43752..........................  Naso- or oro-gastric tube              Q3          5523  Agree..............................           Q1          5735
                                  placement, requiring
                                  physician's skill and
                                  fluoroscopic guidance
                                  (includes fluoroscopy,
                                  image documentation and
                                  report).
43756..........................  Duodenal intubation and                Q1          5524  Agree..............................           Q1          5301
                                  aspiration, diagnostic,
                                  includes image guidance;
                                  single specimen (e.g., bile
                                  study for crystals or
                                  afferent loop culture).
47531..........................  Injection procedure for                Q2          5524  Agree..............................           Q2          5341
                                  cholangiography,
                                  percutaneous, complete
                                  diagnostic procedure
                                  including imaging guidance
                                  (e.g., ultrasound and/or
                                  fluoroscopy) and all
                                  associated radiological
                                  supervision and
                                  interpretation; existing
                                  access.
62303..........................  Myelography via lumbar                 Q2          5524  Disagree...........................           Q2          5524
                                  injection, including
                                  radiological supervision
                                  and interpretation;
                                  thoracic.
75801..........................  Lymphangiography, extremity            Q2          5524  Agree..............................           Q2          5181
                                  only, unilateral,
                                  radiological supervision
                                  and interpretation.
91200..........................  Liver elastography,                    Q1          5521  Agree..............................           Q1          5721
                                  mechanically induced shear
                                  wave (e.g., vibration),
                                  without imaging, with
                                  interpretation and report.
93982..........................  Noninvasive physiologic                Q1          5521  Agree..............................           Q1          5721
                                  study of implanted wireless
                                  pressure sensor in
                                  aneurysmal sac following
                                  endovascular repair,
                                  complete study including
                                  recording, analysis of
                                  pressure and waveform
                                  tracings, interpretation
                                  and report.
C9733..........................  Non-ophthalmic fluorescent             Q2          5523  Disagree...........................           Q2          5523
                                  vascular angiography.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: One commenter requested that CMS reassign CPT code 91200 
from APC 5521 to APC 5721, and modify the proposed status indicator 
assignment from ``Q1'' (conditionally packaged) to ``S'' (Paid under 
OPPS; separate APC payment.) in order to separately pay for the test 
under all circumstances.
    Response: Although we agree with the commenter regarding the APC 
assignment for clinical similarity purposes, we disagree with the 
commenter regarding the status indicator assignment. The procedure 
described by CPT code 91200 is an ancillary ultrasound diagnostic test, 
not unlike the ultrasound tests that were packaged as a part of our 
ancillary services packaging policy in CY 2015. (We refer readers to 
the CY 2015 OPPS/ASC final rule with comment period (79 FR 66819) for a 
further discussion of the ancillary services packaging policy.) 
Therefore, we are finalizing our proposal, without modification, to 
assign CPT code 91200 to APC 5721, with a status indicator of 
assignment of ``Q1'' for CY 2017.
    Comment: A few commenters requested that CMS modify the status 
indicator assignment for HCPCS code C9733 from ``Q2'' to a separately 
payable status indicator (for example, status indicator ``S''). The 
commenters noted that status indicator ``Q2'' indicates that payment 
for the procedure described by HCPCS code C9733 is conditionally 
packaged when provided in conjunction with other procedures assigned to 
status indicator ``T,'' which are primarily surgical procedures.
    Response: We have responded to this comment in past rules. The 
service described by HCPCS code C9733 is primarily an intraoperative 
imaging service. Therefore, it is conditionally packaged under Sec.  
419.2(b)(14), which packages intraoperative items and services. When 
the procedure described by HCPCS code C9733 is not furnished in 
conjunction with a surgical procedure, then the service is paid 
separately. We believe that the OPPS payments, separate or packaged, 
for surgical procedures in which this test is performed in conjunction 
with (for example, breast reconstruction) are more than adequate to 
cover the cost of the service described by HCPCS code C9733 for 
Medicare beneficiaries in need of this service.
    Comment: One commenter requested that CMS assign three procedures 
from APC 5181 (Level 1 Vascular Procedures) to APC 5182 (Level 2 
Vascular Procedures) because the geometric mean costs of these 
procedures are more

[[Page 79633]]

comparable to the geometric mean cost of APC 5182 than that of APC 
5181:
     CPT code 75731 (Angiography, adrenal, unilateral, 
selective, radiological supervision and interpretation);
     CPT code 75746 (Angiography, pulmonary, by nonselective 
catheter or venous injection, radiological supervision and 
interpretation); and
     CPT code 75810 (Splenoportography, radiological 
supervision and interpretation).
    Response: We disagree with the commenter. Based on the CY 2017 
final rule updated claims data, CPT code 75731 only has one single 
claim, CPT code 75746 only has 5 single claims, and CPT code 75810 only 
has 2 single claims. The number of claims for these services is too low 
upon which to base an APC reassignment for better resource homogeneity. 
Therefore, we are finalizing our proposal, without modification, to 
assign these three procedures to APC 5181.
    After consideration of the public comments we received, we are 
finalizing the proposals, with the modifications as described above in 
the responses to the comments on the restructuring and reorganization 
of the imaging APCs. Table 21 below lists the final seven CY 2017 
imaging APCs (not including the four nuclear medicine APCs). All of 
these APCs are assigned to status indicator ``S,'' although payment for 
some of the procedures assigned to these APCs are conditionally 
packaged and are instead assigned to status indicator ``Q1'' or ``Q2.''

                  Table 21--Final CY 2017 Imaging APCs
------------------------------------------------------------------------
                CY 2017 APC                       CY 2017 APC title
------------------------------------------------------------------------
5521......................................  Level 1 Imaging without
                                             Contrast.
5522......................................  Level 2 Imaging without
                                             Contrast.
5523......................................  Level 3 Imaging without
                                             Contrast.
5524......................................  Level 4 Imaging without
                                             Contrast.
5571......................................  Level 1 Imaging with
                                             Contrast.
5572......................................  Level 2 Imaging with
                                             Contrast.
5573......................................  Level 3 Imaging with
                                             Contrast.
------------------------------------------------------------------------

b. Radiation Oncology (APCs 5092, 5611, and 5627)
    Comment: A few commenters disagreed with CMS' proposed reassignment 
of CPT code 19298 (Placement of radiotherapy afterloading brachytherapy 
catheters (multiple tube and button type) into the breast for 
interstitial radioelement application following (at the time of or 
subsequent to) partial mastectomy, includes imaging guidance) to APC 
5092 (Level 2 Breast/Lymphatic Surgery and Related Procedures), with a 
payment rate of approximately $4,395 for CY 2017. In CY 2016, this code 
is assigned to APC 5093 (Level 3 Breast/Lymphatic Surgery and Related 
Procedures), with a payment rate of approximately $7,558. The 
commenters believed that the previous APC assignment to APC 5093 is 
appropriate and requested that CMS continue to assign CPT code 19298 to 
APC 5093 for CY 2017.
    Response: The geometric mean cost for CPT code 19298 decreased from 
approximately $6,269 in CY 2016 to approximately $5,128 for CY 2017. 
This change prompted the proposed reassignment of this code from the 
Level 3 APC to Level 2. We do not believe that the CY 2017 geometric 
mean cost supports continued assignment to APC 5093. After 
consideration of the public comment we received, we are finalizing our 
proposal, without modification, and reassigning CPT code 19298 to APC 
5092 for CY 2017.
    Comment: A few commenters suggested that CMS reassign CPT codes 
77424 (Intraoperative radiation treatment delivery, x-ray, single 
treatment session) and 77425 (Intraoperative radiation treatment 
delivery, electrons, single treatment session) to an APC in the 
radiation therapy series other than APC 5093 (Level 3 Breast/Lymphatic 
Surgery and Related Procedures) because these radiation treatment 
services are not clinically similar to the breast procedures that are 
assigned to APC 5093.
    Response: We agree with the commenters. The assignment of these 
codes to APC 5093 was intended to be temporary until more claims data 
for these codes was available. Based on these codes being radiation 
treatment delivery codes and their geometric mean costs for CPT codes 
77424 (approximately $8,701) and 77425 (approximately $7,172), we are 
reassigning these services to APC 5627 (Level 7 Radiation Therapy), 
with a geometric mean cost of approximately$7,664. We note that if 
planning and preparation and imaging services are repackaged into the 
single session cranial SRS codes (that are assigned to APC 5627) in the 
future, this could cause the geometric mean cost for the single session 
cranial SRS codes to increase such that it may no longer be appropriate 
to group CPT codes 77424 and 77425 with the single session SRS codes in 
the same APC. However, for CY 2017, APC 5627 is the most appropriate 
APC for CPT codes 77424 and 77425, both clinically and from a resource-
cost perspective. The final payment rate for these codes can be found 
in Addendum B to this final rule with comment period (which is 
available via the Internet on the CMS Web site).
    Comment: A few commenters requested that CMS create a fourth level 
in the Therapeutic Radiation Treatment Preparation APC series and 
assign CPT code 77301 (Intensity modulated radiotherapy plan, including 
dose-volume histograms for target and critical structure partial 
tolerance specifications) to this new APC. The commenters believed that 
the costs from the claims data for CPT code 77301 are lower than the 
actual current costs because the AMA CPT Editorial Panel bundled 
simulation services (that used to be separately coded) into the payment 
for CPT code 77301.
    Response: We prefer to wait for the actual claims data before 
reassigning a code because the cost of a new bundled code is often 
difficult to predict and often the cost of the new bundled code is 
significantly less than the sum of the costs of the individual codes 
that contribute to the bundle. For CY 2017, we are finalizing our 
proposal to reassign CPT code 77301 to APC 5613.
    Comment: A few commenters requested that CMS not reassign CPT codes 
77370, 77280, and 77333 to APC 5611 (Level 1 Therapeutic Radiation 
Treatment Preparation) for CY 2017. These codes are currently assigned 
to the Level 2 Therapeutic Radiation Treatment Preparation APC (APC 
5612) in CY 2016. The payment would decrease from $167 in CY 2016 to 
$117 in CY 2017.
    Response: As we do annually, we examined the APCs in this series. 
We noticed that the difference in the geometric mean costs between 
Level 1 and 2 was not significant. Therefore, we proposed to 
consolidate these two APCs into a single APC and reduce the number of 
levels in the Therapeutic Radiation Treatment Preparation APC series 
from four to three. We believe that this change promotes resource 
homogeneity without excessive granularity with consecutive levels 
having almost the same mean cost. The range of geometric mean costs for 
significant services in the proposed CY 2017 APC 5611 (Level 1 
Therapeutic Radiation Treatment Preparation) is $101 to $197, which 
comports with the 2 times rule. Therefore, we are finalizing this 
proposed APC structure and CPT codes 77370, 77280, and 77333 are 
assigned to APC 5611 for CY 2017.

[[Page 79634]]

7. Skin Substitutes (APCs 5053 through 5055)
    For CY 2017, we proposed to assign skin substitute procedures to 
APCs 5053 through 5055 (Level 3 through 5 Skin Procedures). The cost of 
the procedures is affected by whether the skin substitute product is 
low cost or high cost, the surface area of the wound, and the location 
of the wound.
    Comment: Commenters disagreed with the proposed APC assignments for 
procedures described by HCPCS code C5277 (Application of low cost skin 
substitute graft to face, scalp, eyelids, mouth, neck, ears, orbits, 
genitalia, hands, feet, and/or multiple digits, total wound surface 
area greater than or equal to 100 cm\2\; First 100 cm\2\ wound surface 
area, or 1% of body area of infants and children) to APC 5053 (Level 3 
Skin Procedures) and procedures described by CPT code 15277 
(Application of skin substitute graft to face, scalp, eyelids, mouth, 
neck, ears, orbits, genitalia, hands, feet, and/or multiple digits, 
total wound surface area greater than or equal to 100 cm\2\; First 100 
cm\2\ wound surface area, or 1% of body area of infants and children) 
to APC 5054 (Level 4 Skin Procedures). The commenters stated that the 
proposed payment rates for APC 5053 and APC 5054 do not accurately 
reflect the cost of providing the services described by HCPCS code 
C5277 and CPT code 15277. The commenters further stated that the cost 
of applying a skin substitute product to a larger wound (surface area 
greater than or equal to 100 cm\2\) should be similar, irrespective of 
whether the product is applied to the head, genitalia, hands, or feet 
as compared to the trunk, legs, or arms. The commenters compared the 
differences between procedures described by HCPCS code C5277 and 
procedures described by HCPCS code C5273 (Application of low cost skin 
substitute graft to trunk, arms, legs, total wound surface area greater 
than or equal to 100 cm\2\; First 100 cm\2\ wound surface area, or 1% 
of body area of infants and children). Procedures described by HCPCS 
code C5273 are assigned to APC 5054, which has a higher geometric mean 
cost than APC 5053. The commenters did a similar comparison between 
procedures described by CPT code 15277 and procedures described by CPT 
code 15273 (Application of skin substitute graft to trunk, arms, legs, 
total wound surface area greater than or equal to 100 cm\2\; First 100 
cm\2\ wound surface area, or 1% of body area of infants and children). 
Procedures described by CPT code 15273 are assigned to APC 5055 (Level 
5 Skin Procedures), which has a higher geometric mean cost than APC 
5054. One commenter believed that the low volume of single claims for 
procedures described by HCPCS code C5277 and CPT code 15277 may have 
resulted in inaccurately low geometric mean costs.
    Response: We disagree with the commenters. We reviewed the services 
in both APC 5053 and APC 5054 and found that procedures described by 
HCPCS code C5277 and CPT code 15277 have both clinical and resource 
homogeneity to the other 11 procedures assigned to these two APCs. 
Therefore, there is no justification to assign these procedures to APCs 
with higher geometric mean costs. The final geometric mean cost of 
procedures described by HCPCS code C5277 is approximately $810 (based 
on 26 single claims), which is more comparable to the final geometric 
mean cost of APC 5053 ($466) than the geometric mean cost of APC 5054 
($1,468). Also, regarding the accuracy of the cost data for these 
codes, we again note our longstanding policy provides that, beyond our 
standard OPPS trimming methodology that we apply to those claims that 
have passed various types of claims processing edits, it is not our 
general policy to judge the accuracy of hospital coding and charging 
for purposes of ratesetting. (We refer readers to 75 FR 71838 for a 
detailed discussion.) Therefore, after consideration of the public 
comments we received, we are finalizing our proposal, without 
modification, to assign HCPCS code C5277 to APC 5053 and CPT code 15277 
to APC 5054.
    Comment: Commenters requested that APC 5053 (Level 3 Skin 
Procedures) be divided into two APCs in order to separate more resource 
intensive services using skin substitute products (procedures described 
by HCPCS codes C5271, C5275, and C5277) from other, less resource 
intensive skin procedures. The commenters believed an additional APC 
level within the skin procedures APC series between the current level 3 
and level 4 would more closely reflect the cost of the low cost skin 
substitute application procedures. The commenters also believed that 
the current APC structure incentivizes hospitals to prefer high cost 
skin substitutes over low cost skin substitutes.
    Response: We disagree with the commenters. We do not believe that 
it is necessary to expand the skin procedures APC series to six levels. 
We reviewed the services assigned to APC 5053 and found that all of the 
procedures assigned to the APC have both sufficient clinical and 
resource homogeneity. The highest volume low cost skin substitute 
application procedure, described by HCPCS code C5271 (Application of 
low cost skin substitute graft to trunk, arms, legs, total wound 
surface area up to 100 sq cm; first 25 sq cm or less wound surface 
area), had a final geometric mean cost of $596 (11,256 single claims), 
and the final geometric mean cost of APC 5053 was $466. While the 
geometric mean cost of procedures described by HCPCS code C5271 is 
higher than the geometric mean cost of APC 5053, the difference is well 
within the span of the two times rule.
    In conclusion, we do not believe that there is justification to 
create another level within the skin procedures APC series by dividing 
APC 5053 into two APCs. Therefore, after consideration of the public 
comments we received, we are finalizing our proposal, without 
modification, to maintain the current five levels of skin procedures 
APCs.
8. Urology System Procedures and Services
a. Chemodenervation of the Bladder (APC 5373)
    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we 
proposed to continue to assign CPT code 52287 (Cystourethroscopy, with 
injection(s) for chemodenervation of the bladder) to APC 5373 (Level 3 
Urology and Related Services), with a payment rate of approximately 
$1,642. In addition, we proposed to reassign its status indicator from 
``T'' (Procedure or Service, Multiple Procedure Reduction Applies. Paid 
under OPPS; separate APC payment.) to ``J1'' (Hospital Part B services 
paid through a comprehensive APC) to indicate that all covered Part B 
services on the claim are packaged with the primary ``J1'' service for 
the claim, except for services with OPPS status indicators ``F,'' 
``G,'' ``H,'' ``L,'' and ``U''; ambulance services; diagnostic and 
screening mammography; all preventive services; and certain Part B 
inpatient services.
    We proposed to continue to assign CPT code 52287 to APC 5373 based 
on the claims data used for the proposed rule. Specifically, our 
analysis of the claims data showed a geometric mean cost of 
approximately $2,219 for CPT code 52287 based on 7,464 single claims 
(out of 7,609 total claims), which fits more appropriately in APC 5373, 
whose geometric mean cost is approximately $1,716. We did not propose 
to assign CPT code 52287 to APC 5374 (Level 4 Urology and Related 
Services) because we would have overpaid for the procedure because the 
geometric mean

[[Page 79635]]

cost for this APC is approximately $2,642.
    Comment: One commenter disagreed with the proposed APC assignment 
for CPT code 52287, and requested that CMS reassign the procedure to 
APC 5374. The commenter explained that CPT code 52287 describes a 
procedure that involves the use of the BOTOX[supreg] drug for the 
treatment of overactive bladder (OAB) and detrusor overactivity 
associated with a neurologic condition (NDO). The commenter also stated 
that because of the proposed revision to the code's status indicator 
from ``T'' to ``J1,'' the BOTOX[supreg] used in the procedure would no 
longer be paid separately, whereas in CY 2016 the drug is paid 
separately under HCPCS code J0585 (Injection, onabotulinumtoxin a, 1 
unit). According to the commenter, the resource cost of performing the 
procedure with 200 units of the drug is significantly greater than that 
of furnishing 100 units. Consequently, the commenter stated that the 
payment rate for APC 5373 is inadequate to cover the resource costs 
associated with performing the procedure and furnishing the drug. The 
commenter recommended that CMS reconfigure APCs 5373 and 5374 so that 
all procedures with a geometric mean cost greater than $2,150 are 
assigned to APC 5374, and to reassign CPT code 52287 to APC 5374. 
Alternatively, if CMS does not reassign CPT code 52287 to APC 5374, the 
commenter suggested that CMS establish a complexity adjustment for 
those procedures that involve a dose of 200 units of BOTOX[supreg].
    Response: We believe that APC 5373 is the most appropriate APC 
assignment for CPT code 52287 based on its resource and clinical 
homogeneity to the other procedures within the APC. Based on updated CY 
2015 claims data for this final rule with comment period, the range of 
geometric mean costs for significant procedures assigned to APC 5373 is 
between $1,175 and $2,275. The geometric mean cost of $2,196 for CPT 
code 52287 is within this range. We do not believe that it would be 
appropriate to assign CPT code 52287 to APC 5374, whose geometric mean 
cost is approximately $2,613.
    With respect to the issue of the drug cost, the payment for the 
BOTOX[supreg] drug is included in the payment for the procedure 
described by CPT code 52287. As stated in section II.A.2.c. of this 
final rule with comment period, the payment for procedures assigned to 
a ``J1'' status indicator include all drugs, biologicals, and 
radiopharmaceuticals, regardless of cost, except those drugs with pass-
through payment status and those drugs that are usually self-
administered (SADs), unless they function as packaged supplies (78 FR 
74868 through 74869, 74909, and 79 FR 66800).
    On the issue of a complexity adjustment, as listed in Addendum J of 
the CY 2017 OPPS/ASC proposed rule, specifically, in the ``Complexity 
Adjustments'' tab of the Excel file, we proposed to reassign CPT code 
52287 to a complexity adjustment APC. In particular, we proposed to 
assign CPT code 52287 to APC 5374 when the procedure is performed in 
conjunction with other procedures during the same hospital stay that 
meet the complexity adjustment criteria discussed in section II.A.2.c. 
of this final rule with comment period.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to assign CPT code 52287 
to APC 5373 for CY 2017. The final status indicator and APC assignments 
and payment rate for this code, where applicable, can be found in 
Addendum B to this final rule with comment period (which is available 
via the Internet on the CMS Web site). The list of the complexity 
adjustments for add-on code combinations for CY 2017, along with all of 
the other complexity adjustments, can be found in Addendum J to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site). Addendum J to this final rule with comment period 
also contains the summary cost statistics for each of the code 
combinations that describe a complex code combination that will qualify 
for a complexity adjustment and will be reassigned to the next higher 
cost C-APC within the clinical family.
b. Temporary Prostatic Urethral Stent (APC 5373)
    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we 
proposed to continue to assign CPT code 53855 (Insertion of a temporary 
prostatic urethral stent, including urethral measurement) to APC 5372 
(Level 2 Urology and Related Services), with a payment rate of 
approximately $561.
    Comment: One commenter disagreed with the proposed assignment of 
CPT code 53855 to APC 5372. The commenter believed that the proposed 
payment rate of approximately $561 for APC 5372 is inadequate to cover 
the cost of providing the service. The commenter stated that the 
payment rate of approximately $1,642 for APC 5373 better supports the 
resource costs and clinical characteristics associated with the 
procedure described by CPT code 53855 and recommended that CMS reassign 
the CPT code to this APC for CY 2017.
    Response: Based on our analysis of the updated CY 2015 hospital 
outpatient claims used for this final rule with comment period, we 
agree with the commenter. Our claims data showed a geometric mean cost 
of approximately $1,860 for CPT code 53855 based on 31 single claims 
(out of 31 total claims), which is similar to the geometric mean cost 
of approximately $1,691 for APC 5373.
    After consideration of the public comment we received, we are 
modifying our proposal and assigning CPT code 53855 to APC 5373 for CY 
2017. The final CY 2017 payment rate for this procedure can be found in 
Addendum B to this CY 2017 OPPS/ASC final rule with comment period 
(which is available via the Internet on the CMS Web site).
c. Transprostatic Urethral Implant Procedure (TUIP) (APCs 5375 and 
5376)
    Currently, there are four procedure codes that describe 
transprostatic urethral implant procedures, specifically, HCPCS codes 
C9739 and C9740, and CPT codes 52441 and 52442. As shown in Table 22 
below, and as listed in Addendum B of the CY 2017 OPPS/ASC proposed 
rule, we proposed to continue to assign HCPCS code C9739 to APC 5375 
(Level 5 Urology and Related Services). We also proposed to reassign 
HCPCS code C9740 from New Technology APC 1565 (New Technology--Level 28 
($5001-$5500)) to APC 5376 (Level 6 Urology and Related Services), and 
to reassign the status indicator for HCPCS code C9740 from ``T'' to 
``J1.'' In addition, we proposed to continue to assign CPT codes 52441 
and 52442 to status indicator ``B'' to indicate that these codes are 
not recognized by OPPS when submitted on a hospital outpatient Part B 
bill type (12x and 13x). As we discussed in the CY 2015 OPPS/ASC final 
rule with comment period (79 FR 66853 through 66854), we do not 
recognize CPT codes 52441 and 52442 because the code descriptors do not 
accurately capture the number of implants typically provided in a 
hospital outpatient or ASC setting.

[[Page 79636]]



         Table 22--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Transprostatic Urethral Implant Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                                                                                                       CY 2016    Proposed  CY    Proposed     CY 2017
            CPT/HCPCS code                      Long descriptors          CY 2016 OPPS    CY 2016        OPPS      2017  OPPS     CY 2017        OPPS
                                                                               SI         OPPS APC     payment         SI         OPPS APC     payment
                                                                                                         rate                                    rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
C9739................................  Cystourethroscopy, with insertion           J1          5375    $3,393.73           J1          5375    $3,460.41
                                        of transprostatic implant; 1 to
                                        3 implants.
C9740................................  Cystourethroscopy, with insertion            T          1565     5,250.00           J1          5376     7,389.67
                                        of transprostatic implant; 4 or
                                        more implants.
52441................................  Cystourethroscopy, with insertion            B           N/A          N/A            B           N/A          N/A
                                        of permanent adjustable
                                        transprostatic implant; single
                                        implant.
52442................................  Cystourethroscopy, with insertion            B           N/A          N/A            B           N/A          N/A
                                        of permanent adjustable
                                        transprostatic implant; each
                                        additional permanent adjustable
                                        transprostatic implant (list
                                        separately in addition to code
                                        for primary procedure).
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: One commenter expressed concern with the proposed 
reassignment of HCPCS code C9740 to APC 5376. The commenter stated that 
the reassignment may not be aligned with the current clinical 
homogeneity of other procedures assigned to APC 5376 because the 
procedure described by HCPCS code C9740 is performed through a natural 
orifice (urethra) and can be performed with local anesthesia. To ensure 
clinical homogeneity within APC 5376, the commenter requested that CMS 
reevaluate the appropriate APC assignment for HCPCS code C9740.
    Response: As we do every year, we review the APC assignments for 
all services and items paid under the OPPS. Based on resource and 
clinical homogeneity, we believe that HCPCS code C9740 is more 
appropriately assigned to the Urology and Related Services APC series. 
We reviewed the procedures assigned to the Urology and Related Services 
APCs and, based on its resource cost and clinical homogeneity, we 
determined that HCPCS code C9740 most appropriately aligns with the 
other procedures in the Level 6 APC within the Urology and Related 
Services APC grouping.
    For the proposed rule, our claims data showed a geometric mean cost 
of approximately $6,312 for HCPCS code C9740 based on 585 single claims 
(out of 606 total claims), which is relatively similar to the geometric 
mean cost of approximately $7,723 for APC 5376. We believe that neither 
APC 5375 (Level 5 Urology and Related Services), whose geometric mean 
cost is approximately $3,617 or APC 5377 (Level 7 Urology and Related 
Services), whose geometric mean cost is approximately $15,377, would 
have been appropriate APC assignments. When compared to the geometric 
mean cost of $6,312 for HCPCS code C9740, an APC assignment to APC 5375 
would underpay for the procedure, while an APC assignment to APC 5377 
would overpay for the service. For the final rule with comment period, 
our updated claims data showed a similar pattern. Specifically, our 
analysis showed a geometric mean cost of approximately $6,167 for HCPCS 
code C9740 based on 691 single claims (out of 701 total claims), which 
is comparable to the geometric mean cost of approximately $7,661 for 
APC 5376. We believe that an APC assignment to either APC 5375, whose 
geometric mean cost is approximately $3,581 or APC 5377, whose 
geometric mean cost is approximately $14,764, would be inappropriate. 
Based on the updated claims data for the final rule with comment 
period, we believe that APC 5376 is the most appropriate APC assignment 
for HCPCS code C9740 based on its clinical homogeneity and resource 
cost compared to the other procedures within this APC.
    Comment: Several commenters agreed with CMS' proposal to continue 
to assign HCPCS code C9739 to APC 5375 and to reassign HCPCS code C9740 
to APC 5376 for CY 2017. The commenters requested that CMS finalize the 
proposal.
    Response: We appreciate the commenters' support. After 
consideration of the public comments we received, we are adopting as 
final, without modification, the proposed APC and status indicator 
assignments for HCPCS codes C9739 and C9740, and CPT codes 52441 and 
52442 for CY 2017. Table 23 below lists the final status indicator and 
APC assignments and payment rates for the transprostatic urethral 
implant procedures for CY 2017. We refer readers to Addendum B of this 
final rule with comment period for the payment rates for all codes 
reportable under the OPPS. Addendum B is available via the Internet on 
the CMS Web site.

           Table 23--Final CY 2017 Status Indicator (SI), APC Assignments and Payment Rates for the Transprostatic Urethral Implant Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016                                 Final CY
                                                                          CY 2016 OPPS    CY 2016        OPPS       Final  CY    Final  CY    2017  OPPS
            CPT/HCPCS code                      Long descriptors               SI         OPPS APC     payment     2017  OPPS    2017  OPPS    payment
                                                                                                         rate          SI           APC          rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
C9739................................  Cystourethroscopy, with insertion           J1          5375    $3,393.73           J1          5375    $3,482.54
                                        of transprostatic implant; 1 to
                                        3 implants.

[[Page 79637]]

 
C9740................................  Cystourethroscopy, with insertion            T          1565     5,250.00           J1          5376     7,449.52
                                        of transprostatic implant; 4 or
                                        more implants.
52441................................  Cystourethroscopy, with insertion            B           N/A          N/A            B           N/A          N/A
                                        of permanent adjustable
                                        transprostatic implant; single
                                        implant.
52442................................  Cystourethroscopy, with insertion            B           N/A          N/A            B           N/A          N/A
                                        of permanent adjustable
                                        transprostatic implant; each
                                        additional permanent adjustable
                                        transprostatic implant (list
                                        separately in addition to code
                                        for primary procedure).
--------------------------------------------------------------------------------------------------------------------------------------------------------

9. Other Procedures and Services
a. Cryoablation Procedures (APCs 5114, 5361, 5362, and 5432)
    As part of our standard annual OPPS update process, we review each 
APC assignment for the clinical similarity and resource homogeneity of 
the procedures assigned to each APC. Based on our analysis of the 
hospital outpatient claims data used for the proposed rule, we made 
some modifications to the APC assignments of certain cryoablation 
procedures. Specifically, for the CY 2017 OPPS update, we proposed to 
delete APC 5352 (Level 2 Percutaneous Abdominal/Biliary Procedures and 
Related Procedures), and reassign the cryoablation procedures that were 
previously assigned to this APC to APC 5361 (Level 1 Laparoscopy and 
Related Services). As shown in Table 24 below, and as listed in 
Addendum B of the CY 2017 OPPS/ASC proposed rule, we proposed to 
reassign CPT codes 20983, 47383, 50593, and 0340T from APC 5352 to APC 
5361. Through our continuing efforts to simplify the APCs through 
consolidation and to improve clinical and resource homogeneity for the 
APCs, we believe that these cryoablation procedures that were 
previously assigned to APC 5352 would be more appropriately assigned to 
APC 5361 based on their geometric mean costs for the CY 2017 OPPS 
update. Further, we believe that the proposed revision appropriately 
categorized these cryoablation procedures in APC 5361 based on clinical 
coherence and resource costs compared to the other procedures in the 
same APC.

                Table 24--Proposed CY 2017 Status Indicators (SI), APC Assignments, and Payment Rates for Certain Cryoablation Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                                                                                                       CY 2016    Proposed  CY    Proposed     CY 2017
            CPT/HCPCS code                      Long descriptors          CY 2016 OPPS    CY 2016        OPPS      2017  OPPS     CY 2017        OPPS
                                                                               SI         OPPS APC     payment         SI         OPPS APC     payment
                                                                                                         rate                                    rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
20983................................  Ablation therapy for reduction or            T          5352    $4,118.23           J1          5361    $4,178.33
                                        eradication of 1 or more bone
                                        tumors (e.g., metastasis)
                                        including adjacent soft tissue
                                        when involved by tumor
                                        extension, percutaneous,
                                        including imaging guidance when
                                        performed; cryoablation.
47383................................  Ablation, 1 or more liver                    T          5352     4,118.23           J1          5361     4,178.33
                                        tumor(s), percutaneous,
                                        cryoablation.
50593................................  Ablation, renal tumor(s),                    T          5352     4,118.23           J1          5361     4,178.33
                                        unilateral, percutaneous,
                                        cryotherapy.
0340T................................  Ablation, pulmonary tumor(s),                T          5352     4,118.23           J1          5361     4,178.33
                                        including pleura or chest wall
                                        when involved by tumor
                                        extension, percutaneous,
                                        cryoablation, unilateral,
                                        includes imaging guidance.
0440T................................  Ablation, percutaneous,                     J1          5361     4,001.15           J1          5361     4,178.33
                                        cryoablation, includes imaging
                                        guidance; upper extremity distal/
                                        peripheral nerve.
0441T................................  Ablation, percutaneous,                     J1          5361     4,001.15           J1          5361     4,178.33
                                        cryoablation, includes imaging
                                        guidance; lower extremity distal/
                                        peripheral nerve.

[[Page 79638]]

 
0442T................................  Ablation, percutaneous,                      T          5352     4,118.23           J1          5361     4,178.33
                                        cryoablation, includes imaging
                                        guidance; nerve plexus or other
                                        truncal nerve (e.g., brachial
                                        plexus, pudendal nerve).
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: One commenter expressed concern with the proposed 
assignment of the kidney, lung, liver, bone and nerve cryoablation 
procedures, specifically, the procedure codes listed in Table 24, to 
APC 5361. The commenter stated that APC 5361 does not appropriately 
reflect the clinical nature of the procedures and inadequately 
recognizes the resources needed to perform the services. The commenter 
further stated that reassigning the procedures previously assigned to 
APC 5361 results in a lack of clinical coherence because the APC would 
include various diagnostic and therapeutic procedures that consist of a 
wide range of anatomic systems with disparate costs. Consequently, the 
commenter urged CMS to reevaluate the APC assignments for the 
cryoablation procedures listed in Table 24, and suggested that CMS 
either create a new APC that includes both the cryoablation and 
radiofrequency ablation procedures, or reassign the procedures to APCs 
that groups the ablation procedures with other clinically similar 
procedures.
    Response: We reviewed the updated CY 2015 hospital outpatient 
claims data used for this final rule with comment period. Based on our 
review, we agree with the commenter that some of these procedures 
should be reassigned to more appropriate APCs. First, although we have 
no claims data for CPT codes 0440T, 0441T, and 0442T because these 
codes are new for CY 2016, we believe that these procedures more 
appropriately align, based on clinical characteristics, with the 
procedures in APC 5432 (Level 2 Nerve Procedures). Therefore, we are 
reassigning CPT codes 0440T, 0441T, and 0442T to APC 5432 for CY 2017. 
Secondly, based on our analysis, we found a geometric mean of 
approximately $5,416 for CPT code 20983 based on 98 single claims (out 
of 100 total claims), which is similar to the geometric mean of 
approximately $5,367 for APC 5114. Therefore, we are reassigning CPT 
code 20983 to APC 5114. In addition, we found a geometric mean cost of 
approximately $5,944 for CPT code 50593 based on 1,811 single claims 
(out of 1,823 total claims). Furthermore, a high percentage of CPT code 
50593 cases were complexity adjusted to APC 5362 in the proposed rule. 
Given that the geometric mean cost of CPT code 50593 is at the very top 
of the geometric mean cost range for APC 5361 and the need for a 
complexity adjustment for many of the cases into APC 5362, we are 
reassigning CPT code 50593 to APC 5362 for CY 2017. In addition, our 
analysis of the final rule with comment period data showed a geometric 
mean costs for CPT codes 0340T (approximately $5,519) and 47383 
(approximately $5,178) indicates that the proposed rule assignment to 
APC 5361 for these cryoablation procedures is appropriate because their 
geometric mean costs are closer to the geometric mean cost of APC 5361 
(approximately $4,316) than to the geometric mean cost of APC 5362 
(approximately $7,164).
    After consideration of the public comment we received, we are 
adopting as final, without modification, the proposal to assign CPT 
codes 0340T and 47383 to APC 5361. However, we are modifying our 
proposal and reassigning CPT codes 0440T, 0441T, 0442T, 20983, and 
50593 to the final APCs listed in Table 25 below. Table 25 shows the 
final status indicator, APC assignments, and payment rates for the 
cryoablation procedures for CY 2017. We refer readers to Addendum B of 
this final rule with comment period for the payment rates for all codes 
reportable under the OPPS. Addendum B is available via the Internet on 
the CMS Web site.

                  Table 25--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for Certain Cryoablation Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016                                Final  CY
                                                                             CY 2016      CY 2016        OPPS       Final  CY    Final  CY    2017  OPPS
            CPT/HCPCS code                      Long descriptors             OPPS SI      OPPS APC     payment     2017  OPPS    2017  OPPS    payment
                                                                                                         rate          SI           APC          rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
20983................................  Ablation therapy for reduction or            T          5352    $4,118.23           J1          5114    $5,219.36
                                        eradication of 1 or more bone
                                        tumors (e.g., metastasis)
                                        including adjacent soft tissue
                                        when involved by tumor
                                        extension, percutaneous,
                                        including imaging guidance when
                                        performed; cryoablation.
47383................................  Ablation, 1 or more liver                    T          5352     4,118.23           J1          5361     4,197.36
                                        tumor(s), percutaneous,
                                        cryoablation.
50593................................  Ablation, renal tumor(s),                    T          5352     4,118.23           J1          5362     6,966.89
                                        unilateral, percutaneous,
                                        cryotherapy.

[[Page 79639]]

 
0340T................................  Ablation, pulmonary tumor(s),                T          5352     4,118.23           J1          5361     4,197.36
                                        including pleura or chest wall
                                        when involved by tumor
                                        extension, percutaneous,
                                        cryoablation, unilateral,
                                        includes imaging guidance.
0440T................................  Ablation, percutaneous,                     J1          5361     4,001.15           J1          5432     4,150.11
                                        cryoablation, includes imaging
                                        guidance; upper extremity distal/
                                        peripheral nerve.
0441T................................  Ablation, percutaneous,                     J1          5361     4,001.15           J1          5432     4,150.11
                                        cryoablation, includes imaging
                                        guidance; lower extremity distal/
                                        peripheral nerve.
0442T................................  Ablation, percutaneous,                      T          5352     4,118.23           J1          5432     4,150.11
                                        cryoablation, includes imaging
                                        guidance; nerve plexus or other
                                        truncal nerve (e.g., brachial
                                        plexus, pudendal nerve).
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Comprehensive Dialysis Circuit Procedures (APCs 5181, 5192, and 
5193)
    For CY 2017, the AMA CPT Editorial Panel deleted CPT codes 36147 
and 36148 and replaced them with nine new codes, effective January 1, 
2017. Table 26 below list the complete descriptors for the deleted and 
replacement codes. We note that the deleted and replacement codes were 
listed in Addendum B and Addendum O to the CY 2017 OPPS/ASC proposed 
rule. Addendum B listed the proposed status indicator assignments for 
the replacement codes and assigned them to comment indicator ``NP'' 
(New code for the next calendar year or existing code with substantial 
revision to its code descriptor in the next calendar year as compared 
to current calendar year, proposed APC assignment; comments will be 
accepted on the proposed APC assignment for the new code.), while 
Addendum O listed the placeholder/proposed CY 2017 CPT codes and their 
long descriptors.

 Table 26--Coding Changes for the Dialysis Circuit Procedures Effective
                             January 1, 2017
------------------------------------------------------------------------
 Placeholder/ proposed    Final CY 2017  CPT
   CY 2017 CPT code              code               Long descriptors
------------------------------------------------------------------------
36147.................  36147.................  Introduction of needle
                                                 and/or catheter,
                                                 arteriovenous shunt
                                                 created for dialysis
                                                 (graft/fistula);
                                                 initial access with
                                                 complete radiological
                                                 evaluation of dialysis
                                                 access, including
                                                 fluoroscopy, image
                                                 documentation and
                                                 report (includes access
                                                 of shunt, injection[s]
                                                 of contrast, and all
                                                 necessary imaging from
                                                 the arterial
                                                 anastomosis and
                                                 adjacent artery through
                                                 entire venous outflow
                                                 including the inferior
                                                 or superior vena cava.
36148.................  36148.................  Introduction of needle
                                                 and/or catheter,
                                                 arteriovenous shunt
                                                 created for dialysis
                                                 (graft/fistula);
                                                 additional access for
                                                 therapeutic
                                                 intervention (list
                                                 separately in addition
                                                 to code for primary
                                                 procedure).
369X1.................  36901.................  Introduction of
                                                 needle(s) and/or
                                                 catheter(s), dialysis
                                                 circuit, with
                                                 diagnostic angiography
                                                 of the dialysis
                                                 circuit, including all
                                                 direct puncture(s) and
                                                 catheter placement(s),
                                                 injection(s) of
                                                 contrast, all necessary
                                                 imaging from the
                                                 arterial anastomosis
                                                 and adjacent artery
                                                 through entire venous
                                                 outflow including the
                                                 inferior or superior
                                                 vena cava, fluoroscopic
                                                 guidance, radiological
                                                 supervision and
                                                 interpretation and
                                                 image documentation and
                                                 report.
369X2.................  36902.................  Introduction of
                                                 needle(s) and/or
                                                 catheter(s), dialysis
                                                 circuit, with
                                                 diagnostic angiography
                                                 of the dialysis
                                                 circuit, including all
                                                 direct puncture(s) and
                                                 catheter placement(s),
                                                 injection(s) of
                                                 contrast, all necessary
                                                 imaging from the
                                                 arterial anastomosis
                                                 and adjacent artery
                                                 through entire venous
                                                 outflow including the
                                                 inferior or superior
                                                 vena cava, fluoroscopic
                                                 guidance, radiological
                                                 supervision and
                                                 interpretation and
                                                 image documentation and
                                                 report; with
                                                 transluminal balloon
                                                 angioplasty, peripheral
                                                 dialysis segment,
                                                 including all imaging
                                                 and radiological
                                                 supervision and
                                                 interpretation
                                                 necessary to perform
                                                 the angioplasty.
369X3.................  36903.................  Introduction of
                                                 needle(s) and/or
                                                 catheter(s), dialysis
                                                 circuit, with
                                                 diagnostic angiography
                                                 of the dialysis
                                                 circuit, including all
                                                 direct puncture(s) and
                                                 catheter placement(s),
                                                 injection(s) of
                                                 contrast, all necessary
                                                 imaging from the
                                                 arterial anastomosis
                                                 and adjacent artery
                                                 through entire venous
                                                 outflow including the
                                                 inferior or superior
                                                 vena cava, fluoroscopic
                                                 guidance, radiological
                                                 supervision and
                                                 interpretation and
                                                 image documentation and
                                                 report; with
                                                 transcatheter placement
                                                 of intravascular
                                                 stent(s) peripheral
                                                 dialysis segment,
                                                 including all imaging
                                                 and radiological
                                                 supervision and
                                                 interpretation
                                                 necessary to perform
                                                 the stenting, and all
                                                 angioplasty within the
                                                 peripheral dialysis
                                                 segment.
369X4.................  36904.................  Percutaneous
                                                 transluminal mechanical
                                                 thrombectomy and/or
                                                 infusion for
                                                 thrombolysis, dialysis
                                                 circuit, any method,
                                                 including all imaging
                                                 and radiological
                                                 supervision and
                                                 interpretation,
                                                 diagnostic angiography,
                                                 fluoroscopic guidance,
                                                 catheter placement(s),
                                                 and intraprocedural
                                                 pharmacological
                                                 thrombolytic
                                                 injection(s).

[[Page 79640]]

 
369X5.................  36905.................  Percutaneous
                                                 transluminal mechanical
                                                 thrombectomy and/or
                                                 infusion for
                                                 thrombolysis, dialysis
                                                 circuit, any method,
                                                 including all imaging
                                                 and radiological
                                                 supervision and
                                                 interpretation,
                                                 diagnostic angiography,
                                                 fluoroscopic guidance,
                                                 catheter placement(s),
                                                 and intraprocedural
                                                 pharmacological
                                                 thrombolytic
                                                 injection(s); with
                                                 transluminal balloon
                                                 angioplasty, peripheral
                                                 dialysis segment,
                                                 including all imaging
                                                 and radiological
                                                 supervision and
                                                 interpretation
                                                 necessary to perform
                                                 the angioplasty.
369X6.................  36906.................  Percutaneous
                                                 transluminal mechanical
                                                 thrombectomy and/or
                                                 infusion for
                                                 thrombolysis, dialysis
                                                 circuit, any method,
                                                 including all imaging
                                                 and radiological
                                                 supervision and
                                                 interpretation,
                                                 diagnostic angiography,
                                                 fluoroscopic guidance,
                                                 catheter placement(s),
                                                 and intraprocedural
                                                 pharmacological
                                                 thrombolytic
                                                 injection(s); with
                                                 transcatheter placement
                                                 of an intravascular
                                                 stent(s), peripheral
                                                 dialysis segment,
                                                 including all imaging
                                                 and radiological
                                                 supervision and
                                                 interpretation
                                                 necessary to perform
                                                 the stenting, and all
                                                 angioplasty within the
                                                 peripheral dialysis
                                                 circuit.
369X7.................  36907.................  Transluminal balloon
                                                 angioplasty, central
                                                 dialysis segment,
                                                 performed through
                                                 dialysis circuit,
                                                 including all imaging
                                                 and radiological
                                                 supervision and
                                                 interpretation required
                                                 to perform the
                                                 angioplasty (List
                                                 separately in addition
                                                 to code for primary
                                                 procedure).
369X8.................  36908.................  Transcatheter placement
                                                 of an intravascular
                                                 stent(s), central
                                                 dialysis segment,
                                                 performed through
                                                 dialysis circuit,
                                                 including all imaging
                                                 radiological
                                                 supervision and
                                                 interpretation required
                                                 to perform the
                                                 stenting, and all
                                                 angioplasty in the
                                                 central dialysis
                                                 segment (List
                                                 separately in addition
                                                 to code for primary
                                                 procedure).
369X9.................  36909.................  Dialysis circuit
                                                 permanent vascular
                                                 embolization or
                                                 occlusion (including
                                                 main circuit or any
                                                 accessory veins),
                                                 endovascular, including
                                                 all imaging and
                                                 radiological
                                                 supervision and
                                                 interpretation
                                                 necessary to complete
                                                 the intervention (List
                                                 separately in addition
                                                 to code for primary
                                                 procedure).
------------------------------------------------------------------------

    As shown in Table 27 below, and as listed in Addendum B of the CY 
2017 OPPS/ASC proposed rule, we proposed to package payment for some of 
these new CY 2017 CPT codes and to also assign the procedures to APC 
5181 (Level 1 Vascular Procedures), 5192 (Level 2 Endovascular 
Procedures), 5193 (Level 3 Endovascular Procedures), or 5194 (Level 2 
Endovascular Procedures). Specifically, we proposed to assign CPT code 
369X1 (CY 2017 CPT code 36901) to APC 5181, CPT codes 396X2 (CY 2017 
CPT code 36902) and 369X4 (CY 2017 CPT code 36904) to APC 5192, CPT 
codes 396X3 (CY 2017 CPT code 36903) and 369X5 (CY 2017 CPT code 36905) 
to APC 5193, and CPT code 369X6 (CY 2017 CPT code 36906) to APC 5194. 
In addition, we proposed to assign CPT codes 369X7 (CY 2017 CPT code 
36907), 369X8 (CY 2017 CPT code 36908), and 369X9 (CY 2017 CPT code 
36909) to status indicator ``N'' (Items and Services Packaged into APC 
Rates) to indicate that these service are paid under OPPS. However, 
their payment is packaged into the payment for other services.

                Table 27--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Dialysis Circuit Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                                                                                                           CY 2016     Proposed    Proposed     CY 2017
  Proposed  CY 2017  CPT       CY 2017  CPT code          Short descriptors       CY 2016      CY 2016      OPPS       CY 2017      CY 2017      OPPS
           code                                                                   OPPS SI     OPPS APC     payment     OPPS SI     OPPS  APC    payment
                                                                                                            rate                                 rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
36147....................  36147....................  Access av dial grft for            T         5181    *$862.51           D          N/A         N/A
                                                       eval.
36148....................  36148....................  Access av dial grft for            N          N/A         N/A           D          N/A         N/A
                                                       proc.
369X1....................  36901....................  Intro cath dialysis              N/A          N/A         N/A           T         5181     $867.68
                                                       circuit.
369X2....................  36902....................  Intro cath dialysis              N/A          N/A         N/A          J1         5192    4,800.45
                                                       circuit.
369X3....................  36903....................  Intro cath dialysis              N/A          N/A         N/A          J1         5193    9,726.54
                                                       circuit.
369X4....................  36904....................  Thrmbc/nfs dialysis              N/A          N/A         N/A          J1         5192    4,800.45
                                                       circuit.
369X5....................  36905....................  Thrmbc/nfs dialysis              N/A          N/A         N/A          J1         5193    9,726.54
                                                       circuit.
369X6....................  36906....................  Thrmbc/nfs dialysis              N/A          N/A         N/A          J1         5194   14,511.21
                                                       circuit.
369X7....................  36907....................  Balo angiop ctr dialysis         N/A          N/A         N/A           N          N/A         N/A
                                                       seg.
369X8....................  36908....................  Stent plmt ctr dialysis          N/A          N/A         N/A           N          N/A         N/A
                                                       seg.
369X9....................  36909....................  Dialysis circuit embolj.         N/A          N/A         N/A           N          N/A         N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: One commenter agreed with the proposed APC assignments for 
CPT codes 36902, 36903, 36905, and 36906, and requested that CMS 
finalize the proposal. However, this commenter disagreed with the 
proposed APC assignment for CPT code 36904 and the proposed status 
indicator assignment for CPT codes 36907, 36908, and 36909. In 
particular, the commenter believed that the proposed assignment of APC 
5192 fails to reflect the clinical complexity and resource costs 
associated with performing the procedure described by CPT code 36904. 
The commenter recommended that CMS assign CPT code 36904 to APC 5193 
based on its clinical and resource homogeneity to the other procedures 
in this APC. In addition, the commenter disagreed with the packaging of 
payment for services described by CPT codes 36907, 36908, and 36909 
because these procedures involve substantial device costs. As an 
interim measure, the commenter recommended that the procedure codes be 
assigned to New Technology APC 1564 (New Technology--Level 27 ($4501-
$5000), with a status indicator of ``S'' (Procedure or Service, Not 
Discounted When Multiple. Paid under OPPS; separate APC payment.), 
until sufficient claims data is available on which to base assignment 
of the new codes to a more appropriate clinical APC. If CMS continued 
to believe that

[[Page 79641]]

the New Technology APC assignment is inappropriate, the commenter urged 
CMS to create a composite APC for the dialysis circuit CPT codes.
    Response: We appreciate the commenter's support for the proposed 
APC assignments for CPT codes 36902, 36903, 36905, and 36906. We are 
finalizing our proposal for these codes. However, with respect to the 
proposed assignment of CPT code 36904, we believe that, based on its 
similarity to the other procedures in APC 5192, and a comparison to 
other codes in this series we believe that APC 5192 is the most 
appropriate APC for this procedure. In addition, because CPT codes 
36907, 36908, and 36909 are add-on codes, we assigned these codes to a 
status indicator that indicates packaged payment status. Because of our 
packaging policy for add-on codes, we would not consider these codes 
for a composite APC. We note that since January 1, 2014, payment for 
services described by add-on codes have been packaged under the 
hospital OPPS. As we do every year for all items and services under 
OPPS, we will reevaluate the APC assignments for these services in the 
CY 2018 OPPS rulemaking.
    In summary, after consideration of the public comment received, we 
are finalizing our proposal, without modification, to assign the 
dialysis circuit procedures to the APC and status indicators listed in 
Table 28 below. Table 28 shows the final status indicator, APC 
assignments, and payment rates for the dialysis circuit services for CY 
2017. We refer readers to Addendum B of this final rule with comment 
period for the payment rates for all codes reportable under the OPPS. 
Addendum B is available via the Internet on the CMS Web site.

                  Table 28--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Dialysis Circuit Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           CY 2016                             Final  CY
  Proposed  CY 2017  CPT                                                          CY 2016      CY 2016      OPPS      Final  CY    Final  CY  2017  OPPS
           code             Final  CY 2017  CPT code      Short descriptors       OPPS SI     OPPS APC     payment    2017  OPPS  2017  OPPS    payment
                                                                                                            rate          SI          APC        rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
36147....................  36147....................  Access av dial grft for            T         5181     $862.51           D   ..........  ..........
                                                       eval.
36148....................  36148....................  Access av dial grft for            N   ..........  ..........           D   ..........  ..........
                                                       proc.
369X1....................  36901....................  Intro cath dialysis       ...........  ..........  ..........           T         5181     $683.84
                                                       circuit.
369X2....................  36902....................  Intro cath dialysis       ...........  ..........  ..........          J1         5192    4,823.16
                                                       circuit.
369X3....................  36903....................  Intro cath dialysis       ...........  ..........  ..........          J1         5193    9,748.31
                                                       circuit.
369X4....................  36904....................  Thrmbc/nfs dialysis       ...........  ..........  ..........          J1         5192    4,823.16
                                                       circuit.
369X5....................  36905....................  Thrmbc/nfs dialysis       ...........  ..........  ..........          J1         5193    9,748.31
                                                       circuit.
369X6....................  36906....................  Thrmbc/nfs dialysis       ...........  ..........  ..........          J1         5194   14,775.90
                                                       circuit.
369X7....................  36907....................  Balo angiop ctr dialysis  ...........  ..........  ..........           N          N/A         N/A
                                                       seg.
369X8....................  36908....................  Stent plmt ctr dialysis   ...........  ..........  ..........           N          N/A         N/A
                                                       seg.
369X9....................  36909....................  Dialysis circuit embolj.  ...........  ..........  ..........           N          N/A         N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Blood Product Exchange and Related Services (APCs 5241 and 5242)
    For CY 2017, we proposed to assign CPT code 36456 (Partial exchange 
transfusion, blood, plasma or crystalloid necessitating the skill of a 
physician or other qualified health care professional, newborn) 
(described as code 364X1 in the proposed rule) to APC 5241 (Level 1 
Blood Product Exchange and Related Services), with a proposed mean 
geometric mean cost of approximately $364.
    Comment: One commenter disagreed with the CMS proposal to assign 
CPT code 36456 to APC 5241. The commenter stated that APC 5182 (Level 2 
Vascular Procedures) is a more appropriate APC assignment because of 
the clinical similarity and similar resource intensity to other 
services assigned to APC 5182.
    Response: We disagree with the commenter's statement. We do not 
believe that the procedure described by CPT code 36456 is comparable to 
the services in APC 5182 in terms of resource intensity or clinical 
similarity. We do believe that CPT code 36456 is similar to the other 
services assigned to APC 5241, such as CPT code 36450 (Exchange 
transfusion, blood; newborn). When claims data become available for 
this new code, we will consider if assignment to another APC is 
appropriate. After consideration of the public comment we received, we 
are finalizing our proposal to assign CPT code 36456 to APC 5241.
    Comment: For CY 2017, we proposed to assign CPT codes 38230 (Bone 
marrow harvesting for transplantation; allogeneic), 38241 
(Hematopoietic progenitor cell (HPC); autologous transplantation, 38242 
(Allogeneic lymphocyte infusions) and 38243 (HPC Boost) to APC 5242 
(Level 2 Blood Product Exchange and Related Services). This APC has a 
proposed CY 2017 geometric mean cost of approximately $1,129. One 
commenter stated that the proposed payment rate of approximately $1,078 
for this APC was a 66 percent decrease in payment from the final CY 
2016 payment rate. The commenter also noted that the services in this 
APC were not likely to be submitted on a single procedure claim and, as 
a result, the CMS ratesetting methodology may be based on incorrectly 
coded claims. In addition, the commenter requested that CMS consider 
the use of C-APCs to provide for payment for low-volume, clinically 
significant services.
    Response: The commenter is correct that each of these services 
represent a low volume in the OPPS. The geometric mean cost for each of 
the codes is within the geometric mean cost range ($1,111 to $1,518) 
for significant services assigned to APC 5242. We will monitor these 
claims and determine if any future adjustment to the methodology (such 
as the C-APC methodology) would be more appropriate.
d. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS) (APCs 
1537, 5114, and 5414)
    Currently, there are four CPT/HCPCS codes that describe magnetic 
resonance image guided high intensity focused ultrasound (MRgFUS) 
procedures. These codes include CPT codes 0071T, 0072T, and 0398T, and 
HCPCS code C9734. CPT codes 0071T and 0072T are used for the treatment 
of uterine fibroids, CPT code 0398T is used for the treatment of 
essential tremor, and HCPCS code C9734 is used for pain palliation for 
metastatic bone cancer.
    As shown in Table 29 below, and as listed in Addendum B of the CY 
2017 OPPS/ASC proposed rule, we proposed to continue to assign CPT 
codes 0071T and 0072T to APC 5414, with a payment

[[Page 79642]]

rate of approximately $2,074. We also proposed to reassign the APC's 
status indicator to ``J1'' (Hospital Part B services paid through a 
comprehensive APC) to indicate that all covered Part B services on the 
claim are packaged with the payment for the primary ``J1'' service for 
the claim, except for services assigned to OPPS status indicator ``F,'' 
``G,'' ``H,'' ``L'' and ``U''; ambulance services; diagnostic and 
screening mammography; all preventive services; and certain Part B 
inpatient services. In addition, we proposed to reassign HCPCS code 
C9734 from APC 5122 (Level 2 Musculoskeletal Procedures) to APC 5114 
(Level 4 Musculoskeletal Procedures), with a payment rate of 
approximately $5,199. We also proposed to reassign the HCPCS code's 
status indicator from ``T'' to ``J1.''
    Further, we proposed to reassign CPT code 0398T from a nonpayable 
status indicator, specifically, ``E'' (Not paid by Medicare when 
submitted on outpatient claims (any outpatient bill type)) to a 
separately payable APC, specifically, APC 5462 (Level 2 Neurostimulator 
and Related Procedures), with a payment rate of approximately $5,840. 
We note that APC 5462 is assigned to status indicator ``J1.'' This APC 
assignment was based on a comparison to a similar procedure, 
specifically, HCPCS code C9734, with a geometric mean cost of 
approximately $8,565 based on 9 single claims (out of 9 total claims). 
The MRgFUS equipment used in the performance of the procedure described 
by CPT code 0398T is very similar to the MRgFUS equipment used in the 
performance of the procedure described by HCPCS code C9734. Both 
machines are manufactured by the same manufacturer.

   Table 29--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Magnetic Resonance Image Guided High Intensity Focused
                                                             Ultrasound (MRgFUS) Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                                                                                                       CY 2016    Proposed  CY    Proposed     CY 2017
           CPT/HCPCS  code                      Long descriptor              CY 2016      CY 2016        OPPS      2017  OPPS     CY 2017        OPPS
                                                                             OPPS SI      OPPS APC     payment         SI         OPPS APC     payment
                                                                                                         rate                                    rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
0071T................................  Focused ultrasound ablation of               T          5414    $1,861.18           J1          5414    $2,074.22
                                        uterine leiomyomata, including
                                        mr guidance; total leiomyomata
                                        volume less than 200 cc of
                                        tissue.
0072T................................  Focused ultrasound ablation of               T          5414     1,861.18           J1          5414     2,074.22
                                        uterine leiomyomata, including
                                        mr guidance; total leiomyomata
                                        volume greater or equal to 200
                                        cc of tissue.
0398T................................  Magnetic resonance image guided              E           N/A          N/A           J1          5462     5,839.83
                                        high intensity focused
                                        ultrasound (mrgfus),
                                        stereotactic ablation lesion,
                                        intracranial for movement
                                        disorder including stereotactic
                                        navigation and frame placement
                                        when performed.
C9734................................  Focused ultrasound ablation/                 T          5122     2,395.59           J1          5114     5,199.03
                                        therapeutic intervention, other
                                        than uterine leiomyomata, with
                                        magnetic resonance (mr) guidance.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: All of the commenters disagreed with the proposed 
assignment of CPT code 0398T to APC 5462 for CY 2017. The commenters 
stated that the proposed payment severely underestimates the resources 
required to provide the treatment. Some commenters indicated that 
compared to HCPCS code C9734, which requires only one physician and 3 
hours of MRI time, the resources for CPT code 0398T is significantly 
greater and requires the services of a multidisciplinary staff 
(including a neurosurgeon and a radiologist), as well as 6 hours of MRI 
time. Several commenters indicated that MRgFUS for essential tremor is 
a better alternative to deep brain stimulation (DBS) because there is 
no risk of infection or implanted hardware, no need for multiple 
hospital outpatient visits or postoperative programming sessions, and 
lower cost because there is no battery to surgically remove and replace 
every few years. Some commenters pointed out that the cost of providing 
a DBS procedure is between $40,000 and $50,000, while the MRgFUS 
procedure costs approximately $20,000. One commenter stated that the 
capital equipment used in the performance of the procedure described by 
CPT code 0398T is more costly, at approximately $2 million, compared to 
the capital equipment used in the performance of the procedure 
described by HCPCS C9734, which is approximately $750,000. The 
commenter also stated that CPT code 0398T uses additional equipment 
(for example, stereotactic head frame) and supplies resulting in higher 
costs for the procedure. Several commenters expressed concern that the 
proposed payment for CPT code 0398T is inadequate to cover the hospital 
cost of providing the service and recommended that CMS reassign CPT 
code 0398T to either a more appropriate APC that reflects the cost of 
providing the treatment, or to APC 5463 (Level 3 Neurostimulator and 
Related Procedures). Some commenters suggested that a low reimbursement 
rate for the procedure could jeopardize Medicare access to this 
emerging technology.
    Response: CPT code 0398T is a new code for CY 2016. Therefore, we 
do not have available claims data for the CY 2017 ratesetting. HCPCS 
code C9734 describes a similar service that uses the same MRgFUS 
technology, and as noted above, has a geometric mean cost of $8,565. 
However, the manufacturer has indicated that the essential tremor 
MRgFUS service uses a more costly version of the MRgFUS equipment, 
takes longer, and uses some additional supplies and equipment, which 
makes the procedure described by CPT code 0398T more costly than the 
procedure described by HCPCS code C9734. We believe that the procedure 
described by CPT code 0398T can also be compared

[[Page 79643]]

to the procedure described by CPT code 77371 (Radiation treatment 
delivery, stereotactic radiosurgery (SRS), complete course of treatment 
of cranial lesions(s) consisting of 1 session; multi-source Cobalt-60 
based). In particular, both procedures use capital equipment of 
approximately equal cost, both employ a stereotactic head frame to 
treat intracranial lesions, and both require similar staffing. CPT code 
77371 is assigned to APC 5627 (Level 7 Radiation Therapy), with a final 
payment rate of approximately $7,453. The final geometric mean cost of 
CPT code 77371 is $10,105. We believe that the geometric mean cost of 
CPT code 77371 provides an indication of the initial payment rate for 
CPT code 0398T relative to the related service described by HCPCS code 
C9734, for which we have some claims data. Consequently, because there 
is no clinical APC that contains clinically similar and resource-cost 
similar services, we believe that the most appropriate initial 
assignment for CPT code 0398T is APC 1537 (New Technology--Level 37 
($9501-$10000)), which has a final payment rate of approximately 
$9,751. The assignment to APC 1537 will result in a 67-percent increase 
in the CY 2017 payment rate compared to the $5,840 proposed payment 
rate. It is also significantly above the payment rate of approximately 
$5,219 for HCPCS code C9734, to which CPT code 0398T is comparable but 
according to the commenters is more costly.
    Finally, we remind hospitals that, as we do every year, we review 
the APC assignments for all services and items paid under the OPPS. We 
will reevaluate the APC assignment for CPT code 0398T once we have 
claims data for this service.
    Comment: One commenter supported CMS' proposal to reassign HCPCS 
code C9734 to APC 5114, and requested that CMS finalize the proposal.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
modifying our proposal and reassigning CPT code 0398T to APC 1537 for 
CY 2017. In addition, we are finalizing our proposal, without 
modification, to reassign HCPCS code C9734 to APC 5114. Because we did 
not receive any public comments related to CPT codes 0071T and 0072T, 
we are finalizing our proposal, without modification, to continue to 
assign these codes to APC 5414. Table 30 below shows the final status 
indicator and APC assignments and payment rates for the MRgFUS 
procedures for CY 2017. We refer readers to Addendum B of this final 
rule with comment period for the payment rates for all codes reportable 
under the OPPS. Addendum B is available via the Internet on the CMS Web 
site.

    Table 30--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Magnetic Resonance Image Guided High Intensity Focused
                                                             Ultrasound (MRgFUS) Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016                                Final  CY
                                                                          CY 2016 OPPS    CY 2016        OPPS       Final  CY    Final  CY    2017  OPPS
           CPT/HCPCS  code                      Long descriptors               SI         OPPS APC     payment     2017  OPPS    2017  OPPS    payment
                                                                                                         rate          SI           APC          rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
0071T................................  Focused ultrasound ablation of               T          5414    $1,861.18           J1          5414    $2,084.59
                                        uterine leiomyomata, including
                                        mr guidance; total leiomyomata
                                        volume less than 200 cc of
                                        tissue.
0072T................................  Focused ultrasound ablation of               T          5414     1,861.18           J1          5414     2,084.59
                                        uterine leiomyomata, including
                                        mr guidance; total leiomyomata
                                        volume greater or equal to 200
                                        cc of tissue.
0398T................................  Magnetic resonance image guided              E           N/A          N/A            S          1537     9,750.50
                                        high intensity focused
                                        ultrasound (mrgfus),
                                        stereotactic ablation lesion,
                                        intracranial for movement
                                        disorder including stereotactic
                                        navigation and frame placement
                                        when performed.
C9734................................  Focused ultrasound ablation/                 T          5122     2,395.59           J1          5114     5,219.36
                                        therapeutic intervention, other
                                        than uterine leiomyomata, with
                                        magnetic resonance (mr) guidance.
--------------------------------------------------------------------------------------------------------------------------------------------------------

e. Neulasta[supreg] On-Body Injector
    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we 
proposed to assign new CY 2017 CPT code 96377 (Application of on-body 
injector (includes cannula insertion) for timed subcutaneous injection) 
to status indicator ``N'' (Items and Services Packaged into APC Rates) 
to indicate that the service is paid under OPPS; however, its payment 
is packaged into the payment for other services. We note that CPT code 
93677 was listed as placeholder CPT code 963XX in both Addendum B and O 
of the CY 2017 OPPS/ASC proposed rule. Addendum B listed the short 
descriptor with the proposed status indicator of ``N,'' while Addendum 
O listed the complete long descriptor under placeholder CPT code 963XX.
    Comment: Some commenters disagreed with the proposed status 
indicator assignment of ``N'' for CPT code 963XX (CY 2017 CPT code 
96377), and indicated that this is a primary service, not an add-on 
procedure, that represents a complete and unique drug administration 
service that a hospital performs for the subcutaneous administration of 
Neulasta[supreg] with the on-body injector. The commenters stated that 
the service is similar to the drug administration service described by 
CPT code 96372 (Therapeutic, prophylactic, or diagnostic injection 
(specify substance or drug); subcutaneous or intramuscular), which is 
assigned to APC 5692 (Level 2 Drug Administration) with a proposed 
payment rate of about $53. The commenters indicated that the difference 
between the procedure described by CPT code 96372 and CPT

[[Page 79644]]

code 96377 is the use of an on-body injector for CPT code 96377.
    Response: We do not believe that the resources necessary to deliver 
the Neulasta[supreg] service warrants separate payment under the OPPS. 
Because payment for CPT code 96377 will be packaged, the payment for 
use of the on-body injector will be included in the payment for the 
primary service (for example, chemotherapy administration, clinic 
visit, among others) that is reported in conjunction with CPT code 
96377. Furthermore, we believe that the packaged payment that includes 
payment for the use of the Neulasta[supreg] on-body injector adequately 
covers the costs of the service. After consideration of the public 
comments we received, we are adopting as final, without modification, 
the proposal to assign CPT code 96377 to status indicator ``N'' for CY 
2017.
f. Smoking and Tobacco Use Cessation Counseling (APC 5821)
    As shown in Table 31 below, and as listed in Addendum B of the CY 
2017 OPPS/ASC proposed rule, we proposed to continue to assign CPT 
codes 99406 and 99407 to APC 5821 (Level 1 Health and Behavior 
Services), with a proposed payment rate of approximately $25. In 
addition, we proposed to delete HCPCS codes G0436 and G0437 because 
they were replaced with CPT codes 99406 and 99407. Specifically, we 
stated in the October 2016 Update, Change Request 9768, Transmittal 
3602, dated August 26, 2016, that HCPCS codes G0436 and G0437 were 
deleted on September 30, 2016, because they were replaced with CPT 
codes 99406 and 99407, effective October 1, 2016.

    Table 31--Proposed CY 2017 Status Indicator (SI), APC Assignment, and Payment Rate for the Smoking and Tobacco Use Cessation Counseling Services
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                                                                                                       CY 2016    Proposed  CY    Proposed     CY 2017
           CPT/HCPCS  code                      Long descriptors             CY 2016      CY 2016        OPPS      2017  OPPS     CY 2017        OPPS
                                                                             OPPS SI      OPPS APC     payment         SI         OPPS APC     payment
                                                                                                         rate                                    rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
99406................................  Smoking and tobacco use cessation            S          5821       $27.12            S          5821       $25.09
                                        counseling visit; intermediate,
                                        greater than 3 minutes up to 10
                                        minutes.
99407................................  Smoking and tobacco use cessation            S          5821        27.12            S          5821        25.09
                                        counseling visit; intensive,
                                        greater than 10 minutes.
G0436................................  Smoking and tobacco cessation                S          5821        27.12            D   ...........  ...........
                                        counseling visit for the
                                        asymptomatic patient;
                                        intermediate, greater than 3
                                        minutes, up to 10 minutes.
G0437................................  Smoking and tobacco cessation                S          5822        69.65            D   ...........  ...........
                                        counseling visit for the
                                        asymptomatic patient; intensive,
                                        greater than 10 minutes.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: One commenter expressed concern that the proposed payment 
rate for APC 5821 did not include the costs associated with HCPCS code 
G0437 because it was previously assigned to APC 5822. The commenter 
requested that CMS reevaluate the payment rate for APC 5821 and to 
include the claims data associated with HCPCS code G0437 in the 
calculation of the geometric mean cost for APC 5821. In addition, 
because the predecessor HCPCS code G0437 was previously assigned to APC 
5822, the commenter believed that CPT code 99407 should also be 
assigned to the same APC. Moreover, the commenter urged CMS to 
crosswalk all deleted codes to the same APC assignment as their 
replacement codes when calculating APC payment rates during the 
transition.
    Response: While we generally crosswalk the APC assignment of 
deleted codes to the same APC as its replacement code, we acknowledge 
that our calculation of the geometric mean cost for APC 5821 in the CY 
2017 OPPS/ASC proposed rule did not include costs associated with HCPCS 
code G0437. We appreciate the commenter bringing this to our attention 
and have corrected this oversight in this final rule with comment 
period. In particular, we are assigning CPT codes 99406 and 99407, and 
HCPCS codes G0436 and G0437 to APC 5821 and are using the geometric 
mean costs of these procedures in determining the final payment rate 
for APC 5821. Based on our analysis of the updated claims data for this 
final rule with comment period, the geometric mean cost of 
approximately $32 for CPT code 99407 based on 2,859 single claims (out 
of 4,148 total claims) is relatively similar to the geometric mean cost 
of approximately $26 for APC 5821. We do not agree with the commenter 
that CPT code 99407 should be assigned to APC 5822 because its 
geometric mean cost of approximately $72 is more than twice the 
geometric mean cost of CPT code 94407. Therefore, based on the resource 
costs and similar characteristics to the other procedures within APC 
5821, we believe that CPT code 99407 is more appropriately assigned to 
this APC.
    Comment: One commenter expressed confusion regarding the reporting 
of CPT codes 99406 and 99407, and requested that CMS clarify whether 
these codes apply to both asymptomatic and symptomatic patients. The 
commenter noted that the descriptor of HCPCS codes G0436 and G0437 
specifically described services for the asymptomatic patient. However, 
the commenter indicated that this distinction is not included in the 
code descriptors for CPT codes 99406 and 99407.
    Response: While not explicit in their code descriptors, CPT codes 
99406 and 99407 apply to both asymptomatic and symptomatic patients. We 
note that the more recent preventive service policy related to these 
codes can be found in section 210.4.1 (Counseling to Prevent Tobacco 
Use (Effective August 25, 2010)) of the Medicare National Coverage 
Determination Manual, which is can be viewed on the CMS Web site at: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/ncd103c1_part4.pdf, as well as on the Medicare Coverage 
Database Web site at: https://www.cms.gov/medicare-coverage-database/details/medicare-coverage-document-details.aspx?MCDId=32. After 
consideration of the public comments we received, we

[[Page 79645]]

are finalizing our proposal, without modification, to continue to 
assign CPT codes 99406 and 99407 to APC 5821 for CY 2017. Table 32 
below shows the final status indicator, APC assignment, and payment 
rate for CPT codes 99406 and 99407 for CY 2017. We refer readers to 
Addendum B of this final rule with comment period for the payment rates 
for all codes reportable under the OPPS. Addendum B is available via 
the Internet on the CMS Web site.

      Table 32--Final CY 2017 Status Indicator (SI), APC Assignment, and Payment Rate for the Smoking and Tobacco Use Cessation Counseling Services
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016                                Final  CY
                                                                             CY 2016      CY 2016        OPPS       Final  CY    Final  CY    2017  OPPS
           CPT/HCPCS  code                      Long descriptors             OPPS SI      OPPS APC     payment     2017  OPPS    2017  OPPS    payment
                                                                                                         rate          SI           APC          rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
99406................................  Smoking and tobacco use cessation            S          5821       $27.12            S          5821       $25.22
                                        counseling visit; intermediate,
                                        greater than 3 minutes up to 10
                                        minutes.
99407................................  Smoking and tobacco use cessation            S          5821        27.12            S          5821        25.22
                                        counseling visit; intensive,
                                        greater than 10 minutes.
G0436................................  Smoking and tobacco cessation                S          5821        27.12            D   ...........  ...........
                                        counseling visit for the
                                        asymptomatic patient;
                                        intermediate, greater than 3
                                        minutes, up to 10 minutes.
G0437................................  Smoking and tobacco cessation                S          5822        69.65            D   ...........  ...........
                                        counseling visit for the
                                        asymptomatic patient; intensive,
                                        greater than 10 minutes.
--------------------------------------------------------------------------------------------------------------------------------------------------------

g. Radiofrequency Ablation of Uterine Fibroids (APC 5362)
    For CY 2017, the AMA CPT Editorial Panel deleted CPT code 0336T 
(Laparoscopy, surgical, ablation of uterine fibroid(s), including 
intraoperative ultrasound guidance and monitoring, radiofrequency) and 
replacing it with CPT code 58674 (Laparoscopy, surgical, ablation of 
uterine fibroid(s) including intraoperative ultrasound guidance and 
monitoring, radiofrequency), effective January 1, 2017. We proposed to 
assign CPT code 58674 to APC 5362 (Level 2 Laparoscopy and Related 
Services), which is the same APC assignment for the predecessor CPT 
code 0336T. We note that CPT code 58674 was listed as placeholder CPT 
code 585X1 in both Addendum B and O of the CY 2017 OPPS/ASC proposed 
rule. Addendum B listed the short descriptor with the proposed APC 
assignment and payment rate, while Addendum O listed the complete long 
descriptor under placeholder CPT code 585X1. We note that both Addendum 
B and O also assigned this code to comment indicator ``NP'' to indicate 
that we would be accepting comments on the proposed APC assignment for 
the new code.
    Comment: One commenter agreed with the proposed APC assignment for 
new CY 2017 CPT code 58674 to APC 5362 and stated that the assignment 
is consistent with the APC assignment for its predecessor code (CPT 
code 0336T). The commenter indicated that the resources required to 
furnish the service described by CPT code 58674 is similar to the 
resources of the other procedures assigned to APC 5362. Consequently, 
the commenter urged CMS to finalize the proposal.
    Response: We appreciate the commenter's support. As noted by the 
commenter, we assigned new CY 2017 CPT code 58674 to APC 5362 based on 
its similarity to the other procedures within this APC.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to assign CPT code 58674 
to APC 5362. The final status indicator, APC assignment, and payment 
rate for CPT code 58674 can be found in Addendum B to this final rule 
with comment period (which is available via the Internet on the CMS Web 
site).
h. Intrapulmonary Surfactant Administration (APC 5791)
    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we 
proposed to continue to assign CPT code 94610 (Intrapulmonary 
surfactant administration by a physician or other qualified health care 
professional through endotracheal tube) to APC 5791 (Pulmonary 
Treatment), with a proposed payment rate of approximately $161. We also 
proposed to continue to assign CPT code 94610 to OPPS status indicator 
``Q1'' (STV-Packaged Codes) to indicate that the service is 
conditionally packaged.
    Comment: One commenter disagreed with CMS' proposal to assign CPT 
code 94610 to OPPS status indicator ``Q1.'' The commenter indicated 
that this is a primary service, not an ancillary service as designated 
by the status indicator, and recommended that CMS reassign the CPT code 
to OPPS status indicator ``T'' (Procedure or Service, Multiple 
Procedure Reduction Applies. Paid under OPPS; separate APC payment).
    Response: We believe that the commenter may have misunderstood the 
meaning of OPPS status indicator ``Q1.'' Assigning a procedure to OPPS 
status indicator ``Q1'' indicates that payment for the service is 
conditionally packaged under the OPPS. A criterion under the 
conditional packaging policy is that payment for a service is packaged 
when it is provided in combination with a significant procedure on the 
same date of service, but the service is separately paid when it is 
reported on the claim without a significant procedure. Addendum D1 to 
the CY 2017 OPPS/ASC proposed rule (which is available via the Internet 
on the CMS Web site) showed the definition of status indicator ``Q1.''
    In the case of the procedure described by CPT code 94610, payment 
for this service is included in the payment for the significant 
procedure when it is reported in combination with HCPCS codes that are 
assigned to either status indicators ``S,'' ``T,'' or ``V.'' 
Alternatively, the service is separately paid when performed alone, or 
when reported in combination with HCPCS codes that described procedures 
assigned to a status indicator other than ``S,'' ``T,'' or ``V.'' In 
addition, assignment to OPPS status indicator

[[Page 79646]]

``Q1'' indicates that the service or procedure is assigned a composite 
APC payment when billed with specific combinations of services based on 
OPPS composite-specific payment criteria, and payment is packaged into 
a single payment for specific combinations of services. We disagree 
with the commenter that CPT code 94610 should be reassigned to OPPS 
status indicator ``T.'' Based on our understanding of the service, we 
believe that status indicator ``Q1'' is the most appropriate status 
indicator assignment for CPT code 94610 because the service is often 
provided in combination with other services on the same day.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to continue to assign 
CPT code 94610 to APC 5791, and to assign status indicator ``Q1'' to 
the code for CY 2017. The complete list of the OPPS payment status 
indicators and their definitions for CY 2017 is displayed in Addendum 
D1 to this final rule with comment period, which is available on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html. Further, we refer readers to Addendum B of this final 
rule with comment period for the payment rates for all codes reportable 
under the OPPS. Addendum B is available via the Internet on the CMS Web 
site.
i. Non-Contact Low Frequency Ultrasound (NLFU) Therapy (APC 5051)
    As listed in Addendum B of the CY 2017 OPPS/ASC proposed rule, we 
proposed to continue to assign CPT code 97610 (Low frequency, non-
contact, non-thermal ultrasound, including topical application(s), when 
performed, wound assessment, and instruction(s) for ongoing care, per 
day) to APC 5051 (Level 1 Skin Procedures), with a proposed payment 
rate of approximately $154. In addition, we proposed to continue to 
assign CPT code 97610 to OPPS status indicator ``Q1'' (STV-Packaged 
Codes) to indicate that the service is conditionally packaged.
    Comment: One commenter disagreed with CMS' proposal to assign CPT 
code 97610 to OPPS status indicator ``Q1.'' The commenter indicated 
that this is a primary service, not an ancillary service, and providers 
frequently perform NLFU therapy as a standalone, independent procedure. 
The commenter further stated that CMS' proposed OPPS status indicator 
assignment of ``Q1'' contradicts AMA's guidance in the June 2014 CPT 
Assistant, which clearly describes the service as a standalone 
procedure. The commenter recommended that CMS reassign CPT code 97610 
to OPPS status indicator ``T'' (Procedure or Service, Multiple 
Procedure Reduction Applies. Paid under OPPS; separate APC payment.).
    Response: Assigning CPT code 97610 to OPPS status indicator ``Q1'' 
indicates that payment for the service is conditionally packaged under 
the OPPS. A criterion under the conditional packaging policy is that 
payment for a service is packaged when it is provided in combination 
with a significant procedure on the same date of service, but the 
service is separately paid when it is reported on the claim without a 
significant procedure. Addendum D1 to the CY 2017 OPPS/ASC proposed 
rule (which is available via the Internet on the CMS Web site) showed 
the definition of status indicator ``Q1.''
    We note that payment for the procedure described by CPT code 97610 
is included in the payment for the significant procedure when it is 
reported in combination with HCPCS codes that are assigned to any of 
status indicators ``S,'' ``T,'' or ``V.'' Alternatively, the service is 
separately paid when performed alone, or when reported in combination 
with HCPCS codes that describe procedures assigned to a status 
indicator other than ``S,'' ``T,'' or ``V.'' In addition, assignment to 
OPPS status indicator ``Q1'' indicates that the service or procedure is 
assigned a composite APC payment if billed with specific combinations 
of services based on OPPS composite-specific payment criteria, and 
payment is packaged into a single payment for specific combinations of 
services. Based on our understanding of the service, we believe that 
``Q1'' is the most appropriate status indicator assignment for CPT code 
97610 because the service is provided in combination with other 
services on the same day.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to continue to assign 
CPT code 97610 to APC 5051 and to assign CPT code 97610 to OPPS status 
indicator ``Q1'' for CY 2017. The complete list of the OPPS payment 
status indicators and their definitions for CY 2017 is displayed in 
Addendum D1 to this final rule with comment period, which is available 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html. Further, we refer readers to Addendum B of this final 
rule with comment period for the payment rates for all codes reportable 
under the OPPS. Addendum B is available via the Internet on the CMS Web 
site.
j. Pulmonary Rehabilitation Services (APCs 5732 and 5733)
    Currently, there are four HCPCS codes that describe pulmonary 
rehabilitation services, specifically, HCPCS codes G0237, G0238, G0239, 
and G0424. As shown in Table 33 below and as listed in Addendum B of 
the CY 2017 OPPS/ASC proposed rule, we proposed to reassign these 
services to APCs 5734 (Level 4 Minor Procedures), 5735 (Level 5 Minor 
Procedures), and 5791 (Pulmonary Treatment). In addition, we proposed 
to continue their status indicator assignment of ``Q1'' to indicate 
that these services are conditionally packaged.

             Table 33--Proposed CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Pulmonary Rehabilitation Services
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                                                                             CY 2016      CY 2016      CY 2016    Proposed  CY    Proposed     CY 2017
              HCPCS code                        Long descriptors             OPPS SI      OPPS APC       OPPS      2017  OPPS     CY 2017        OPPS
                                                                                                       payment         SI         OPPS APC     payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
G0237................................  Therapeutic procedures to                   Q1          5734       $91.18           Q1          5735      $265.56
                                        increase strength or endurance
                                        of respiratory muscles, face to
                                        face, one on one, each 15
                                        minutes (includes monitoring).

[[Page 79647]]

 
G0238................................  Therapeutic procedures to improve           Q1          5733        55.94           Q1          5791       161.29
                                        respiratory function, other than
                                        described by g0237, one on one,
                                        face to face, per 15 minutes
                                        (includes monitoring).
G0239................................  Therapeutic procedures to improve           Q1          5732        30.51           Q1          5734        95.66
                                        respiratory function or increase
                                        strength or endurance of
                                        respiratory muscles, two or more
                                        individuals (includes
                                        monitoring).
G0424................................  Pulmonary rehabilitation,                   Q1          5733        55.94           Q1          5791       161.29
                                        including exercise (includes
                                        monitoring), one hour, per
                                        session, up to two sessions per
                                        day.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Comment: Several commenters expressed concern with the proposed 
status indicator assignment of ``Q1'' for HCPCS code G0424. The 
commenters stated that Medicare's benefit categories for cardiac and 
pulmonary rehabilitation programs were codified in section 144 of the 
Medicare Improvements for Patients and Providers Act of 2008, which 
provides for payment and coverage of pulmonary and cardiac 
rehabilitation services. Because the payment for this service was 
established under a statutory provision, the commenters believed that 
CMS' proposed status indicator assignment of ``Q1'' for HCPCS code 
G0424 is an oversight. The commenters requested that CMS reconsider the 
issue and revise the status indicator assignment to ``S'' (Procedure or 
Service, Not Discounted When Multiple. Paid under OPPS; separate APC 
payment), similar to the status indicator assignment for the cardiac 
rehabilitation codes.
    Response: We appreciate the commenters' feedback and agree, in 
part, with the commenters' concerns. Consequently, we believe that we 
should reassign HCPCS code G0424 to status indicator ``S.'' In 
addition, we believe that we should reassign HCPCS codes G0237, G0238, 
and G0239 to status indictor ``S'' because these codes also describe 
pulmonary rehabilitation services. However, the rationale for this 
modification of the proposal for these codes is not related to the 
statutory provision of section 144 of the Medicare Improvements for 
Patients and Providers Act of 2008. We believe that pulmonary 
rehabilitation is not typically ancillary to the other HOPD services 
that may be furnished to beneficiaries. Pulmonary rehabilitation is 
typically a course of treatment that is prescribed after a diagnosis is 
made and often after other treatments are initiated or completed.
    Comment: Several commenters supported the proposed APC 
reassignments for HCPCS codes G0237, G0238, G0239, and G0424. These 
commenters indicated that the proposed payment increase for these 
services appears to be driven by more accurate and complete costs 
reports submitted by hospitals providing the service, and recommended 
that CMS finalize the proposed payment rates.
    Response: We appreciate the commenters' support. We note that we 
proposed to reassign the HCPCS codes for these services based on the 
claims data used for the proposed rule that reported these codes as 
being conditionally packaged. Specifically, our analysis revealed a 
geometric mean cost of approximately $293 for HCPCS code G0237, which 
was relatively close to the geometric mean cost of approximately $278 
for APC 5735. We also found that the geometric mean costs of 
approximately $165 for HCPCS code G0238 and approximately $169 for 
HCPCS code G0424 was relatively similar to APC 5791, which had a 
geometric mean cost of approximately $169. In addition, we found that 
the geometric mean cost of approximately $121 for HCPCs code G0239 was 
comparable to the geometric mean cost of approximately $100 for APC 
5374. However, based on our review of the updated CY 2015 claims data 
used for this final rule with comment period, which included the status 
indicator revision from ``Q1'' to ``S'' for these codes, we found the 
geometric mean costs for HCPCS codes G0237, G0238, G0239, and G0424 to 
be significantly lower than the proposed rule geometric mean costs. 
This is due to significantly reduced packaged costs from other services 
after the status indicator was changed from ``Q1'' to ``S.'' We also 
note that the proposed rule claims data were based on claims submitted 
from January 1, 2015, through December 31, 2015, and processed through 
December 31, 2015, while the final rule with comment period claims data 
are based on claims submitted from January 1, 2015, through December 
31, 2015, and processed through June 30, 2016. Based on our analysis of 
the final rule with comment period claims data, we found a geometric 
mean cost of approximately $24 for HCPCS code G0237, approximately $22 
for HCPCS code G0238, approximately $33 for HCPCS code G0239, and 
approximately $44 for HCPCS code G0424. As a result of our findings, we 
are revising the APC assignments for HCPCS codes G0237, G0238, and 
G0239. Specifically, we found the geometric mean costs for HCPCS code 
G0237 ($24), G0238 ($22), and G0239 ($33) to be comparable to the 
geometric mean cost for APC 5732 ($29), while the geometric cost of 
HCPCS code G0424 ($44) was similar to that of APC 5733 ($56). Based on 
our analysis of the updated claims data used for the final rule with 
comment period, we believe that the revised APC assignments for the 
pulmonary rehabilitation services better reflect their clinical 
coherence and resource costs.
    In summary, after consideration of the public comments we received 
and our analysis of the updated claims data for this final rule with 
comment period, we are modifying our proposal and reassigning HCPCS 
codes G0237, G0238, G0239, and G0424 to status indicator ``S.'' In 
addition, we are modifying our

[[Page 79648]]

proposal and reassigning HCPCS codes G0237, G0238, and G0239 to the 
final APCs listed in Table 34 below. Table 34 lists the final status 
indicator, APC assignments, and payment rates for the pulmonary 
rehabilitation services for CY 2017. We refer readers to Addendum B of 
this final rule with comment period for the payment rates for all codes 
reported under the OPPS. Addendum B is available via the Internet on 
the CMS Web site.

               Table 34--Final CY 2017 Status Indicator (SI), APC Assignments, and Payment Rates for the Pulmonary Rehabilitation Services
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       CY 2016      Final  CY    Final  CY    Final  CY
              HCPCS code                        Long descriptors             CY 2016      CY 2016        OPPS      2017  OPPS    2017  OPPS   2017  OPPS
                                                                             OPPS SI      OPPS APC     payment         SI           APC        payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
G0237................................  Therapeutic procedures to                   Q1          5734       $91.18            S          5732       $28.37
                                        increase strength or endurance
                                        of respiratory muscles, face to
                                        face, one on one, each 15
                                        minutes (includes monitoring).
G0238................................  Therapeutic procedures to improve           Q1          5733        55.94            S          5732        28.37
                                        respiratory function, other than
                                        described by g0237, one on one,
                                        face to face, per 15 minutes
                                        (includes monitoring).
G0239................................  Therapeutic procedures to improve           Q1          5732        30.51            S          5732        28.37
                                        respiratory function or increase
                                        strength or endurance of
                                        respiratory muscles, two or more
                                        individuals (includes
                                        monitoring).
G0424................................  Pulmonary rehabilitation,                   Q1          5733        55.94            S          5733        54.53
                                        including exercise (includes
                                        monitoring), one hour, per
                                        session, up to two sessions per
                                        day.
--------------------------------------------------------------------------------------------------------------------------------------------------------

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
    Section 1833(t)(6)(B)(iii) of the Act sets forth the period for 
which a device category eligible for transitional pass-through payments 
under the OPPS may be in effect. The implementing regulation at 42 CFR 
419.66(g) provides that this pass-through payment eligibility period 
begins on the date CMS establishes a particular transitional pass-
through category of devices. The eligibility period is for at least 2 
years but no more than 3 years. We may establish a new device category 
for pass-through payment in any quarter. Under our current policy, we 
base the pass-through status expiration date for a device category on 
the date on which pass-through payment is effective for the category; 
that is, the date CMS establishes a particular category of devices 
eligible for transitional pass-through payments. (We note that in this 
final rule with comment period, in accordance with section 
1833(t)(6)(B)(iii)(II) of the Act, we are adopting a policy to base 
pass-through status expiration for a device category on the first date 
on which pass-through payment is made under the OPPS.) 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).
b. CY 2017 Pass-Through Devices
    As stated earlier, 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 years, but not more 
than 3 years. There currently are four device categories eligible for 
pass-through payment: (1) HCPCS code C2624 (Implantable wireless 
pulmonary artery pressure sensor with delivery catheter, including all 
system components), which was established effective January 1, 2015; 
(2) HCPCS code C2623 (Catheter, transluminal angioplasty, drug-coated, 
non-laser), which was established effective April 1, 2015; (3) HCPCS 
code C2613 (Lung biopsy plug with delivery system), which was 
established effective July 1, 2015; and (4) HCPCS code C1822 
(Generator, neurostimulator (implantable), high frequency, with 
rechargeable battery and charging system), which was established 
effective January 1, 2016. The pass-through payment status of the 
device category for HCPCS code C2624 will end on December 31, 2016. 
Therefore, in accordance with our current policy, in the CY 2017 OPPS/
ASC proposed rule (81 FR 45649), we proposed, beginning in CY 2017, to 
package the costs of the device described by HCPCS code C2624 into the 
costs related to the procedure with which the device is reported in the 
hospital claims data. We stated in the proposed rule that the other 
three codes listed will continue with pass-through status in CY 2017. 
We did not receive any public comments on this proposal. Therefore, we 
are finalizing our proposal to expire device pass-through payments for 
the device described by HCPCS code C2624, effective January 1, 2017.
2. New Device Pass-Through Applications
a. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments, referred to as ``transitional pass-through payments,'' for 
devices and section 1833(t)(6)(B) of the Act requires CMS to use 
categories in determining the eligibility of devices for transitional 
pass-through payments. As part of implementing the statute through 
regulations, we have continued to believe that it is important for 
hospitals to receive pass-through payments for

[[Page 79649]]

devices that offer substantial clinical improvement in the treatment of 
Medicare beneficiaries to facilitate access by beneficiaries to the 
advantages of the new technology. Conversely, we have noted that the 
need for additional payments for devices that offer little or no 
clinical improvement over previously existing devices is less apparent. 
In such cases, these devices can still be used by hospitals, and 
hospitals will be paid for them through appropriate APC payment. 
Moreover, a goal is to target pass-through payments for those devices 
where cost considerations might be most likely to interfere with 
patient access (66 FR 55852; 67 FR 66782; and 70 FR 68629).
    As specified in regulations at 42 CFR 419.66(b)(1) through (b)(3), 
to be eligible for transitional pass-through payment under the OPPS, a 
device must meet the following criteria: (1) if required by FDA, the 
device must have received FDA approval or clearance (except for a 
device that has received an FDA investigational device exemption (IDE) 
and has been classified as a Category B device by the FDA), or another 
appropriate FDA exemption; and the pass-through payment application 
must be submitted within 3 years from the date of the initial FDA 
approval or clearance, if required, unless there is a documented, 
verifiable delay in U.S. market availability after FDA approval or 
clearance is granted, in which case CMS will consider the pass-through 
payment application if it is submitted within 3 years from the date of 
market availability; (2) the device is determined to be reasonable and 
necessary for the diagnosis or treatment of an illness or injury or to 
improve the functioning of a malformed body part, as required by 
section 1862(a)(1)(A) of the Act; and (3) the device is an integral 
part of the service furnished, is used for one patient only, comes in 
contact with human tissue, and is surgically implanted or inserted 
(either permanently or temporarily), or applied in or on a wound or 
other skin lesion. In addition, according to 42 CFR 419.66(b)(4), a 
device is not eligible to be considered for device pass-through payment 
if it is any of the following: (1) equipment, an instrument, apparatus, 
implement, or item of this type for which depreciation and financing 
expenses are recovered as depreciation assets as defined in Chapter 1 
of the Medicare Provider Reimbursement Manual (CMS Pub. 15-1); or (2) a 
material or supply furnished incident to a service (for example, a 
suture, customized surgical kit, or clip, other than a radiological 
site marker).
    Separately, we use the following criteria, as set forth under Sec.  
419.66(c), to determine whether a new category of pass-through devices 
should be established. The device to be included in the new category 
must--
     Not be appropriately described by an existing category or 
by any category previously in effect established for transitional pass-
through payments, and was not being paid for as an outpatient service 
as of December 31, 1996;
     Have an average cost that is not ``insignificant'' 
relative to the payment amount for the procedure or service with which 
the device is associated as determined under Sec.  419.66(d) by 
demonstrating: (1) the estimated average reasonable costs of devices in 
the category exceeds 25 percent of the applicable APC payment amount 
for the service related to the category of devices; (2) the estimated 
average reasonable cost of the devices in the category exceeds the cost 
of the device-related portion of the APC payment amount for the related 
service by at least 25 percent; and (3) the difference between the 
estimated average reasonable cost of the devices in the category and 
the portion of the APC payment amount for the device exceeds 10 percent 
of the APC payment amount for the related service (with the exception 
of brachytherapy and temperature-monitored cryoblation, which are 
exempt from the cost requirements as noted at Sec. Sec.  419.66(c)(3) 
and (e); and
     Demonstrate a substantial clinical improvement, that is, 
substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment.
    Beginning in CY 2016, we changed our device pass-through evaluation 
and determination process. Device pass-through applications are still 
submitted to us through the quarterly subregulatory process, but the 
applications will be subject to notice-and-comment rulemaking in the 
next applicable OPPS annual rulemaking cycle. Under this process, all 
applications that are preliminarily approved upon quarterly review will 
automatically be included in the next applicable OPPS annual rulemaking 
cycle, while submitters of applications that are not approved upon 
quarterly review will have the option of being included in the next 
applicable OPPS annual rulemaking cycle or withdrawing their 
application from consideration. Under this notice-and-comment process, 
applicants may submit new evidence, such as clinical trial results 
published in a peer-reviewed journal, or other materials for 
consideration during the public comment process for the proposed rule. 
This process allows those applications that we are able to determine 
meet all the criteria for device pass-through payment under the 
quarterly review process to receive timely pass-through payment status, 
while still allowing for a transparent, public review process for all 
applications (80 FR 70417 through 70418). More details on the 
requirements for device pass-through payment applications are included 
on the CMS Web site in the application form itself at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html, in the ``Downloads'' 
section.
    In addition, CMS is amenable to meeting with applicants or 
potential applicants to discuss research trial design in advance of any 
device pass-through application or to discuss application criteria, 
including the substantial clinical improvement criterion.
b. Applications Received for Device Pass-Through Payment for CY 2017
    We received three applications by the March 1, 2016 quarterly 
deadline, which was the last quarterly deadline in time to be included 
for the CY 2017 OPPS/ASC proposed rule. None of these three 
applications were approved for device pass-through payment during the 
quarterly review process. Applications received for the later deadlines 
for the remaining 2016 quarters (June 1, September 1, and December 1), 
if any, will be presented in the CY 2018 OPPS/ASC proposed rule. We 
note that the quarterly application process and requirements have not 
changed in light of the addition of rulemaking review. Detailed 
instructions on submission of a quarterly device pass-through payment 
application are included on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/catapp.pdf. A discussion of the three applications received 
by the March 1, 2016 deadline is presented below, as detailed in the CY 
2017 OPPS/ASC proposed rule (81 FR 45650 through 45653).
(1) BioBag[supreg] (Larval Debridement Therapy in a Contained Dressing)
    BioMonde US, LLC submitted an application for a new device pass-
through category for the BioBag[supreg] (larval debridement therapy in 
a contained dressing) (hereinafter referred to as the

[[Page 79650]]

BioBag[supreg]). According to the applicant, BioBag[supreg] is a 
biosurgical wound treatment (``maggot therapy'') consisting of 
disinfected, living larvae (Lucilia sericata) in a polyester net bag; 
the larvae remove dead tissue from wounds. The BioBag[supreg] is 
indicated for debridement of nonhealing necrotic skin and soft tissue 
wounds, including pressure ulcers, venous stasis ulcers, neuropathic 
foot ulcers, and nonhealing traumatic or postsurgical wounds. 
Debridement, which is the action of removing devitalized tissue and 
bacteria from a wound, is required to treat or prevent infection and to 
allow the wound to progress through the healing process. This system 
contains disinfected, living larvae that remove the dead tissue from 
wounds and leave healthy tissue undisturbed. The larvae are provided in 
a sterile polyester net bag, available in different sizes. The only 
other similar product is free-range (that is, uncontained) larvae. 
Free-range larvae are not widely used in the United States because 
application is time consuming, there is a fear of larvae escaping from 
the wound, and there are concerns about proper and safe handling of the 
larvae. The total number of treatment cycles depends on the 
characteristics of the wound, the response of the wound, and the aim of 
the therapy. Most ulcers are completely debrided within 1 to 6 
treatment cycles.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant received FDA clearance for BioBag[supreg] through the 
premarket notification section 510(k) process on August 28, 2013, and 
its March 1, 2016 application was within 3 years of FDA clearance. The 
applicant claims that BioBag[supreg] is an integral part of the wound 
debridement, is used for one patient only, comes in contact with human 
skin, and is applied in or on a wound. In addition, the applicant 
stated that BioBag[supreg] is not an instrument, apparatus, or item for 
which depreciation and financing expenses are recovered. We believe 
that BioBag could be considered to be a surgical supply similar to a 
surgical dressing that facilitates either mechanical or autolytic 
debridement (for example, hydrogel dressings), and therefore ineligible 
for device pass-through payments under the provisions of Sec.  
419.66(b)(4)(ii). In the CY 2017 OPPS/ASC proposed rule (81 FR 45650), 
we invited public comment on whether BioBag[supreg] should be eligible 
under Sec.  419.66(b) to be considered for device pass-through payment.
    Comment: One commenter, the manufacturer, submitted comments on 
whether BioBag[supreg] should be considered to be a surgical supply 
similar to a surgical dressing that facilitates either mechanical or 
autolytic debridement. The commenter stated that BioBag[supreg] is a 
``treatment for active and physical wound debridement'' that does not 
function like an autolytic or mechanical debridement, but more like a 
sharp debridement, surgical debridement or water-jet. The commenter 
also noted that BioBag[supreg] is individualized to the patient and has 
a limited viability window, and that ordering, manufacturing, storage 
and handling are different than for a supply.
    Response: For purposes of the device pass-through payment process, 
we are persuaded by this additional information, and we no longer 
consider the BioBag[supreg] product to be an ineligible supply under 
Sec.  419.66(b)(4)(ii) of the regulations because the BioBag[supreg] is 
not ``furnished incident to a service,'' as described in Sec.  
419.66(b)(4)(ii).
    With respect to the existence of a previous pass-through device 
category that describes the BioBag[supreg], the applicant suggested a 
category descriptor of ``Larval therapy for the debridement of necrotic 
non-healing skin and soft tissue wounds.'' We stated in the proposed 
rule that we have not identified an existing pass-through payment 
category that describes the BioBag[supreg], but we welcomed public 
comments on this issue.
    We did not receive any public comments on this issue and have not 
identified an existing pass-through payment category that describes 
BioBag[supreg].
    With respect to the cost criterion, the applicant stated that 
BioBag[supreg] would be reported with CPT code 97602 (Removal of 
devitalized tissue from wound(s), non-selective debridement, without 
anesthesia (e.g., wet-to-moist dressings, enzymatic, abrasion), 
including topical application(s), wound assessment, and instruction(s) 
for ongoing care, per session). CPT code 97602 is assigned to APC 5051 
(Level 1 Skin Procedures), with a CY 2016 payment rate of $117.83, and 
the device offset is $1.18. The price of BioBag[supreg] varies with the 
size of the bag ($375 to $435 per bag), and bag size selection is based 
on the size of the wound. To meet the cost significance criterion, 
there are three cost significance subtests that must be met and 
calculations are noted below. The first cost significance is that the 
device cost needs to be at least 25 percent of the applicable APC 
payment rate to reach cost significance, as follows for the highest-
priced BioBag[supreg]: $435/117.83 x 100 = 369 percent. Thus, 
BioBag[supreg] meets the first cost significance test. The second cost 
significance test is that the device cost needs to be at least 125 
percent of the offset amount (the device-related portion of the APC 
found on the offset list): $435/1.18 x 100 = 36864 percent. Thus, 
BioBag[supreg] meets the second cost significance test. The third cost 
significance test is that the difference between the estimated average 
reasonable cost of the devices in the category and the portion of the 
APC payment amount determined to be associated with the device in the 
associated APC exceeds 10 percent of the total APC payment: ($435-
1.18)/117.83 x 100 = 368 percent. Thus, BioBag[supreg] meets the third 
cost significance test and satisfies the cost significance criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant cited a total of 18 articles relating to wound debridement, 
and most of these articles discussed the use of larval therapy for the 
treatment of ulcers. One peer-reviewed journal article described a 
randomized controlled trial with 267 subjects who received loose 
larvae, bagged larvae, or hydrogel intervention.\1\ Results of the 
study showed that the time to healing was not significantly different 
between the three groups, but that larval therapy significantly reduced 
the time to debridement (hazard ratio for the combined larvae group 
compared with hydrogel was 2.31 (95 percent confidence interval 1.65 to 
3.24; P<0.001)); and mean ulcer related pain scores were higher in 
either larvae group compared with hydrogel (mean difference in pain 
score: loose larvae versus hydrogel 46.74 (95 percent confidence 
interval 32.44 to 61.04), P<0.001; bagged larvae versus hydrogel 38.58 
(23.46 to 53.70), P<0.001).
---------------------------------------------------------------------------

    \1\ Dumville, et al.: Larval therapy for leg ulcers (VenUS II): 
randomized controlled trial).
---------------------------------------------------------------------------

    Another article described a study of 88 patients (of which 64 
patients completed the study) and patients either received a larval 
therapy dressing (BioFOAM) or hydrogel.\2\ Because the study did not 
use BioBag[supreg] and there was a large drop-out rate that was not 
fully explained, we did not find this article helpful in determining 
whether the BioBag[supreg] provides a substantial clinical improvement 
compared to existing wound debridement modalities.
---------------------------------------------------------------------------

    \2\ Mudge, et al.: A randomized controlled trial of larval 
therapy for the debridement of leg ulcers: Results of a multicenter, 
randomized, controlled, open, observer blind, parallel group study. 
Wound Repair and Regeneration. 2013, 1-9.
---------------------------------------------------------------------------

    Another article that the applicant submitted was a meta-analysis of 
maggot debridement therapy compared to standard therapy for diabetic 
foot

[[Page 79651]]

ulcers.\3\ It compared four studies with a total of 356 participants 
and the authors concluded that maggot debridement therapy ``may be a 
scientific and effective therapy in treatment of diabetic foot ulcers'' 
but ``the evidence is too weak to routinely recommend it for 
treatment''.
---------------------------------------------------------------------------

    \3\ Tian et al.: Maggot debridement therapy for the treatment of 
diabetic foot ulcers: a meta-analysis. Journal of Wound Care. Vol. 
22, No. 9, 2013.
---------------------------------------------------------------------------

    There were some additional articles provided that included a case 
series of maggot therapy with no control group, a retrospective study 
with free-range maggot therapy, maggot therapy as treatment of last 
resort, in vitro studies, economic modeling for wound therapy, an 
informational review of maggot debridement therapy and other 
debridement therapies, and research on other wound therapy options. 
These remaining articles did not assist in assessing substantial 
clinical improvement of BioBag[supreg] compared to existing treatments. 
Based on the evidence submitted with the application, we stated in the 
proposed rule that we are not yet convinced that the BioBag[supreg] 
provides a substantial clinical improvement over other treatments for 
wound debridement. We invited public comments on whether the 
BioBag[supreg] meets the substantial clinical improvement criterion.
    Comment: One commenter, the manufacturer, disagreed with CMS' 
review of the three cited articles from the initial application (Tian, 
Dumville, Mudge) and suggested that these articles prove substantial 
clinical improvement. Specifically, the commenter noted that the meta-
analysis by Tian suggests that findings of lower amputation rates, less 
antibiotic use, increased healing rates and increased healing times for 
larval therapy over conventional treatments are statistically 
significant, although the conclusion states that more evidence is 
needed; and that the randomized controlled trial by Mudge showed that 
successful wound debridement was 96.9 percent with larvae compared to 
34.4 percent with hydrogel. (However, the commenter noted this trial 
was performed with BioFoam, which is a variation of the current 
BioBag[supreg] product, but stated that the two were similar.) In 
addition, the commenter stated that larval therapy demonstrated healing 
9 days faster than hydrogel, although it was not believed to be 
statistically significant by the authors in the Dumville trial.
    Several commenters representing health care professionals who have 
an interest in wound management supported the BioBag[supreg] 
application. These commenters provided testimonials of their or their 
patients' favorable experience with larval therapy. However, these 
commenters did not provide empirical data pertaining to substantial 
clinical improvement.
    Response: We appreciate the commenters' responses on the 
BioBag[supreg] application. However, none of the commenters provided 
new empirical evidence that demonstrates clinical superiority of the 
BioBag[supreg] over existing treatment options. At this time, we have 
not been able to determine that the BioBag[supreg] represents a 
substantial clinical improvement relative to existing therapies 
currently available for wound care.
    After consideration of the public comments we received, we are not 
approving device pass-through payment status for the BioBag[supreg] for 
CY 2017.
(2) EncoreTM Suspension System
    Siesta Medical, Inc. submitted an application for a new device 
pass-through category for the Encore Suspension System (hereinafter 
referred to as the EncoreTM System). According to the 
application, the EncoreTM System is a kit of surgical 
instruments and implants that are used to perform an adjustable hyoid 
suspension. In this procedure, the hyoid bone (the U-shaped bone in the 
neck that supports the tongue) and its muscle attachments to the tongue 
and airway are pulled forward with the aim of increasing airway size 
and improving airway stability in the retrolingual and hypopharyngeal 
airway (airway behind and below the base of tongue). This procedure is 
indicated for the treatment of mild or moderate obstructive sleep apnea 
(OSA) and/or snoring, when the patient is unable to tolerate continuous 
positive airway pressure (CPAP). The current alternative to the hyoid 
suspension is the hyo-thyroid suspension technique (hyothyroidpexy). 
The EncoreTM System is designed for hyoid bone suspension to 
the mandible bone using bone screws and suspension lines. The 
EncoreTM System kit contains the following items:
     Integrated suture passer pre-loaded with polyester suture;
     Three bone screws and two bone screw inserters;
     Suspension line lock tool;
     Threading tool for suspension lines; and
     Four polyester suspension lines.
    With regard to the newness criterion, the EncoreTM 
System received FDA clearance through the section 510(k) process on 
March 26, 2014. Accordingly, it appears that the EncoreTM 
System is new for purposes of evaluation for device pass-through 
payments.
    Several components of the EncoreTM System appear to be 
either instruments or supplies, which are not eligible for pass-through 
according to Sec.  419.66(b)(4)(i) and (ii). For instance, the suture 
passer is an instrument and the suture is a supply, the bone screw 
inserters are instruments, the suspension line lock tool is an 
instrument, the threading tool for suspension lines is an instrument, 
and the polyester suspension lines are similar to sutures and therefore 
are supplies. With respect to the presence of a previously established 
code, the only implantable devices in the kit are the bone screws, and 
by the applicant's own admission the bone screws are described by the 
existing pass-through category HCPCS code C1713 (Anchor/screw for 
opposing bone-to-bone or soft tissue-to-bone (implantable)). In the CY 
2017 OPPS/ASC proposed rule (81 FR 45651), we invited public comments 
on whether the EncoreTM System bone screws are described by 
a previously existing category and also whether the remaining kit 
components are supplies or instruments.
    Comment: One commenter, the manufacturer, stated that the 
EncoreTM bone screws are designed with unique strength, 
profile and adjustability functions for the EncoreTM System, 
and therefore the bone screws are not adequately described by HCPCS 
code C1713. In addition, the commenter stated that the remaining kit 
components are custom designed for the procedure, would not be 
available otherwise within the operating room, and, therefore, would 
not meet the criteria for supplies and instruments, as specified in 
Sec.  419.66(b)(4)(i)(ii).
    Response: We note that manufacturers frequently package a number of 
individual items used with a device for a particular procedure into a 
kit. Hospitals may not bill for transitional pass-through payments for 
supplies that may be contained in kits (Medicare Claims Processing 
Manual (Pub. 100-04, Chapter 4, Section 60.4)). We continue to believe 
that the suture passer, the bone screw inserters, the suspension line 
lock tool, and the threading tool for suspension lines are all 
instruments and that the sutures and polyester suspension lines are 
supplies, even though they may have been customized for the procedure. 
Regarding the bone screws, we continue to believe that the bone screws 
are described by HCPCS code C1713 because, although customized, the 
bone screws anchor/

[[Page 79652]]

screw for opposing bone-to-bone (hyoid bone to mandible bone).
    With regard to the cost criterion, the applicant stated that the 
EncoreTM System would be used in the procedure described by 
CPT code 21685 (Hyoid myotomy and suspension). CPT code 21685 is 
assigned to APC 5164 (Level 4 ENT Procedures) with a CY 2016 payment 
rate of $1,616.90, and the device offset is $15.85. The price of the 
EncoreTM System as stated in the application is $2,200. To 
meet the cost criterion, there are three cost significance subtests 
that must be met and the calculations are noted below. The first cost 
significance is that the device cost needs to be at least 25 percent of 
the applicable APC payment rate to reach cost significance: $2,200/
$1,616.90 x 100 percent = 136 percent. Thus, the EncoreTM 
System meets the first cost significance test. The second cost 
significance test is that the device cost needs to be at least 125 
percent of the offset amount (the device-related portion of the APC 
found on the offset list): $2,200/$15.85 x 100 percent = 13880 percent. 
Thus, the EncoreTM System meets the second cost significance 
test. The third cost significance test is that the difference between 
the estimated average reasonable cost of the devices in the category 
and the portion of the APC payment amount determined to be associated 
with the device in the associated APC exceeds 10 percent of the total 
APC payment: ($2,200--$15.85)/$1,616.90 x 100 percent = 135 percent. 
Thus, the EncoreTM System meets the third cost significance 
test. Based on the costs submitted by the applicant and the 
calculations noted earlier, the EncoreTM System meets the 
cost criterion. However, as stated in the proposed rule, we have 
concerns about whether the cost criterion would be met if based only on 
the kit components that are not supplies, not instruments, and not 
described by an existing category (if any).
    We did not receive any public comments related to the cost 
criterion of the EncoreTM System application. As noted 
earlier in this section, the applicant stated that the 
EncoreTM System would be used in the procedure described by 
CPT code 21685 (Hyoid myotomy and suspension). CPT code 21685 is 
assigned to APC 5164 (Level 4 ENT Procedures) with a CY 2016 payment 
rate of $1,616.90, and the device offset is $15.85. The applicant also 
stated that the price of the EncoreTM System is $2,200. 
Based on our determination earlier in this section of this final rule 
with comment period, the device is described by HCPCS code C1713 and 
the bone screws and other kit supplies are supplies and instruments. 
Because of this determination, the cost of the device and the other 
components in the kit cannot be included in the device costs used to 
determine whether the device meets the cost criterion. Accordingly, the 
EncoreTM System does not meet the cost threshold.
    With regard to the substantial clinical improvement criterion, the 
applicant provided a thorough review of the hyoid myotomy with 
suspension and other surgical procedures that treat mild or moderate 
obstructive sleep apnea. However, specific data addressing substantial 
clinical improvement with the EncoreTM System were lacking. 
The application included information on a case series of 17 obstructive 
apnea patients who received an Encore hyo-mandibular suspension as well 
as a previous or concurrent uvulopalatopharyngoplasty (UPPP). According 
to the application, the 17 patients studied demonstrated a 76 percent 
surgical success, and 73 percent median reduction in the Respiratory 
Disturbance Index (RDI) at 3 months, significantly reduced surgical 
time, and 1 infection requiring device removal. This study was a 
retrospective, single center study with no comparator.
    In addition, the American Academy of Otolaryngology Head and Neck 
Surgery (AAOHNS) ``Position Statement: Tongue Based Procedures'' 
(accessed on 3.30.2016 and located at: http://www.entnet.org/node/215) 
considers the Hyoid myotomy and suspension ``effective and non-
investigational with proven clinical results when considered as part of 
the comprehensive surgical management of symptomatic adult patients 
with mild obstructive sleep apnea (OSA) and adult patients with 
moderate and severe OSA assessed as having tongue base or 
hypopharyngeal obstruction.'' The AMA CPT Editorial Panel created CPT 
code 21685 (Hyoid myotomy and suspension) in 2004. The AAOHNS statement 
and the age of the CPT code indicate that this is an established 
surgical procedure. The EncoreTM System is a new kit of 
surgical instruments and implantable materials that are used to perform 
this procedure. According to the EncoreTM System's section 
510(k) Summary, ``[t]he fundamental scientific technology and 
technological characteristics of the EncoreTM System are the 
same as the predicate devices,'' which includes the Medtronic AirVance 
System (another surgical kit used on CPT code 21685). The applicant 
claimed several advantages of the EncoreTM System over the 
AirVance System that relate to greater ease of use for the surgeon and 
better long-term stability. However, there are no studies comparing the 
EncoreTM System to the AirVance System. There are no 
clinical data provided by the applicant to suggest that the 
EncoreTM System kit provides a substantial clinical 
improvement over other instruments/implants that are used to perform 
Hyoid myotomy and suspension. In the proposed rule, we invited public 
comments on whether the EncoreTM System meets the 
substantial clinical improvement criterion.
    Comment: One commenter stated that the EncoreTM System 
has ``provided improved and more consistent results than previous hyoid 
suspension techniques'' and that it is reasonable to assume that a 
system that provides significantly improved control of the hyoid bone 
suspension location and greater long-term stability of this surgically 
modified hyoid bone location will lead to improved and less variable 
clinical results for the patients treated, including reducing the 
mortality rate, future hospitalization, and the need for future 
additional interventions. Numerous commenters who used the 
EncoreTM System supported the application and stated that, 
in their experience, the system provided a substantial clinical 
improvement for performing hyomandibular suspension and was superior to 
the hyo-thyroid technique. These commenters did not provide any new 
empirical data in support of the application.
    Response: As stated in the proposed rule, there were no clinical 
data provided by the applicant to suggest that the EncoreTM 
System kit provides a substantial clinical improvement over other 
instruments/implants that are used to perform Hyoid myotomy and 
suspension. While the commenters provided some suggestions that the 
EncoreTM System kit had clinical merits, these suggestions 
were anecdotal and largely based on assumptions, not actual empirical 
clinical evidence. Because no new significant information or data were 
provided through the public comments, we are not able to determine that 
the EncoreTM System represents a substantial clinical 
improvement relative to existing medical treatments.
    After consideration of the public comments we received, we are not 
approving device pass-through payment status for the 
EncoreTM System for CY 2017.
(3) Endophys Pressure Sensing System (Endophys PSS) or Endophys 
Pressure Sensing Kit
    Endophys Holdings, LLC. submitted an application for a new device 
pass-

[[Page 79653]]

through category for the Endophys Pressure Sensing System or Endophys 
Pressure Sensing Kit (hereinafter referred to as the Endophys PSS). The 
applicant suggested a category descriptor within either the HCPCS code 
C18XX series or the HCPCS code C26XX series and the device was 
described by the applicant as a stand-alone catheterization sheath that 
is inserted percutaneously during intravascular diagnostic or 
interventional procedures. When applied intravascularly, the two 
separate functions delivering an improved patient outcome include: (1) 
Continuous intra-arterial blood pressure monitoring using a high-
precision Fabry-Perot pressure sensor located within the device 
anterior approaching the distal tip of the system; and (2) a conduit 
that allows the introduction of other devices for cardiovascular or 
percutaneous interventional procedures.
    The Endophys PSS is an introducer sheath (including a dilator and 
guidewire) with an integrated fiber optic pressure transducer for blood 
pressure monitoring. The Endophys PSS is used with the Endophys Blood 
Pressure Monitor to display blood pressure measurements. The sheath is 
inserted percutaneously during intravascular diagnostic or 
interventional procedures, typically at the site of the patient's 
femoral artery. This device facilitates the introduction of diagnostic 
and interventional devices into the coronary and peripheral vessels 
while continuously sensing and reporting blood pressure during the 
interventional procedure. Physicians would use this device to pass 
guidewires, catheters, stents, and coils, to perform the diagnostic or 
therapeutic treatment on the coronary or other vasculature. The 
Endophys PSS provides continuous blood pressure monitor information to 
the treating physician so that there is no need for an additional 
arterial access site for blood pressure monitoring.
    With respect to the newness criterion, the Endophys PSS received 
FDA clearance through the section 510(k) process on January 7, 2015, 
and therefore is new. According to the applicant, the Endophys PSS is 
an integral part of various endovascular procedures, is used for one 
patient only, comes in contact with human skin, and is surgically 
implanted. Endophys PSS is not an instrument, apparatus, implement or 
item for which depreciation and financing expenses are recovered, and 
it is not a supply or material.
    With respect to the presence of a previously established category, 
based on our review of the application, we believe that Endophys PSS 
may be described by HCPCS code C1894 (Introducer/sheath, other than 
guiding, other than intracardiac electrophysiological, non-laser). The 
FDA section 510(k) Summary Product Description Section in the 
application describes the Endophys PSS as an introducer sheath with an 
integrated fiber optic pressure transducer. Because the Endophys PSS is 
an introducer sheath that is not guiding, not intracardiac 
electrophysiological, and not a laser, we believe that it is described 
by the previously existing category of HCPCS code C1894 established for 
transitional pass-through payments. In the CY 2017 OPPS/ASC proposed 
rule (81 FR 45652), we invited public comment on whether Endophys PSS 
is described by a previously existing category.
    Comment: One commenter, the manufacturer, disagreed with CMS that 
the Endophys PSS is described by HCPCS code C1894 and states that HCPCS 
code C1894 ``describes a device that does not look like the Endophys 
PSS, does not provide continuous intraarterial blood pressure readings 
equivalent to a radial arterial line, is not used or monitored by a 
physician in a similar manner.'' The commenter noted that the design 
for Endophys PSS is patented. The commenter also noted that FDA has 
assigned new product codes to the Endophys PSS that are not similar to 
devices described by HCPCS code C1894.
    Response: We continue to believe that HCPCS code C1894 accurately 
describes the Endophys PSS because it is a type of introducer/sheath 
(but with a built-in pressure transducer). Also, a new product code 
from the FDA, which is used by the FDA to classify and track a medical 
device, is not relevant in CMS' consideration of whether the device is 
described by an existing HCPCS C-code. The FDA may provide new product 
codes for items that we consider to be described more broadly and with 
an existing HCPCS C-code.
    With respect to the cost criterion, according to the applicant, the 
Endophys PSS would be reported with CPT code 36620 (Arterial 
catheterization or cannulation for sampling, monitoring or transfusion 
(separate procedure); percutaneous). CPT code 36620 is assigned status 
indicator ``N'', which means its payment is packaged under the OPPS. 
The applicant stated that its device can be used in many endovascular 
procedures that are assigned to the APCs listed below:

------------------------------------------------------------------------
               APC                              Description
------------------------------------------------------------------------
5188.............................  Diagnostic Cardiac Catheterization.
5191.............................  Level 1 Endovascular Procedures.
5526.............................  Level 6 X-Ray and Related Services.
5183.............................  Level 3 Vascular Procedures.
5181.............................  Level 1 Vascular Procedures.
5182.............................  Level 2 Vascular Procedures.
5291.............................  Thrombolysis and Other Device
                                    Revisions.
------------------------------------------------------------------------

    To meet the cost criterion for device pass-through payment, a 
device must pass all three tests for cost threshold for at least one 
APC. For our calculations, we used APC 5291 (Thrombolysis and Other 
Device Revisions), which has a CY 2016 payment rate of $199.80 and the 
device offset of $3.38. According to the applicant, the cost of the 
Endophys PSS is $2,500. The first cost significance test is that the 
device cost needs to be at least 25 percent of the applicable APC 
payment rate to reach cost significance: $2,500/199.80 x 100 percent = 
1251 percent. Thus, the Endophys PSS meets the first cost significance 
test. The second cost significance test is that the device cost needs 
to be at least 125 percent of the offset amount (the device-related 
portion of the APC found on the offset list): $2,500/3.38 x 100 percent 
= 73964 percent. Thus, the Endophys PSS meets the second cost 
significance test. The third cost significance test is that the 
difference between the estimated average reasonable cost of the devices 
in the category and the portion of the APC payment amount determined to 
be associated with the device in the associated APC exceeds 10 percent 
of the total APC payment: ($2,500-3.38)/199.80 x 100 percent = 1250 
percent. Thus, the Endophys PSS meets the third cost significance test. 
Based on the costs submitted by the applicant and the above 
calculations, the Endophys PSS meets the cost criterion. In the 
proposed rule, we invited public comments on this issue.
    We did not receive any public comments on whether the Endophys PSS 
meets the cost criterion. We continue to believe that the Endophys PSS 
meets the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant stated that the Endophys PSS represents a substantial 
clinical improvement over existing medical therapies because the 
Endophys PSS includes a built-in pressure sensor, which eliminates the 
need for a second arterial line to monitor the blood pressure. The 
applicant stated that the Endophys PSS reduces the time to treatment 
for the patient (because there is no time needed to establish the 
second arterial line) and reduces

[[Page 79654]]

potential complications associated with the second arterial line. While 
several references were provided in support of this application, there 
were minimal direct clinical data provided on the Endophys PSS to 
support substantial clinical improvement. The application included 
slides with statements pertaining to cost savings, reduced morbidity 
and life saving for a study of 36 patients, but a published study was 
not submitted and additional information on study design and other 
details of the study were not provided. Also, the applicant provided 
six physician testimonials citing support for the Endophys PSS based on 
between one and six patient experiences with the device.
    The published articles provided with the application did not 
provide any information based on usage of the Endophys PSS. Topics 
addressed in the references included: Articles on intraarterial 
treatment for acute ischemic stroke; references providing education on 
blood pressure measurement and monitoring; articles on complications 
during percutaneous coronary intervention; and a reference on 
ultrasound guided placement of arterial cannulas in the critically ill. 
Given the paucity of studies using the Endophys PSS, we stated in the 
proposed rule that we have not been persuaded that the threshold for 
substantial clinical improvement has been met. We invited public 
comments on whether the Endophys PSS meets the substantial clinical 
improvement criterion.
    Comment: One commenter, the manufacturer, submitted a new 
publication \4\ that compared a set of patients' radial artery 
catheterization (RAC) blood pressure measurements, sphygmomanometer 
readings, and measurements from the Endophys PSS. Study results 
suggested that the Endophys PSS correlated with the RAC and the blood 
pressure cuff. The study authors conclude that because the Endophys PSS 
has ``competitive functionality to that seen with a dedicated radial 
artery catheter for blood pressure monitoring and is available 
immediately on sheath insertion without the added risk of [RAC] . . . , 
potential complications from RAC could be avoided.'' In addition, in 
its comment, the commenter noted that validation of the patient benefit 
due to the lack of a second arterial line for blood pressure monitoring 
in a randomized clinical trial may not meet the criteria of a well-
designed clinical investigation and cited three considerations for why 
this is the case. The commenter noted that the ``clinical evidence is 
abundant in the published literature reporting the incidence of radial 
arterial catheterization complications, cost, and patient morbidity. 
Time saved by eliminating a second RA placement while providing 
equivalent and continuous arterial pressure readings is obvious, and 
has cost benefits beyond the purely medical benefits discussed above.'' 
The commenter further noted that patients who received Endophys PSS 
``did not require a RA catheter placement, no serious complications 
were reported, and that the procedure was completed achieving the 
therapeutic objective. Reports were received across the centers noting 
when using accurate continuous arterial pressures the clinician was 
alerted to serious changes in blood pressure requiring immediate 
attention. In the absence of the Endophys PSS, the variance would not 
have been identified causing the patient to suffer complications.''
---------------------------------------------------------------------------

    \4\ Purdy PD, South C. Klucznik RP et al. J NeuroIntervent Surg. 
Published online first July 16, 2016 doi:10.1136/neurintsurg-2016-
012536).
---------------------------------------------------------------------------

    Response: We appreciate the submission of the new study as well as 
the public comment. We note that the study appears to show correlation 
on blood pressure readings between the Endophys PSS and RAC, and we 
believe that a clinical trial of the Endophys PSS versus RAC examining 
complication rates would be necessary to validate the theory of 
reduction in complication rates with use of the Endophys PSS. 
Accordingly, we do not believe the study supports a definitive 
conclusion that this device provides a substantial clinical improvement 
over existing modalities.
    After consideration of the public comments we received, we are not 
approving device pass-through payment status for the Endophys PSS for 
CY 2017.
3. Beginning Eligibility Date for Device Pass-Through Payment Status
    The regulation at 42 CFR 419.66(g) currently provides that the 
pass-through payment eligibility period begins on the date CMS 
establishes a category of devices. In the CY 2017 OPPS/ASC proposed 
rule (81 FR 45653), we proposed to amend Sec.  419.66(g) such that it 
more accurately comports with section 1833(t)(6)(B)(iii)(II) of the 
Act, which provides that the pass-through eligibility period begins on 
the first date on which pass-through payment is made. We recognize that 
there may be a difference between the establishment of a pass-through 
category and the date of first pass-through payment for a new pass-
through device for various reasons. In most cases, we would not expect 
this proposed change in the beginning pass-through eligibility date to 
make any difference in the anticipated pass-through expiration date. 
However, in cases of significant delay from the date of establishment 
of a pass-through category to the date of the first pass-through 
payment, by using the date that the first pass-through payment was made 
rather than the date on which a device category was established could 
result in an expiration date of device pass-through eligibility that is 
later than it otherwise would have been had the clock began on the date 
the category was first established. We invited public comments on our 
proposal.
    Comment: Many commenters supported the proposal. The commenters' 
statements of support included that the proposed policy recognizes that 
the quarterly implementation date may not be aligned with market 
availability and starting the device pass-through eligibility period on 
date of first payment would allow for more robust data collection for 
the purposes of setting future APC rates to accurately include the 
device costs.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing the proposal to amend Sec.  419.66(g) such that it provides 
that the pass-through eligibility period begins on the first date on 
which pass-through payment is made.
4. Policy To Make the Transitional Pass-Through Payment Period 3 Years 
for All Pass-Through Devices and Expire Pass-Through Status on a 
Quarterly Rather Than Annual Basis
a. Background
    As required by statute, transitional pass-through payments for a 
device described in section 1833(t)(6)(B)(iii) of the Act can be made 
for a period of at least 2 years, but not more than 3 years, beginning 
on the first date on which pass-through payment was made for the 
product. Our current policy is to accept pass-through applications on a 
quarterly basis and to begin pass-through payments for new pass-through 
devices on a quarterly basis through the next available OPPS quarterly 
update after the approval of a device's pass-through status. However, 
we expire pass-through status for devices on a calendar-year basis 
through notice-and-comment rulemaking rather than on a quarterly basis. 
Device pass-through status currently expires at the end of a

[[Page 79655]]

calendar year when at least 2 years of pass-through payments have been 
made, regardless of the quarter in which it was initially approved. 
This means that the duration of the pass-through eligibility for a 
particular device will depend upon when during a year the applicant 
applies and is approved for pass-through payment. For example, a new 
pass-through device with pass-through payment status effective on April 
1 would receive 2 years and 3 quarters of pass-through payment status, 
while a pass-through device with pass-through payment status effective 
on October 1 would receive 2 years and 1 quarter of pass-through 
payment status.
b. CY 2017 Policy
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45653), we proposed, 
beginning with pass-through devices newly approved in CY 2017 and 
subsequent calendar years, to allow for a quarterly expiration of pass-
through payment status for devices to afford a pass-through payment 
period that is as close to a full 3 years as possible for all pass-
through payment devices. This proposed change would eliminate the 
variability of the pass-through eligibility period, which currently 
varies based on the timing of the particular application. For example, 
under this proposal, for a device with pass-through first effective on 
October 1, 2017, pass-through payment status would expire on September 
30, 2020. As stated in the proposed rule, we believe that the payment 
adjustment for transitional pass-through payments for devices under the 
OPPS is intended to provide adequate payment for new innovative 
technology while we collect the necessary data to incorporate the costs 
for these devices into the calculation of the associated procedure 
payment rate (66 FR 55861). We believe that the 3-year maximum pass-
through payment period for all pass-through devices would better insure 
robust data collection and more representative procedure payments once 
the pass-through payment devices are packaged. We invited public 
comments on this proposal.
    Comment: Many commenters, including MedPAC, supported the proposal. 
Some commenters suggested that, by maximizing the timeframe for receipt 
of device pass-through payment, there would be more robust cost data 
that can be utilized for setting future APC rates to accurately include 
the device costs.
    Response: We appreciate the commenters' support.
    Comment: One commenter asked whether CMS intends to adjust payment 
rates mid-year to include the costs of newly packaged devices upon 
expiration of device pass-through payments, when a device pass-through 
payment status expires mid-year. The commenter was concerned that 
hospitals might not receive adequate payment for the costs of a device, 
unless the payment was also adjusted, when the device pass-through 
payment status expired.
    Response: We do not generally adjust payment rates mid-year and do 
not anticipate doing so for this proposal. Under our final policy, we 
will continue to include all device costs in the associated 
procedure(s) for ratesetting purposes. The final CY 2017 OPPS policy 
represents an extension of the timeframe for which device pass-through 
payment policy applies but does not affect the claims available for 
ratesetting purposes. We note that our not adjusting rates mid-year 
will not result in double payment for devices. While the device 
maintains pass-through payment status, we will reduce APC payment by 
the device offset and add the device pass-through payment; once the 
device pass-through payment status expires, hospitals will bill for and 
receive the full APC payment, which includes packaged device costs.
    Comment: Several commenters requested that CMS consider amending 
the proposal in order to implement the proposed policy retroactively to 
previously approved devices that were proposed to continue receiving 
device pass-through payments in CY 2017. The commenters stated that 
this recommended change would extend the timeframe for receipt of 
device pass-through payments to current applicants that have already 
been awarded device pass-through payment status and anticipate receipt 
of device pass-through payments in CY 2017.
    Response: As proposed, the policy begins with pass-through devices 
newly approved in CY 2017, and we are not going to this policy for 
devices that received pass-through payment approval prior to CY 2017.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to allow for quarterly 
expiration of pass-through payment status for devices, beginning with 
newly approved pass-through payment devices in CY 2017 and subsequent 
calendar years, to afford a pass-through payment period that is as 
close to a full 3 years as possible for all pass-through payment 
devices.
5. Changes to Cost-to-Charge Ratios (CCRs) That Are Used To Determine 
Device Pass-Through Payments
a. Background
    Section 1833(t)(6)(D)(ii) of the Act and 42 CFR 419.66(h) describe 
how payment will be determined for pass-through payment devices. 
Currently, transitional pass-through payments for devices are 
calculated by taking the hospital charges for each billed device, 
reducing them to cost by use of the hospital's average CCR across all 
outpatient departments, and subtracting an amount representing the 
device cost contained in the APC payments for procedures involving that 
device (65 FR 18481 and 65 FR 67809). In the original CY 2000 OPPS 
final rule, we stated that we would examine claims in order to 
determine if a revenue center-specific set of CCRs should be used 
instead of the average CCR across all outpatient departments (65 FR 
18481).
    In the FY 2009 IPPS final rule (73 FR 48458 through 48467), CMS 
created a cost center for ``Medical Supplies Charged to Patients,'' 
which are generally low cost supplies, and another cost center for 
``Implantable Devices Charged to Patients,'' which are generally high-
cost implantable devices. This change was in response to a Research 
Triangle Institute, International (RTI) study that was discussed in the 
FY 2009 IPPS final rule and which determined that there was charge 
compression in both the IPPS and the OPPS cost estimation of expensive 
and inexpensive medical supplies. Charge compression can result in 
undervaluing high-cost items and overvaluing low-cost items when an 
estimate of average markup, embodied in a single CCR (such as the 
hospital-wide CCR) is applied to items of widely varying costs in the 
same cost center. By splitting medical supplies and implantable devices 
into two cost centers, some of the effects of charge compression were 
mitigated. The cost center for ``Implantable Devices Charged to 
Patients'' has been available for use for OPPS cost reporting periods 
beginning on or after May 1, 2009.
    In CY 2013, we began using data from the ``Implantable Devices 
Charged to Patients'' cost center to create a distinct CCR for use in 
calculating the OPPS relative payment weights for CY 2013 (77 FR 
68225). Hospitals have adapted their cost reporting and coding 
practices in order to report usage to the ``Implantable Devices Charged 
to Patients'' cost center, resulting in sufficient data to perform a 
meaningful analysis. However, we have continued to use the hospital-
wide CCR in our

[[Page 79656]]

calculation of device pass-through payments. We have received a request 
to consider using the ``Implantable Devices Charged to Patients'' CCR 
in the calculation of device pass-through payment and have evaluated 
this request. An analysis of the CCR data for the CY 2017 OPPS/ASC 
proposed rule indicated that about two-thirds of providers have an 
``Implantable Devices Charged to Patients'' CCR. At the time of our 
analysis for the proposed rule, for the hospitals that have an 
``Implantable Devices Charged to Patients'' CCR, the median was 0.3911, 
compared with a median hospital-wide CCR of 0.2035.
b. CY 2017 Policy
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45654), we proposed to 
use the more specific ``Implantable Devices Charged to Patients'' CCR 
instead of the less specific average hospital-wide CCR to calculate 
transitional pass-through payments for devices, beginning with device 
pass-through payments in CY 2017. When the CCR for the ``Implantable 
Devices Charged to Patients'' CCR is not available for a particular 
hospital, we would continue to use the average CCR across all 
outpatient departments to calculate pass-through payments. We believe 
using the ``Implantable Devices Charged to Patients'' CCR will provide 
more accurate pass-through payments for most device pass-through 
payment recipients and will further mitigate the effects of charge 
compression. We invited public comments on this proposal.
    Comment: Many commenters, including MedPAC, supported the proposal. 
Commenters generally agreed that use of the ``Implantable Devices 
Charged to Patients'' CCR would result in more accurate measurement of 
costs for pass-through medical devices, by reducing the effects of 
charge compression when applying the hospital-wide CCR.
    Response: We appreciate the commenters' support.
    Comment: One commenter suggested that CMS modify the proposal to 
allow use of the ``Medical Supplies Charged to Patients'' CCR, if the 
hospital does not have an ``Implantable Devices Charged to Patients'' 
CCR. The commenter stated that this CCR would be a more accurate cost 
calculation than the hospital-wide CCR.
    Response: In the FY 2009 IPPS final rule (73 FR 48458 through 
48467), we created a cost center for ``Medical Supplies Charged to 
Patients,'' which generally includes low cost supplies, and another 
cost center for ``Implantable Devices Charged to Patients,'' which 
generally includes high-cost implantable devices. This change was in 
response to a Research Triangle Institute, International (RTI) study 
that was discussed in the FY 2009 IPPS final rule and which determined 
that there was charge compression in both the IPPS and the OPPS cost 
estimation of expensive and inexpensive medical supplies. By splitting 
medical supplies and implantable devices into two cost centers, some of 
the effects of charge compression were mitigated. We note that the 
intent of the ``Medical Supplies Charged to Patients'' CCR is to 
capture the costs and charges for low cost supplies which would not 
include implantable devices. Accordingly, in the absence of an 
``Implantable Devices Charged to Patients'' CCR, we believe that the 
hospital-wide CCR would be an appropriate alternative since the 
hospital-wide CCR should reflect any implantable device costs that were 
incurred.
    Comment: One commenter stated that providers who have not complied 
with the requirement to create an ``Implantable Devices Charged to 
Patients'' cost center should not receive any indirect payment benefits 
from their noncompliance.
    Response: We note that we provide some flexibility in how hospitals 
address their cost reporting. As noted in the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60344), ``We typically do not specify a 
revenue-code-to-cost center crosswalk that hospitals must adopt to 
prepare their cost reporting, recognizing hospitals' need to interpret 
. . . cost reporting requirements within the context of their own 
financial systems.''
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to use the ``Implantable 
Devices Charged to Patients'' CCR instead of the average hospital-wide 
CCR to calculate transitional pass-through payments for devices, 
beginning with device pass-through payments in CY 2017. If the CCR for 
the ``Implantable Devices Charged to Patients'' CCR is not available 
for a particular hospital, we will instead use the average hospital-
wide CCR to calculate pass-through payments.
6. Provisions for Reducing Transitional Pass-Through Payments To Offset 
Costs Packaged Into APC Groups
a. Background
    Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional 
pass-through payment for an eligible device as the amount by which the 
hospital's charges for a device, adjusted to cost (the cost of the 
device), exceeds the portion of the otherwise applicable Medicare 
outpatient department fee schedule amount (the APC payment amount) 
associated with the device. We have an established policy to estimate 
the portion of each APC payment rate that could reasonably be 
attributed to the cost of the associated devices that are eligible for 
pass-through payments (66 FR 59904) for purposes of estimating the 
portion of the otherwise applicable APC payment amount associated with 
pass-through devices. For eligible device categories, we deduct an 
amount that reflects the portion of the APC payment amount that we 
determine is associated with the cost of the device, defined as the 
device APC offset amount, from the charges adjusted to cost for the 
device, as provided by section 1833(t)(6)(D)(ii) of the Act, to 
determine the pass-through payment amount for the eligible device. We 
have 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). In the unusual case where the device 
offset amount exceeds the device pass-through payment amount, the 
regular APC rate would be paid and the pass-through payment would be 
$0.
b. CY 2017 Policy
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45654), for CY 2017, 
we proposed to calculate the portion of the otherwise applicable 
Medicare OPD fee schedule amount, for each device-intensive procedure 
payment rate that can reasonably be attributed to (that is, reflect) 
the cost of an associated device (the device offset amount) at the 
HCPCS code level rather than at the APC level (which is an average of 
all codes assigned to an APC). We refer readers to section IV.B. of the 
proposed rule and of this final rule with comment period for a 
discussion of this proposal. Otherwise, as stated in the proposed rule, 
we will continue our established practice of reviewing each new pass-
through device category to determine whether device costs associated 
with the new category replace device costs that are already packaged 
into the device implantation procedure. If device costs that are 
packaged into the procedure are related to the new category, then 
according to our established practice we will deduct the device offset 
amount from the pass-through payment for the device

[[Page 79657]]

category. The list of device offsets for all device procedures is 
posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    We are finalizing, without modification, our proposal to calculate 
the portion of the otherwise applicable Medicare OPD fee schedule 
amount for each device-intensive procedure payment rate that can be 
reasonably attributed to (that is, reflect) the cost of an associated 
device at the HCPCS code level rather than at the APC level. We refer 
readers to section IV.B. of this final rule with comment period for a 
discussion of the proposal to calculate device offsets at the HCPCS 
level. Otherwise, we will continue our established practice of 
reviewing each new pass-through device category to determine whether 
device costs associated with the new category replace device costs that 
are already packaged into the device implantation procedure. If device 
costs that are packaged into the procedure are related to the new 
category, then according to our established practice, we will deduct 
the device offset amount from the pass-through payment for the device 
category. The list of device offsets for all device procedures will be 
posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

B. Device-Intensive Procedures

1. Background
    Under the OPPS, device-intensive APCs are defined as those APCs 
with a device offset greater than 40 percent (79 FR 66795). In 
assigning device-intensive status to an APC, the device costs of all of 
the procedures within the APC are calculated and the geometric mean 
device offset of all of the procedures must exceed 40 percent. Almost 
all of the procedures assigned to device-intensive APCs utilize 
devices, and the device costs for the associated HCPCS codes exceed the 
40-percent threshold. The no cost/full credit and partial credit device 
policy (79 FR 66872 through 66873) applies to device-intensive APCs and 
is discussed in detail in section IV.B.4. of this final rule with 
comment period. A related device policy is the requirement that certain 
procedures assigned to device-intensive APCs require the reporting of a 
device code on the claim (80 FR 70422). For further background 
information on the device-intensive APC policy, we refer readers to the 
CY 2016 OPPS/ASC final rule with comment period (80 FR 70421 through 
70426).
2. HCPCS Code-Level Device-Intensive Determination
    As stated above, currently the device-intensive methodology assigns 
device-intensive status to all procedures requiring the implantation of 
a device, which are assigned to an APC with a device offset greater 
than 40 percent. Historically, the device-intensive designation has 
been at the APC level and applied to the applicable procedures within 
that given APC. In the CY 2017 OPPS/ASC proposed rule (81 FR 45654), 
for CY 2017, we proposed to modify the methodology for assigning 
device-intensive status. Specifically, for CY 2017, we proposed to 
assign device-intensive status to all procedures that require the 
implantation of a device and have an individual HCPCS code-level device 
offset of greater than 40 percent, regardless of the APC assignment, as 
we no longer believe that device-intensive status should be based on 
APC assignment because APC groupings of clinically similar procedures 
do not necessarily factor in device cost similarity. In 2016, we 
restructured many of the APCs, and this resulted in some procedures 
with significant device costs not being assigned device-intensive 
status because they were not assigned to a device-intensive APC. Under 
our proposal, all procedures with significant device costs (defined as 
a device offset of more than 40 percent) would be assigned device-
intensive status, regardless of their APC placement. Also, we believe 
that a HCPCS code-level device offset would, in most cases, be a better 
representation of a procedure's device cost than an APC-wide average 
device offset based on the average device offset of all of the 
procedures assigned to an APC. Unlike a device offset calculated at the 
APC level, which is a weighted average offset for all devices used in 
all of the procedures assigned to an APC, a HCPCS code-level device 
offset is calculated using only claims for a single HCPCS code. We 
believe that such a methodological change would result in a more 
accurate representation of the cost attributable to implantation of a 
high-cost device, which would ensure consistent device-intensive 
designation of procedures with a significant device cost. Further, we 
believe a HCPCS code-level device offset would remove inappropriate 
device-intensive status to procedures without a significant device cost 
but which are granted such status because of APC assignment.
    Under our proposal, procedures that have an individual HCPCS code-
level device offset of greater than 40 percent would be identified as 
device-intensive procedures and would be subject to all the CY 2017 
policies applicable to procedures assigned device-intensive status 
under our established methodology, including our policies on device 
edits and device credits. Therefore, under our proposal, all procedures 
requiring the implantation of a medical device and that have an 
individual HCPCS code-level device offset of greater than 40 percent 
would be subject to the device edit and no cost/full credit and partial 
credit device policies, discussed in sections IV.B.3. and IV.B.4. of 
the proposed rule, respectively. We proposed to amend the regulation at 
Sec.  419.44(b)(2) to reflect that we would no longer be designating 
APCs as device-intensive, and instead would be designating procedures 
as device-intensive.
    Comment: The majority of commenters supported the proposal to 
revise the device-intensive calculation methodology and calculate at 
the HCPCS code level rather than at the APC level. One commenter 
believed that device-intensive procedures should not be assigned to an 
APC that includes procedures that are not device-intensive. A few 
commenters asked that CMS provide further detail into how device 
offsets are calculated, and provide examples of how this proposed 
change might impact existing APCs for both OPPS and ASC payment prior 
to implementing. One commenter requested that CMS make further 
refinements to the methodology if needed to ensure the full breadth of 
implantable device and supply costs are being captured and recommended 
moving forward that CMS routinely release the device offset 
calculations with each year's OPPS/ASC proposed rule. Another commenter 
requested that CMS create two different device offsets based on 
differing calculations, with the proposed device offset methodology 
used to calculate a ``device offset for device intensive policies'' 
(which would be used to determine if a procedure is device intensive or 
not) and an alternate methodology used to calculate a ``device offset 
for pass-through payment policy'' (which would be used to calculate the 
portion of the otherwise applicable Medicare OPD fee schedule amount 
for device pass-through status).
    Response: We appreciate the commenters' support. We disagree with 
the commenter's belief that device-intensive procedures should not be 
assigned to an APC that includes procedures that are not device-
intensive. Under our proposed policy, the APC placement of a device-
intensive

[[Page 79658]]

procedure will have no bearing on the procedure's device-intensive 
designation. The device offset is the estimated portion of the payment 
for a procedure that is attributable to the device. We remind 
commenters that the list of device offsets for all device procedures is 
posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In response 
to the request to create an additional device offset for pass-through 
payment policy, in addition to a device offset based on the proposed 
device offset methodology, we do not see the need for the creation of a 
second device offset. We believe that a device offset calculated based 
on the proposed device offset methodology is appropriate and an 
accurate proxy for a procedure's device costs when calculating the 
portion of the otherwise applicable Medicare OPD fee schedule amount.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, for CY 2017, to assign 
device-intensive status to all procedures that require the implantation 
of a device and have an individual HCPCS code-level device offset of 
greater than 40 percent, regardless of the APC assignment.
    In addition, for new HCPCS codes describing procedures requiring 
the implantation of medical devices that do not yet have associated 
claims data, we proposed to apply device-intensive status with a 
default device offset set at 41 percent until claims data are available 
to establish the HCPCS code-level device offset for the procedures. 
This default device offset amount of 41 percent would not be calculated 
from claims data; instead it would be applied as a default until claims 
data are available upon which to calculate an actual device offset for 
the new code. The purpose of applying the 41 percent default device 
offset to new codes that describe procedures that implant medical 
devices would be to ensure ASC access for new procedures until claims 
data become available. However, as stated in the proposed rule (81 FR 
45655), in certain rare instances, for example, in the case of a very 
expensive implantable device, we may temporarily assign a higher offset 
percentage if warranted by additional information such as pricing data 
from a device manufacturer. Once claims data are available for a new 
procedure requiring the implantation of a medical device, device-
intensive status would be applied to the code if the HCPCS code-level 
device offset is greater than 40 percent, according to our proposed 
policy of determining device-intensive status by calculating the HCPCS 
code-level device offset. The full listing of proposed device-intensive 
procedures was included in a new Addendum P to the proposed rule (which 
is available via the Internet on the CMS Web site).
    Comment: A number of commenters supported CMS' proposal to apply a 
default device offset of at least 41 percent to new implant procedures 
with the possibility for higher device offset if supported by device 
costs. Some commenters in support of the proposal asked that CMS 
specify how additional information can be submitted, including the 
deadline for submission, the type of information that can be submitted 
and who it can be submitted by to have CMS consider a higher offset 
percentage for a new implant procedure. One commenter did not support 
the proposal under which every new HCPCS code that describes procedures 
requiring implantation of a device should be assigned a default device 
offset of 41 percent. This commenter stated that CMS should ensure that 
all new procedures requiring implantation of a device require use of a 
device that is described by a device HCPCS code that satisfies the 
device edit for device intensive procedures, before assigning a default 
device offset of 41 percent and recognizing the new implantation 
procedure as a device intensive procedure.
    Response: We appreciate the commenters' support. Additional 
information for our consideration of an offset percentage higher than 
the default of 41 percent for new HCPCS codes describing procedures 
requiring the implantation (or in some cases the insertion) of a 
medical device that do not yet have associated claims data, such as 
pricing data or invoices from a device manufacturer, should be directed 
to the Division of Outpatient Care, Mail Stop C4-01-26, Centers for 
Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 
21244-1850, or electronically at [email protected]. Additional 
information can be submitted prior to issuance of an OPPS/ASC proposed 
rule or as a public comment in response to an issued OPPS/ASC proposed 
rule. Device offset percentages will be set in each year's final rule. 
In response to the commenter who did not support this proposal, we note 
that we are creating a new category HCPCS C-code (described in section 
IV.B.3. of this final rule with comment period) for providers to report 
when a device implantation or insertion procedure uses a device that is 
not described by a specific Level II HCPCS C-code so that these device 
intensive procedures can satisfy the device edit policy.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, for CY 2017 to apply 
device-intensive status with a default device offset set at 41 percent 
for new HCPCS codes describing procedures requiring the implantation of 
a medical device that do not yet have associated claims data until 
claims data are available to establish the HCPCS code-level device 
offset for the procedures. For CY 2017, we also are finalizing our 
proposal, without modification, that in certain rare instances, we may 
temporarily assign a higher offset percentage if warranted by 
additional information.
3. Changes to the Device Edit Policy
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66795), we finalized a policy and implemented claims processing edits 
that require any of the device codes used in the previous device-to-
procedure edits to be present on the claim whenever a procedure code 
assigned to any of the APCs listed in Table 5 of the CY 2015 OPPS/ASC 
final rule with comment period (the CY 2015 device-dependent APCs) is 
reported on the claim. In addition, in the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70422), we modified our previously existing 
policy and applied the device coding requirements exclusively to 
procedures that require the implantation of a device that are assigned 
to a device-intensive APC. In the CY 2016 OPPS/ASC final rule with 
comment period, we also finalized our policy that the claims processing 
edits are such that any device code, when reported on a claim with a 
procedure assigned to a device-intensive APC (listed in Table 42 of the 
CY 2016 OPPS/ASC final rule with comment period (80 FR 70422)) will 
satisfy the edit.
    As discussed in the CY 2017 OPPS/ASC proposed rule (81 FR 45655), 
as part of our proposal described in section IV.B.2. of the proposed 
rule to no longer recognize device-intensive APCs and instead recognize 
device-intensive procedures based on their individual HCPCS code-level 
device offset being greater than 40 percent, for CY 2017, we proposed 
to modify our existing device edit policy. Specifically, for CY 2017 
and subsequent years, we proposed to apply the CY 2016 device coding 
requirements to the newly defined (individual HCPCS code-level device 
offset greater than 40 percent) device-intensive procedures. In 
addition, we proposed that any device code, when reported on a claim 
with a device-

[[Page 79659]]

intensive procedure, would satisfy the edit.
    Comment: A number of commenters urged CMS to restore the specific 
device-to-procedure and procedure-to-device edits that CMS used to 
apply and not keep the current ``any device'' code policy. One 
commenter asked that CMS require hospitals to report all devices, not 
just those associated with procedures that CMS has already determined 
to be device intensive. Another commenter requested that CMS create a 
miscellaneous C-code for providers to report when a device used does 
not have a specific Level II HCPCS Category C-code.
    Response: As we stated in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66794), we continue to believe that the 
elimination of device-to-procedure edits and procedure-to-device edits 
is appropriate due to the experience hospitals now have in coding and 
reporting these claims fully. More specifically, for the more costly 
devices, we believe the C-APCs will reliably reflect the cost of the 
device if charges for the device are included anywhere on the claim. We 
remind commenters that, under our current policy, hospitals are still 
expected to adhere to the guidelines of correct coding and append the 
correct device code to the claim when applicable. We also remind 
commenters that, as with all other items and services recognized under 
the OPPS, we expect hospitals to code and report their costs 
appropriately, regardless of whether there are claims processing edits 
in place. We agree with the commenter that we should create a 
miscellaneous HCPCS C-code for providers to report when a device used 
does not have a specific Level II HCPCS C-code. Therefore, effective 
January 1, 2017, we are creating HCPCS code C1889 (Implantable/
insertable device for device intensive procedure, not otherwise 
classified) to recognize devices implanted or inserted during a device-
intensive procedure that are not described by a specific Level II HCPCS 
Category C-code.
    After consideration of the public comments we received, we are 
finalizing our proposal for CY 2017 and subsequent years to apply the 
CY 2016 device coding requirements to the newly defined (individual 
HCPCS code-level device offset greater than 40 percent) device-
intensive procedures. For CY 2017 and subsequent years, we also are 
finalizing our proposal that any device code, when reported on a claim 
with a device-intensive procedure, will satisfy the edit. In addition, 
we are creating HCPCS code C1889 to recognize devices furnished during 
a device intensive procedure that are not described by a specific Level 
II HCPCS Category C-code. Reporting HCPCS code C1889 with a device 
intensive procedure will satisfy the edit requiring a device code to be 
reported on a claim with a device-intensive procedure.
4. Adjustment to OPPS Payment for No Cost/Full Credit and Partial 
Credit Devices
a. Background
    To ensure equitable OPPS payment when a hospital receives a device 
without cost or with full credit, in CY 2007, we implemented a policy 
to reduce the payment for specified device-dependent APCs by the 
estimated portion of the APC payment attributable to device costs (that 
is, the device offset) when the hospital receives a specified device at 
no cost or with full credit (71 FR 68071 through 68077). Hospitals were 
instructed to report no cost/full credit device cases on the claim 
using the ``FB'' modifier on the line with the procedure code in which 
the no cost/full credit device is used. In cases in which the device is 
furnished without cost or with full credit, hospitals were instructed 
to report a token device charge of less than $1.01. In cases in which 
the device being inserted is an upgrade (either of the same type of 
device or to a different type of device) with a full credit for the 
device being replaced, hospitals were instructed to report as the 
device charge the difference between the hospital's usual charge for 
the device being implanted and the hospital's usual charge for the 
device for which it received full credit. In CY 2008, we expanded this 
payment adjustment policy to include cases in which hospitals receive 
partial credit of 50 percent or more of the cost of a specified device. 
Hospitals were instructed to append the ``FC'' modifier to the 
procedure code that reports the service provided to furnish the device 
when they receive a partial credit of 50 percent or more of the cost of 
the new device. We refer readers to the CY 2008 OPPS/ASC final rule 
with comment period for more background information on the ``FB'' and 
``FC'' modifiers payment adjustment policies (72 FR 66743 through 
66749).
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 
through 75007), beginning in CY 2014, we modified our policy of 
reducing OPPS payment for specified APCs when a hospital furnishes a 
specified device without cost or with a full or partial credit. For CY 
2013 and prior years, our policy had been to reduce OPPS payment by 100 
percent of the device offset amount when a hospital furnishes a 
specified device without cost or with a full credit and by 50 percent 
of the device offset amount when the hospital receives partial credit 
in the amount of 50 percent or more of the cost for the specified 
device. For CY 2014, we reduced OPPS payment, for the applicable APCs, 
by the full or partial credit a hospital receives for a replaced 
device. Specifically, under this modified policy, hospitals are 
required to report on the claim the amount of the credit in the amount 
portion for value code ``FD'' (Credit Received from the Manufacturer 
for a Replaced Medical Device) when the hospital receives a credit for 
a replaced device that is 50 percent or greater than the cost of the 
device. For CY 2014, we also limited the OPPS payment deduction for the 
applicable APCs to the total amount of the device offset when the 
``FD'' value code appears on a claim. For CY 2015, we continued our 
existing policy of reducing OPPS payment for specified APCs when a 
hospital furnishes a specified device without cost or with a full or 
partial credit and to use the three criteria established in the CY 2007 
OPPS/ASC final rule with comment period (71 FR 68072 through 68077) for 
determining the APCs to which our CY 2015 policy will apply (79 FR 
66872 through 66873). In the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70424), we finalized our policy to no longer specify a 
list of devices to which the OPPS payment adjustment for no cost/full 
credit and partial credit devices would apply and instead apply this 
APC payment adjustment to all replaced devices furnished in conjunction 
with a procedure assigned to a device-intensive APC when the hospital 
receives a credit for a replaced specified device that is 50 percent or 
greater than the cost of the device.
b. Policy for CY 2017
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45656), for CY 2017, 
we proposed modifications to our current policy for reducing OPPS 
payment by the full or partial credit a provider receives for a 
replaced device, in conjunction with our proposal above to recognize 
the newly defined (individual HCPCS level device offset greater than 40 
percent) device-intensive procedures. For CY 2017 and subsequent years, 
we proposed to reduce OPPS payment for specified procedures when a 
hospital furnishes a specified device without cost or with a full or 
partial credit. Specifically, for CY 2017, we proposed to continue to 
reduce the OPPS

[[Page 79660]]

payment, for the device-intensive procedures, by the full or partial 
credit a provider receives for a replaced device. Under this proposed 
policy, hospitals would continue to be required to report on the claim 
the amount of the credit in the amount portion for value code ``FD'' 
when the hospital receives a credit for a replaced device that is 50 
percent or greater than the cost of the device.
    For CY 2017 and subsequent years, we also proposed to determine 
which procedures our proposed policy would apply to using three 
criteria analogous to the three criteria established in the CY 2007 
OPPS/ASC final rule with comment period for determining the APCs to 
which our existing policy applies (71 FR 68072 through 68077).
    Specifically, for CY 2017 and subsequent years, we proposed to use 
the following three criteria for determining the procedures to which 
our proposed policy would apply: (1) All procedures 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 
procedure must be device-intensive; that is, the device offset amount 
must be significant, which is defined as exceeding 40 percent of the 
procedure's mean cost. We continue to believe these criteria are 
appropriate because no-cost devices and device credits are likely to be 
associated with particular cases only when the device must be reported 
on the claim and is of a type that is implanted and remains in the body 
when the beneficiary leaves the hospital. We believe that the reduction 
in payment is appropriate only when the cost of the device is a 
significant part of the total cost of the procedure into which the 
device cost is packaged, and that the 40-percent threshold is a 
reasonable definition of a significant cost. As noted earlier in this 
section, procedures with a device offset that exceed the 40-percent 
threshold are called device-intensive procedures.
    Comment: One commenter recommended that CMS reinstate the procedure 
code list that is subject to the no cost/full credit and partial credit 
devices.
    Response: As stated in the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70424), we no longer believe it is necessary to restrict 
the application of our policy to reduce the OPPS payment by the full or 
partial credit a provider receives for a replaced device to a specific 
list of devices. Therefore, we no longer believe it is necessary to 
specify a list of devices to which the OPPS payment adjustment for no 
cost/full credit and partial credit devices would apply.
    After consideration of the public comments we received, for CY 
2017, we are finalizing our proposed modifications to our current 
policy for reducing OPPS payment by the full or partial credit a 
provider receives for a replaced device, in conjunction with our 
finalized policy to recognize the newly defined (individual HCPCS level 
device offset greater than 40 percent) device-intensive procedures. 
Specifically, for CY 2017, we are finalizing our proposal to continue 
to reduce the OPPS payment, for the device-intensive procedures, by the 
full or partial credit a provider receives for a replaced device. In 
addition, for CY 2017 and subsequent years, we are finalizing our 
proposal to use the following three criteria for determining the 
procedures to which our final policy will apply: (1) All procedures 
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 procedure must be device intensive; that is, the device offset 
amount must be significant, which is defined as exceeding 40 percent of 
the procedure's mean cost.
5. Payment Policy for Low-Volume Device-Intensive Procedures
    For CY 2016, we used our equitable adjustment authority under 
section 1833(t)(2)(E) of the Act and used the median cost (instead of 
the geometric mean cost per our standard methodology) to calculate the 
payment rate for the implantable miniature telescope procedure 
described by CPT code 0308T (Insertion of ocular telescope prosthesis 
including removal of crystalline lens or intraocular lens prosthesis), 
which is the only code assigned to APC 5494 (Level 4 Intraocular 
Procedures) (80 FR 70388). We note that, as stated in the CY 2017 OPPS/
ASC proposed rule (81 FR 45656), we proposed to reassign the procedure 
described by CPT code 0308T to APC 5495 (Level 5 Intraocular 
Procedures) for CY 2017, but it would be the only procedure code 
assigned to APC 5495. The payment rates for a procedure described by 
CPT code 0308T (including the predecessor HCPCS code C9732) were 
$15,551 in CY 2014, $23,084 in CY 2015, and $17,551 in CY 2016. The 
procedure described by CPT code 0308T is a high-cost device-intensive 
surgical procedure that has a very low volume of claims (in part 
because most of the procedures described by CPT code 0308T are 
performed in ASCs), and we believe that the median cost is a more 
appropriate measure of the central tendency for purposes of calculating 
the cost and the payment rate for this procedure because the median 
cost is impacted to a lesser degree than the geometric mean cost by 
more extreme observations. We stated that, in future rulemaking, we 
would consider proposing a general policy for the payment rate 
calculation for very low-volume device-intensive APCs (80 FR 70389).
    For CY 2017, we proposed a payment policy for low-volume device-
intensive procedures that is similar to the policy applied to the 
procedure described by CPT code 0308T in CY 2016. In particular, we 
proposed that the payment rate for any device-intensive procedure that 
is assigned to a clinical APC with fewer than 100 total claims for all 
procedures in the APC be calculated using the median cost instead of 
the geometric mean cost, for the reasons described above for the policy 
applied to the procedure described by CPT code 0308T in CY 2016. We 
believe that this approach will help to mitigate to some extent 
significant year-to-year payment rate fluctuations while preserving 
accurate claims data-based payment rates for low-volume device-
intensive procedures. For CY 2017, this policy would only apply to a 
procedure described by CPT code 0308T in APC 5495 because this APC is 
the only APC containing a device-intensive procedure with less than 100 
total claims in the APC. The CY 2017 proposed rule median cost for the 
procedure described by CPT code 0308T was approximately $17,965 (the 
median cost was incorrectly stated in the proposed rule as $15,567). 
The proposed CY 2017 payment rate (calculated using the median cost and 
the claims that reported the device consistent with our device edit 
policy for device intensive procedures) was approximately $17,189. We 
invited public comments on this proposal.
    Comment: The majority of commenters supported the proposal to base 
payment on the median cost instead of the geometric mean cost for any 
device-intensive procedure that is assigned to an APC with fewer than 
100 total claims (for all of the services assigned to the APC). One 
commenter recommended that CMS consider whether refinements to the low-
volume, device-intensive procedure policy are

[[Page 79661]]

appropriate in future rulemaking, such as using the claims volume at 
the HCPCS level rather than the APC level.
    Response: We appreciate the commenters' support. At this time, we 
believe it is only appropriate to calculate the payment rate using 
median cost instead of the geometric mean for a device-intensive 
procedure that is assigned to a clinical APC with fewer than 100 total 
claims for all procedures in the APC.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, that the payment rate 
for any device-intensive procedure that is assigned to a clinical APC 
with fewer than 100 total claims for all procedures in the APC be 
calculated using the median cost instead of the geometric mean cost. 
The CY 2017 final rule geometric mean cost for the procedure described 
by CPT code 0308T (based on 19 claims containing the device HCPCS C-
code in accordance with the device-intensive edit policy) is 
approximately $21,302, and the median cost is approximately $19,521. 
The final CY 2017 payment rate (calculated using the median cost) is 
approximately $18,984.

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

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals. Throughout this final rule with comment period, the 
term ``biological'' is used because this is the term that appears in 
section 1861(t) of the Act. ``Biological'' as used in this final rule 
with comment period includes (but is not necessarily limited to) 
``biological product'' or ``biologic'' as defined in the Public Health 
Service Act. As enacted by the Medicare, Medicaid, and SCHIP Balanced 
Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), this pass-
through payment provision requires the Secretary to make additional 
payments to hospitals for: Current orphan drugs, as designated under 
section 526 of the Federal Food, Drug, and Cosmetic Act; current drugs 
and biologicals and brachytherapy sources used in cancer therapy; and 
current radiopharmaceutical drugs and biologicals. ``Current'' refers 
to drugs or biologicals that are hospital outpatient services under 
Medicare Part B for which payment was made on the first date the 
hospital OPPS was implemented.
    Transitional pass-through payments also are provided for certain 
``new'' drugs and biologicals that were not being paid for as an HOPD 
service as of December 31, 1996 and whose cost is ``not insignificant'' 
in relation to the OPPS payments for the procedures or services 
associated with the new drug or biological. For pass-through payment 
purposes, radiopharmaceuticals are included as ``drugs.'' As required 
by statute, transitional pass-through payments for a drug or biological 
described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a 
period of at least 2 years, but not more than 3 years, after the 
payment was first made for the product as a hospital outpatient service 
under Medicare Part B. CY 2017 pass-through drugs and biologicals and 
their designated APCs are assigned status indicator ``G'' in Addenda A 
and B to this final rule with comment period (which are available via 
the Internet on the CMS Web site).
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act for the 
drug or biological exceeds the portion of the otherwise applicable 
Medicare OPD fee schedule that the Secretary determines is associated 
with the drug or biological. The methodology for determining the pass-
through payment amount is set forth in regulations at 42 CFR 419.64. 
These regulations specify that the pass-through payment equals the 
amount determined under section 1842(o) of the Act minus the portion of 
the APC payment that CMS determines is associated with the drug or 
biological. Section 1847A of the Act establishes the average sales 
price (ASP) methodology, which is used for payment for drugs and 
biologicals described in section 1842(o)(1)(C) of the Act furnished on 
or after January 1, 2005. The ASP methodology, as applied under the 
OPPS, uses several sources of data as a basis for payment, including 
the ASP, the wholesale acquisition cost (WAC), and the average 
wholesale price (AWP). In this final rule with comment period, the term 
``ASP methodology'' and ``ASP-based'' are inclusive of all data sources 
and methodologies described therein. Additional information on the ASP 
methodology can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Policy Change To Make the Transitional Pass-Through Payment Period 3 
Years for All Pass-Through Drugs, Biologicals, and Radiopharmaceuticals 
and Expire Pass-Through Status on a Quarterly Rather Than Annual Basis
    As required by statute, transitional pass-through payments for a 
drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act 
can be made for a period of at least 2 years, but not more than 3 
years, after the payment was first made for the product as a hospital 
outpatient service under Medicare Part B. Our current policy is to 
accept pass-through applications on a quarterly basis and to begin 
pass-through payments for new pass-through drugs and biologicals on a 
quarterly basis through the next available OPPS quarterly update after 
the approval of a product's pass-through status. However, we expire 
pass-through status for drugs and biologicals on an annual basis 
through notice-and-comment rulemaking (74 FR 60480). This means that 
because the 2-year to 3-year pass-through payment eligibility period 
starts on the date of first pass-through payment under 42 CFR 
419.64(c)(2), the duration of pass-through eligibility for a particular 
drug or biological will depend upon when during a year the applicant 
applies for pass-through status. Under the current policy, a new pass-
through drug or biological with pass-through status effective on 
January 1 would receive 3 years of pass-through status; a pass-through 
drug with pass-through status effective on April 1 would receive 2 
years and 3 quarters of pass-through status; a pass-through drug with 
pass-through status effective on July 1 would receive 2 and \1/2\ years 
of pass-through status; and a pass-through drug with pass-through 
status effective on October 1 would receive 2 years and 3 months (a 
quarter) of pass-through status.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45657), we proposed, 
beginning with pass-through drugs and biologicals newly approved in CY 
2017 and subsequent calendar years, to allow for a quarterly expiration 
of pass-through payment status for drugs and biologicals to afford a 
pass-through period that is as close to a full 3 years as possible for 
all pass-through payment drugs, biologicals, and radiopharmaceuticals. 
This proposed change would eliminate the variability

[[Page 79662]]

of the pass-through payment eligibility period, which currently varies 
based on the timing of the particular application, as we now believe 
that the timing of a pass-through payment application should not 
determine the duration of pass-through payment status. For example, for 
a drug with pass-through status first effective on April 1, 2017, pass-
through status would expire on March 31, 2020. This approach would 
allow for the maximum pass-through period for each pass-through drug 
without exceeding the statutory limit of 3 years. We invited public 
comments on this proposal.
    Comment: Several commenters supported CMS' proposal to expire pass-
through status and payment for pass-through drugs on a quarterly basis 
rather than an annual basis such that pass-through status would be as 
close as possible to 3 years for all pass-through drugs and 
biologicals. Some commenters recommended that CMS apply the proposed 
policy to all drugs with pass-through payment status in CY 2017 to 
prevent disparate treatment of such drugs based on their pass-through 
approval date.
    Response: We appreciate commenters' support. In response to 
commenters' recommendation to expire pass-through status and payment 
for pass-through drugs on a quarterly basis rather than an annual basis 
for all drugs with pass-through payment status in CY 2017, we note that 
the annual expiration of pass-through payment status for all drugs 
currently assigned pass-through payment status under the OPPS was 
finalized in previous years' OPPS/ASC rulemaking and was not proposed 
to be altered in our CY 2017 proposal.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, beginning with pass-
through drugs and biologicals newly approved in CY 2017 and subsequent 
calendar years, to allow for a quarterly expiration of pass-through 
payment status for drugs and biologicals to afford a pass-through 
period that is as close to a full 3 years as possible for all pass-
through drugs, biologicals, and radiopharmaceuticals.
3. Drugs and Biologicals With Expiring Pass-Through Payment Status in 
CY 2016
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45657), we proposed 
that the pass-through status of 15 drugs and biologicals would expire 
on December 31, 2016, as listed in Table 13 of the proposed rule (81 FR 
45658). 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, 2016. These drugs and biologicals were approved for pass-
through payment status on or before January 1, 2015. With the exception 
of those groups of drugs and biologicals that are always packaged when 
they do not have pass-through payment status (specifically, anesthesia 
drugs; drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure (including 
diagnostic radiopharmaceuticals, contrast agents, and stress agents); 
and drugs and biologicals that function as supplies when used in a 
surgical procedure), our standard methodology for providing payment for 
drugs and biologicals with expiring pass-through payment 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 $110 for CY 2017), as discussed further in 
section V.B.2. of this final rule with comment period. In the CY 2017 
OPPS/ASC proposed rule (81 FR 45658), we proposed that if the estimated 
per day cost for the drug or biological is less than or equal to the 
applicable OPPS drug packaging threshold, to package payment for the 
drug or biological into the payment for the associated procedure in the 
upcoming calendar year. If the estimated per day cost of the drug or 
biological is greater than the OPPS drug packaging threshold, we 
proposed to provide separate payment at the applicable relative ASP-
based payment amount (which was proposed at ASP+6 percent for CY 2017, 
and is finalized at ASP+6 percent for CY 2017, as discussed further in 
section V.B.3. of this final rule with comment period).
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal, without modification, to expire the 
pass-through payment status of the 15 drugs and biologicals listed 
below in Table 35 on December 31, 2016.

  Table 35--Drugs and Biologicals for Which Pass-Through Payment Status
                        Expires December 31, 2016
------------------------------------------------------------------------
                                          Final CY 2017
 CY 2017 HCPCS code      CY 2017 long         status       Final CY 2017
                          descriptor        indicator           APC
------------------------------------------------------------------------
C9497...............  Loxapine,                       K             9497
                       inhalation
                       powder, 10 mg.
J1322...............  Injection,                      K             1480
                       elosulfase alfa,
                       1 mg.
J1439...............  Injection, ferric               N              N/A
                       carboxymaltose,
                       1 mg.
J1447...............  Injection, TBO-                 N              N/A
                       Filgrastim, 1
                       microgram.
J3145...............  Injection,                      N              N/A
                       testosterone
                       undecanoate, 1
                       mg.
J3380...............  Injection,                      K             1489
                       vedolizumab, 1
                       mg.
J7181...............  Injection, factor               N              N/A
                       xiii a-subunit,
                       (recombinant),
                       per iu.
J7200...............  Factor ix                       N              N/A
                       (antihemophilic
                       factor,
                       recombinant),
                       Rixubus, per i.u.
J7201...............  Injection, factor               N              N/A
                       ix, fc fusion
                       protein
                       (recombinant),
                       per iu.
J7205...............  Injection, factor               K             1656
                       viii fc fusion
                       (recombinant),
                       per iu.
J7508...............  Tacrolimus,                     N              N/A
                       extended
                       release,
                       (astagraf xl),
                       oral, 0.1 mg.
J9301...............  Injection,                      N              N/A
                       obinutuzumab, 10
                       mg.
J9308...............  Injection,                      K             1488
                       ramucirumab, 5
                       mg.
J9371...............  Injection,                      K             1466
                       Vincristine
                       Sulfate
                       Liposome, 1 mg.
Q4121...............  Theraskin, per                  N              N/A
                       square
                       centimeter.
------------------------------------------------------------------------


[[Page 79663]]

    The final packaged or separately payable status of each of these 
drugs or biologicals is listed in Addendum B to this final rule with 
comment period (which is available via the Internet on the CMS Web 
site).
4. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Payment Status in CY 2017
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45658), we proposed to 
continue pass-through payment status in CY 2017 for 38 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, 2016. These drugs and biologicals, which were approved 
for pass-through status between January 1, 2015, and July 1, 2016, were 
listed in Table 14 of the proposed rule (81 FR 45659). The APCs and 
HCPCS codes for these drugs and biologicals approved for pass-through 
payment status through July 1, 2016 were assigned status indicator 
``G'' in Addenda A and B to the proposed rule (which are available via 
the Internet on the CMS Web site).
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act and the portion of the otherwise applicable 
OPD fee schedule that the Secretary determines is associated with the 
drug or biological. For CY 2017, we proposed to continue to pay for 
pass-through drugs and biologicals at ASP+6 percent, equivalent to the 
payment rate these drugs and biologicals would receive in the 
physician's office setting in CY 2017. We proposed that a $0 pass-
through payment amount would be paid for pass-through drugs and 
biologicals under the CY 2017 OPPS because the difference between the 
amount authorized under section 1842(o) of the Act, which was proposed 
at ASP+6 percent, and the portion of the otherwise applicable OPD fee 
schedule that the Secretary determines is appropriate, which was 
proposed at ASP+6 percent, is $0.
    In the case of policy-packaged drugs (which include the following: 
Anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure 
(including contrast agents; diagnostic radiopharmaceuticals, and stress 
agents); and drugs and biologicals that function as supplies when used 
in a surgical procedure), we proposed that their pass-through payment 
amount would be equal to ASP+6 percent for CY 2017 because, if not for 
their pass-through status, payment for these products would be packaged 
into the associated procedure.
    In addition, we proposed to continue to update pass-through payment 
rates on a quarterly basis on the CMS Web site during CY 2017 if later 
quarter ASP submissions (or more recent WAC or AWP information, as 
applicable) indicate that adjustments to the payment rates for these 
pass-through drugs or biologicals are necessary. For a full description 
of this policy, we refer readers to the CY 2006 OPPS/ASC final rule 
with comment period (70 FR 68632 through 68635).
    In CY 2017, as is consistent with our CY 2016 policy for diagnostic 
and therapeutic radiopharmaceuticals, we proposed to provide payment 
for both diagnostic and therapeutic radiopharmaceuticals that are 
granted pass-through payment status based on the ASP methodology. As 
stated earlier, for purposes of pass-through payment, we consider 
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
payment status during CY 2017, we proposed to follow the standard ASP 
methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which was proposed at ASP+6 
percent. If ASP data are not available for a radiopharmaceutical, we 
proposed to provide pass-through payment at WAC+6 percent, the 
equivalent payment provided to pass-through drugs and biologicals 
without ASP information. If WAC information also is not available, we 
proposed to provide payment for the pass-through radiopharmaceutical at 
95 percent of its most recent AWP.
    Comment: Several commenters supported CMS' proposal to continue to 
provide payment at ASP+6 percent for drugs, biologicals, contrast 
agents, and radiopharmaceuticals that are granted pass-through payment 
status. Some commenters requested that CMS provide an additional 
payment for radiopharmaceuticals that are granted pass-through payment 
status.
    Response: We appreciate the commenters' support. Regarding the 
commenters' request that CMS provide an additional payment for 
radiopharmaceuticals that are granted pass-through payment status, we 
note that, for CY 2017, consistent with our CY 2016 payment policy for 
diagnostic and therapeutic radiopharmaceuticals, we proposed to provide 
payment for both diagnostic and therapeutic radiopharmaceuticals with 
pass-through payment status based on the ASP methodology. As stated 
earlier, the ASP methodology, as applied under the OPPS, uses several 
sources of data as a basis for payment, including the ASP, the WAC if 
the ASP is unavailable, and 95 percent of the radiopharmaceutical's 
most recent AWP if both the ASP and WAC are unavailable. For purposes 
of pass-through payment, we consider radiopharmaceuticals to be drugs 
under the OPPS. Therefore, if a diagnostic or therapeutic 
radiopharmaceutical receives pass-through payment status during CY 
2017, we proposed to follow the standard ASP methodology to determine 
its pass-through payment rate under the OPPS to account for the 
acquisition and pharmacy overhead costs. We continue to believe that a 
single payment is appropriate for diagnostic radiopharmaceuticals with 
pass-through payment status in CY 2017, and that the payment rate of 
ASP+6 percent (or WAC or AWP if ASP is not available) is appropriate to 
provide payment for both a radiopharmaceutical's acquisition and 
pharmacy overhead costs. We refer readers to section V.B.3. of this 
final rule with comment period for further discussion of payment for 
therapeutic radiopharmaceuticals based on ASP information submitted by 
manufacturers. We also refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Feefor-ServicePayment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1656-FC.html.
    After consideration of the public comments we received, we are 
finalizing our proposal to provide payment for drugs, biologicals, 
diagnostic and therapeutic radiopharmaceuticals, and contrast agents 
that are granted pass-through payment status based on the ASP 
methodology. If a diagnostic or therapeutic radiopharmaceutical 
receives pass-through payment status during CY 2017, we will follow the 
standard ASP methodology to determine the pass-through payment rate 
that drugs receive under section 1842(o) of the Act, which is ASP+6 
percent. If ASP data are not available for a radiopharmaceutical, we 
will provide pass-through payment at WAC+6 percent, the equivalent 
payment provided to pass-through drugs and biologicals without ASP 
information. If WAC information also is not available, we will provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP. The 47

[[Page 79664]]

drugs and biologicals that continue to have pass-through payment status 
for CY 2017 or have been granted pass-through payment status as of 
January 2017 are shown in Table 36 below.

                   Table 36--Drugs and Biologicals With Pass-Through Payment Status in CY 2017
----------------------------------------------------------------------------------------------------------------
                                                                                 CY 2017  status
    CY 2016  HCPCS code         CY 2017  HCPCS code     CY 2017 long descriptor      indicator      CY 2017 APC
----------------------------------------------------------------------------------------------------------------
A9586.....................  A9586.....................  Florbetapir f18,                      G             1664
                                                         diagnostic, per study
                                                         dose, up to 10
                                                         millicuries.
N/A.......................  A9588.....................  Fluciclovine f-18,                    G             9052
                                                         diagnostic, 0.1 mCi.
N/A.......................  A9587.....................  Gallium Ga-68,                        G             9056
                                                         dotatate, diagnostic,
                                                         1 mCi.
N/A.......................  C9140.....................  Injection, Factor VIII                G             9043
                                                         (antihemophilic
                                                         factor, recombinant)
                                                         (Afstyla), 1 I.U.
C9137.....................  J7207.....................  Injection, Factor VIII                G             1844
                                                         (antihemophilic
                                                         factor, recombinant)
                                                         PEGylated, 1 I.U.
C9138.....................  J7209.....................  Injection, Factor VIII                G             1846
                                                         (antihemophilic
                                                         factor, recombinant)
                                                         (Nuwiq), per i.u.
C9139.....................  J7202.....................  Injection, Factor IX,                 G             9171
                                                         albumin fusion protein
                                                         (recombinant),
                                                         Idelvion, 1 i.u.
C9349.....................  Q4172.....................  PuraPly, and PuraPly                  G             1657
                                                         Antimicrobial, any
                                                         type, per square
                                                         centimeter.
C9447.....................  C9447.....................  Injection,                            G             1663
                                                         phenylephrine and
                                                         ketorolac, 4 ml vial.
C9460.....................  C9460.....................  Injection, cangrelor, 1               G             9460
                                                         mg.
C9461.....................  A9515.....................  Choline C 11,                         G             9461
                                                         diagnostic, per study
                                                         dose.
C9470.....................  J1942.....................  Injection, aripiprazole               G             9470
                                                         lauroxil, 1 mg.
C9471.....................  J7322.....................  Hyaluronan or                         G             9471
                                                         derivative, Hymovis,
                                                         for intra-articular
                                                         injection, 1 mg.
C9472.....................  J9325.....................  Injection, talimogene                 G             9472
                                                         laherparepvec, 1
                                                         million plaque forming
                                                         units (PFU).
C9473.....................  J2182.....................  Injection, mepolizumab,               G             9473
                                                         1 mg.
C9474.....................  J9205.....................  Injection, irinotecan                 G             9474
                                                         liposome, 1 mg.
C9475.....................  J9295.....................  Injection, necitumumab,               G             9475
                                                         1 mg.
C9476.....................  J9145.....................  Injection, daratumumab,               G             9476
                                                         10 mg.
C9477.....................  J9176.....................  Injection, elotuzumab,                G             9477
                                                         1 mg.
C9478.....................  J2840.....................  Injection, sebelipase                 G             9478
                                                         alfa, 1 mg.
C9479.....................  J7342.....................  Instillation,                         G             9479
                                                         ciprofloxacin otic
                                                         suspension, 6 mg.
C9480.....................  J9352.....................  Injection, trabectedin,               G             9480
                                                         0.1 mg.
C9481.....................  J2786.....................  Injection, reslizumab,                G             9481
                                                         1 mg.
C9482.....................  C9482.....................  Injection, sotalol                    G             9482
                                                         hydrochloride, 1 mg.
C9483.....................  C9483.....................  Injection,                            G             9483
                                                         atezolizumab, 10 mg.
N/A.......................  J0570.....................  Buprenorphine implant,                G             9058
                                                         74.2 mg.
J0596.....................  J0596.....................  Injection, c-1 esterase               G             9445
                                                         inhibitor (human),
                                                         Ruconest, 10 units.
J0695.....................  J0695.....................  Injection, ceftolozane                G             9452
                                                         50 mg and tazobactam
                                                         25 mg.
J0875.....................  J0875.....................  Injection, dalbavancin,               G             1823
                                                         5 mg.
J1833.....................  J1833.....................  Injection,                            G             9456
                                                         isavuconazonium
                                                         sulfate, 1 mg.
J2407.....................  J2407.....................  Injection, oritavancin,               G             1660
                                                         10 mg.
J2502.....................  J2502.....................  Injection, pasireotide                G             9454
                                                         long acting, 1 mg.
J2547.....................  J2547.....................  Injection, peramivir, 1               G             9451
                                                         mg.
J2860.....................  J2860.....................  Injection, siltuximab,                G             9455
                                                         10 mg.
J3090.....................  J3090.....................  Injection, tedizolid                  G             1662
                                                         phosphate, 1 mg.
N/A.......................  J7179.....................  Injection, von                        G             9059
                                                         willebrand factor
                                                         (recombinant),
                                                         (Vonvendi), 1 i.u.
                                                         vwf:rco.
J7313.....................  J7313.....................  Injection, fluocinolone               G             9450
                                                         acetonide intravitreal
                                                         implant, 0.01 mg.
J7503.....................  J7503.....................  Tacrolimus, extended                  G             1845
                                                         release, (envarsus
                                                         xr), oral, 0.25 mg.
J8655.....................  J8655.....................  Netupitant (300 mg) and               G             9448
                                                         palonosetron (0.5 mg).
J9032.....................  J9032.....................  Injection, belinostat,                G             1658
                                                         10 mg.
J9039.....................  J9039.....................  Injection,                            G             9449
                                                         blinatumomab, 1 mcg.
J9271.....................  J9271.....................  Injection,                            G             1490
                                                         pembrolizumab, 1 mg.
J9299.....................  J9299.....................  Injection, nivolumab, 1               G             9453
                                                         mg.
Q5101.....................  Q5101.....................  Injection, Filgrastim                 G             1822
                                                         (G-CSF), Biosimilar, 1
                                                         microgram.
Q9950.....................  Q9950.....................  Injection, sulfur                     G             9457
                                                         hexafluoride lipid
                                                         microsphere, per ml.
C9459.....................  Q9982.....................  Flutemetamol F18,                     G             9459
                                                         diagnostic, per study
                                                         dose, up to 5
                                                         millicuries.
C9458.....................  Q9983.....................  Florbetaben F18,                      G             9458
                                                         diagnostic, per study
                                                         dose, up to 8.1
                                                         millicuries.
----------------------------------------------------------------------------------------------------------------

5. Provisions for Reducing Transitional Pass-Through Payments for 
Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals To Offset 
Costs Packaged Into APC Groups
    Under 42 CFR 419.2(b), nonpass-through drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure are packaged in the OPPS. This category 
includes diagnostic radiopharmaceuticals, contrast agents, stress 
agents, and other diagnostic drugs. Also under 42 CFR 419.2(b), 
nonpass-through drugs and biologicals that function as supplies in a 
surgical procedure are packaged in the OPPS. This category includes 
skin substitutes and other surgical-supply drugs and biologicals. As 
described earlier, section 1833(t)(6)(D)(i) of the Act specifies that 
the transitional pass-through payment amount for pass-through drugs and 
biologicals is the difference between the amount paid under section 
1842(o) of the Act and the otherwise applicable OPD fee schedule 
amount. Because a payment offset is necessary in order to provide an 
appropriate transitional pass-through payment, we deduct from the pass-
through payment for policy packaged drugs, biologicals, and 
radiopharmaceuticals an amount reflecting the portion of the APC 
payment associated with predecessor products in order to ensure no 
duplicate payment is made. This amount reflecting the portion of the 
APC payment associated with predecessor products is called the payment 
offset. The payment offset policy applies to all policy packaged drugs, 
biologicals, and

[[Page 79665]]

radiopharmaceuticals. For a full description of the payment offset 
policy as applied to diagnostic radiopharmaceuticals, contrast agents, 
stress agents, and skin substitutes, we refer readers to the discussion 
in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70430 
through 70432). In the CY 2017 OPPS/ASC proposed rule (81 FR 45660), 
for CY 2017, as we did in CY 2016, we proposed to continue to apply the 
same policy packaged offset policy to payment for pass-through 
diagnostic radiopharmaceuticals, pass-through contrast agents, pass-
through stress agents, and pass-through skin substitutes. The proposed 
APCs to which a diagnostic radiopharmaceutical payment offset may be 
applicable were the same as for CY 2016 (80 FR 70430). Also, the 
proposed APCs to which a stress agent payment offset or a skin 
substitute payment offset were also the same as for CY 2016 (80 FR 
70431 through 70432). The proposed APCs to which a contrast agent 
payment offset may be applicable are APCs 5571 through 5573 (Levels 1-3 
Diagnostic Radiology with Contrast), which were listed in Addendum A to 
the proposed rule (which is available via the Internet on the CMS Web 
site).
    We proposed to continue to post annually on the CMS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset 
amounts that will be used for that year for purposes of both evaluating 
cost significance for candidate pass-through device categories and 
drugs and biologicals and establishing any appropriate APC offset 
amounts. Specifically, the file will continue to provide the amounts 
and percentages of APC payment associated with packaged implantable 
devices, policy-packaged drugs, and threshold packaged drugs and 
biologicals for every OPPS clinical APC.
    Comment: One commenter recommended that CMS consider the drug 
offset amount at the HCPCS level to improve accuracy in isolating 
potentially duplicative packaged payments.
    Response: We thank the commenter for this recommendation. We do not 
believe that the suggested change is necessary at this time. However, 
we may consider it in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, for CY 2017 to continue 
to apply the same policy packaged offset policy to payment for pass-
through diagnostic radiopharmaceuticals, pass-through contrast agents, 
pass-through stress agents, and pass-through skin substitutes as we did 
in CY 2016. We also are finalizing our proposal to continue to post 
annually on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html a file that 
contains the APC offset amounts that will be used for that year for 
purposes of both evaluating cost significance for candidate pass-
through device categories and drugs and biologicals and establishing 
any appropriate APC offset amounts.

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

1. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Packaging Threshold
    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 $100 for CY 
2016 (80 FR 70433).
    Following the CY 2007 methodology, for the CY 2017 OPPS/ASC 
proposed rule (81 FR 45660), 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 2017 and 
rounded the resulting dollar amount ($109.03) to the nearest $5 
increment, which yielded a figure of $110. In performing this 
calculation, we used the most recent forecast of the quarterly index 
levels for the PPI for Pharmaceuticals for Human Use (Prescription) 
(Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS' 
Office of the Actuary (OACT). We refer below to this series generally 
as the PPI for Prescription Drugs. Based on these calculations, we 
proposed a packaging threshold for CY 2017 of $110.
    Following the finalized CY 2007 methodology, for this CY 2017 OPPS/
ASC final rule with comment period, 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 
2017 and rounded the resulting dollar amount ($111.65) to the nearest 
$5 increment, which yielded a figure of $110. In performing this 
calculation, we used the most recent forecast of the quarterly index 
levels for the PPI for Pharmaceuticals for Human Use (Prescription) 
(Bureau of Labor Statistics series code WPUSI07003) from CMS' Office of 
the Actuary (OACT). Therefore, for this CY 2017 OPPS/ASC final rule 
with comment period, using the CY 2007 OPPS methodology, we are 
establishing a packaging threshold for CY 2017 of $110.
b. Packaging of Payment for HCPCS Codes That Describe Certain Drugs, 
Certain Biologicals, and Therapeutic Radiopharmaceuticals Under the 
Cost Threshold (``Threshold-Packaged Drugs'')
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45660), to determine 
the proposed CY 2017 packaging status for all nonpass-through drugs and 
biologicals that are not policy packaged, we calculated, on a HCPCS 
code-specific basis, the per day cost of all drugs, biologicals, and 
therapeutic radiopharmaceuticals (collectively called ``threshold-
packaged'' drugs) that had a HCPCS code in CY 2015 and were paid (via 
packaged or separate payment) under the OPPS. We used data from CY 2015 
claims processed before January 1, 2016 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.1.d. of the proposed rule, or for the following policy-
packaged items that we proposed to continue to package in CY 2017: 
Anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure; and 
drugs and biologicals that function as supplies when used in a surgical 
procedure.
    In order to calculate the per day costs for drugs, biologicals, and 
therapeutic radiopharmaceuticals to determine their proposed packaging 
status in CY 2017, 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

[[Page 79666]]

(70 FR 68636 through 68638). For each drug and biological HCPCS code, 
we used an estimated payment rate of ASP+6 percent (which is the 
payment rate we proposed for separately payable drugs and biologicals 
for CY 2017, as discussed in more detail in section V.B.2.b. of the 
proposed rule) to calculate the CY 2017 proposed rule per day costs. We 
used the manufacturer submitted ASP data from the fourth quarter of CY 
2015 (data that were used for payment purposes in the physician's 
office setting, effective April 1, 2016) to determine the proposed rule 
per day cost.
    As is our standard methodology, for CY 2017, we proposed to use 
payment rates based on the ASP data from the first quarter of CY 2016 
for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to the proposed rule (which 
are available via the Internet on the CMS Web site) because these were 
the most recent data available for use at the time of development of 
the proposed rule. These data also were the basis for drug payments in 
the physician's office setting, effective April 1, 2016. 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 
2015 hospital claims data to determine their per day cost.
    We proposed to package items with a per day cost less than or equal 
to $110, and identify items with a per day cost greater than $110 as 
separately payable. Consistent with our past practice, we cross-walked 
historical OPPS claims data from the CY 2015 HCPCS codes that were 
reported to the CY 2016 HCPCS codes that we displayed in Addendum B to 
the proposed rule (which is available via the Internet on the CMS Web 
site) for proposed payment in CY 2017.
    Comment: A few commenters opposed the proposed OPPS packaging 
threshold of $110 for CY 2017. These commenters recommended that CMS 
freeze the packaging threshold at the current level ($100) or eliminate 
the packaging threshold and provide separate payment for all drugs with 
HCPCS codes.
    Response: We have received and addressed a similar comment in 
numerous OPPS/ASC rulemakings in the past. As we stated in the CY 2007 
OPPS/ASC final rule with comment period (71 FR 68086), we believe that 
packaging certain items is a fundamental component of a prospective 
payment system, that updating the packaging threshold of $50 for the CY 
2005 OPPS is consistent with industry and government practices, and 
that the PPI for Prescription Drugs is an appropriate mechanism to 
gauge Part B drug inflation. Therefore, because packaging is a 
fundamental component of a prospective payment system that continues to 
provide important flexibility and efficiency in the delivery of high 
quality hospital outpatient services, we are not adopting the 
commenters' recommendations to pay separately for all drugs, 
biologicals, and radiopharmaceuticals for CY 2017, or to eliminate the 
packaging threshold, or to freeze the packaging threshold at $100.
    After consideration of the public comments we received, and 
consistent with our methodology for establishing the packaging 
threshold using the most recent PPI forecast data, we are adopting a CY 
2017 packaging threshold of $110. Our policy during previous cycles of 
the OPPS has been to use updated ASP and claims data to make final 
determinations of the packaging status of HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals for the OPPS/ASC 
final rule with comment period. We note that it is also our policy to 
make an annual packaging determination for a HCPCS code only when we 
develop the OPPS/ASC final rule with comment period for the update 
year. Only HCPCS codes that are identified as separately payable in the 
final rule with comment period are subject to quarterly updates. For 
our calculation of per day costs of HCPCS codes for drugs and 
biologicals in this CY 2017 OPPS/ASC final rule with comment period, we 
used ASP data from the first quarter of CY 2016, 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, 2016, along 
with updated hospital claims data from CY 2015. We note that we also 
used these data for budget neutrality estimates and impact analyses for 
this CY 2017 OPPS/ASC final rule with comment period.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B for this final rule with 
comment period are based on ASP data from the third quarter of CY 2016. 
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, 2016. These payment rates will then 
be updated in the January 2017 OPPS update, based on the most recent 
ASP data to be used for physician's office and OPPS payment as of 
January 1, 2017. For items that do not currently have an ASP-based 
payment rate, we proposed to recalculate their mean unit cost from all 
of the CY 2015 claims data and updated cost report information 
available for this CY 2017 final rule with comment period to determine 
their final per day cost.
    Consequently, as stated in the CY 2017 OPPS/ASC proposed rule (81 
FR 45661), the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in the proposed rule 
may be different from the same drug HCPCS code's packaging status 
determined based on the data used for the final rule with comment 
period. Under such circumstances, in the CY 2017 OPPS/ASC proposed 
rule, we proposed to continue to follow the established policies 
initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more 
equitably pay for those drugs whose cost fluctuates relative to the 
proposed CY 2017 OPPS drug packaging threshold and the drug's payment 
status (packaged or separately payable) in CY 2016. These established 
policies have not changed for many years and are the same as described 
in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434).
    We did not receive any public comments on our proposal to 
recalculate the mean unit cost for items that do not currently have an 
ASP-based payment rate from all of the CY 2015 claims data and updated 
cost report information available for this CY 2017 final rule with 
comment period to determine their final per day cost. We also did not 
receive any public comments on our proposal to continue to follow the 
established policies initially adopted for the CY 2005 OPPS (69 FR 
65780), when the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in the proposed rule 
may be different from the same drug HCPCS code's packaging status 
determined based on the data used for the final rule with comment 
period. Therefore, for CY 2017, we are finalizing these two CY 2017 
proposals without modification.
c. Policy Packaged Drugs, Biologicals, and Radiopharmaceuticals
    As mentioned briefly earlier, in the OPPS we package several 
categories of drugs, biologicals, and radiopharmaceuticals regardless 
of the cost of the products. Because the products are packaged 
according to the policies in 42 CFR 419.2(b), we refer to these 
packaged drugs, biologicals, and radiopharmaceuticals as ``policy-
packaged'' drugs, biologicals, and radiopharmaceuticals. Each of these

[[Page 79667]]

policies are either longstanding or based on longstanding principles 
and inherent to the OPPS and are as follows:
     Anesthesia, certain drugs, biologicals, and other 
pharmaceuticals; medical and surgical supplies and equipment; surgical 
dressings; and devices used for external reduction of fractures and 
dislocations (Sec.  419.2(b)(4));
     Intraoperative items and services (Sec.  419.2(b)(14));
     Drugs, biologicals, and radiopharmaceuticals that function 
as supplies when used in a diagnostic test or procedure (including but 
not limited to, diagnostic radiopharmaceuticals, contrast agents, and 
pharmacologic stress agents (Sec.  419.2(b)(15)); and
     Drugs and biologicals that function as supplies when used 
in a surgical procedure (including, but not limited to, skin 
substitutes and similar products that aid wound healing and implantable 
biologicals) (Sec.  419.2(b)(16)).
    The policy at Sec.  419.2(b)(16) is broader than that at Sec.  
419.2(b)(14). As we stated in the CY 2015 OPPS/ASC final rule with 
comment period: ``We consider all items related to the surgical outcome 
and provided during the hospital stay in which the surgery is 
performed, including postsurgical pain management drugs, to be part of 
the surgery for purposes of our drug and biological surgical supply 
packaging policy'' (79 FR 66875). The category described by Sec.  
419.2(b)(15) is large and includes diagnostic radiopharmaceuticals, 
contrast agents, stress agents, and some other products. The category 
described by Sec.  419.2(b)(16) includes skin substitutes and some 
other products. We believe it is important to reiterate that cost 
consideration is not a factor when determining whether an item is a 
surgical supply (79 FR 66875).
    Comment: A few commenters objected to the packaging of diagnostic 
radiopharmaceuticals and contrast agents under Sec.  419.2(b)(15). They 
argued that the service payments that include the payment for the 
radiopharmaceutical or contrast agent do not cover the cost of 
expensive diagnostic radiopharmaceuticals or contrast agents. The 
commenters believed that separate payment should be made for these 
products.
    Response: The packaging policy for these products has been in 
effect since CY 2008. We refer readers to the CY 2008 OPPS final rule 
(72 FR 66635 through 66646) for an extensive discussion of the original 
packaging policy for diagnostic radiopharmaceuticals and contrast 
agents, and to the CY 2014 OPPS/ASC final rule with comment period (78 
FR 74927 through 74930) for a discussion of the packaging of diagnostic 
radiopharmaceuticals and contrast agents under Sec.  419.2(b)(15); that 
is, the broader packaging policy for drugs and biologicals that 
function as supplies when used in a diagnostic test or procedure. We 
are not changing this packaging policy for CY 2017.
    Comment: One commenter, the manufacturer of the stress agent 
Lexiscan[supreg] (regadenoson), disagreed with CMS' policy of packaging 
stress agents under Sec.  419.2(b)(15). The commenter reiterated 
comments that it has made in the past since CMS packaged stress agents 
in CY 2014 (78 FR 74927 through 74930). The commenter believed that 
this packaging policy may create a financial incentive for hospitals to 
utilize a low-cost stress agent instead of a high-cost stress agent 
and/or encourage hospitals to reduce appropriate patient care. The 
commenter requested that CMS create separate APCs for diagnostic tests 
that use high cost drugs.
    Response: We have responded to this comment in previous final rules 
(for example, the CY 2014 OPPS/ASC final rule with comment period (78 
FR 74928 through 74929) and the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70347)). We have no reason to believe that any 
stress agent that a hospital chooses, regardless of the cost, will not 
be entirely medically appropriate for the patient. The commenter did 
not provide any specific information to suggest that a high-cost stress 
agent (for example, regadenoson) is more clinically appropriate than a 
low-cost stress agent (for example, adenosine) in certain patients. In 
fact, we are aware of some evidence that may suggest that the opposite 
is true (Brink, H.L., Dickerson, J.A., Stephens, J.A. and Pickworth, 
K.K. (2015), Comparison of the Safety of Adenosine and Regadenoson in 
Patients Undergoing Outpatient Cardiac Stress Testing. Pharmacotherapy, 
35: 1117-1123. Available at: American College of Cardiology Web site 
at: https://www.acc.org/latest-in-cardiology/journal-scans/2016/01/15/13/40/adenosine-versus-regadenoson-in-cardiac-stress).
    To the extent that this stress agent packaging policy encourages 
hospitals to utilize the cheaper stress agent--adenosine--instead of 
regadenoson (as the commenter speculated that it has), we believe that 
this is a positive effect of the stress agent packaging policy. One 
important purpose of these packaging policies is to provide hospitals 
with the financial incentive to choose less expensive alternative 
drugs, devices, and supplies, as clinically appropriate. In the 
preambles of our past rulemakings, we have repeatedly stated the 
following axiom: ``Where there are a variety of devices, drugs, items, 
supplies, etc. that could be used to furnish a service, some of which 
are more expensive than others, packaging encourages hospitals to use 
the most cost-efficient item that meets the patient's needs, rather 
than to routinely use a more expensive item, which often results if 
separate payment is provided for the items'' (78 FR 74925). The 
potential effect of this policy that the commenter is concerned about 
(hospitals choosing a lower cost stress agent) is precisely the outcome 
that we hope to encourage through this packaging policy. Therefore, we 
believe that this packaging policy supports medically necessary and 
efficient patient care. We believe that creating separate APCs for 
diagnostic tests that use high-cost stress agents could undermine this 
goal and, therefore, is not warranted at this time.
    Comment: One commenter, the manufacturer of the drug 
Omidria[supreg], did not want CMS to package the drug Omidria[supreg] 
(described by HCPCS code C9447, with status indicator ``N'') under 
Sec.  419.2(b)(14) or (b)(16), after pass-through payment status 
expires at the end of CY 2017 (80 FR 70347). Specifically, the 
commenter opposed packaging this drug with cataract surgery effective 
beginning in CY 2018 and subsequent years. The commenter believed that 
the surgical supply packaging policy inadvertently conflicts with CMS' 
broader policies targeting therapeutic products, unintentionally 
creates financial disincentives for hospitals and ASCs to use 
Omidria[supreg], and is overly broad. The commenter pointed out that 
studies have shown that the use of Omidria[supreg] can reduce 
complications during cataract surgery, and therefore Omidria[supreg] 
provides a distinct therapeutic benefit independent of the procedural 
benefits achieved without Omidria[supreg]. The commenter recommended 
that CMS exclude from the surgical supply packaging policy all drugs 
and biologicals that have ``a therapeutic indication that provides a 
benefit independent of the procedure performed without the drug or 
biological and that may substitute for one or more other subsequent 
interventions that would otherwise be separately paid by CMS.'' 
Presumably, according to the commenter, if CMS adopted such an 
exclusion, it would result in the continued separate

[[Page 79668]]

payment for Omidria[supreg] after pass-through payment status expires.
    Response: We appreciate the commenters' concerns and believe that 
some additional explanation might be of use. We believe that this 
comment reflects a misunderstanding of our OPPS packaging policy that 
packages drugs and biologicals that function as supplies when used in a 
surgical procedure. We have reviewed Omidria[supreg]'s indications and, 
based on those indications, it is unclear what the commenter means when 
it requested that CMS exclude drugs from the packaging policy that have 
``a therapeutic indication that provides a benefit independent of the 
procedure performed without the drug or biological and that may 
substitute for one or more other subsequent interventions that would 
otherwise be separately paid by CMS.'' Omidria[supreg] supplements the 
drugs delivered as preoperative eye drops to dilate the pupil to either 
improve or prolong dilation in certain cases. The benefit of 
Omidria[supreg] is the facilitation of cataract surgery. The surgical 
supply packaging policy for drugs and biologicals that function as 
surgical supplies is intended to apply broadly to drugs and biologicals 
that are used in surgery or that are used to achieve the surgical 
objective. In the CY 2014 OPPS/ASC final rule with comment period, in 
discussing the surgical supplies packaging policy as it applies to 
another drug used in an eye surgery, we stated that ``we believe 
packaging is appropriate for items and services that are integral or 
ancillary or supportive or dependent or adjunctive to the primary 
procedure. Therefore, items and services that fall within any of these 
categories may be properly packaged in the OPPS'' (78 FR 74938). Any 
and all of these descriptive terms apply to Omidria[supreg], which is 
integral and ancillary and supportive and dependent and adjunctive to 
cataract surgery. The commenter believes that the packaging policy 
unintentionally creates financial disincentives for hospitals and ASCs 
to use Omidria[supreg]. We view the financial effect of the packaging 
policy differently. We believe this approach promotes efficient 
resource use in hospitals and ASCs. We believe that once its pass-
through payment status expires, Omidria[supreg] should be packaged as 
are all of these other surgical supplies. In summary, in the CY 2016 
OPPS/ASC final rule with comment period, we finalized a policy to 
package the drug Omidria[supreg] (described by HCPCS code C9447) after 
pass-through payment status expires under our policy that packages 
drugs and biologicals that function as supplies when used in a surgical 
procedure. This policy will take effect on January 1, 2018.
    Comment: One commenter, the manufacturer of the drug Cysview 
(described by HCPCS code C9275) requested that CMS withdraw the 
packaging policy described by 42 CFR 419.2(b)(15), which packages 
drugs, biologicals, and radiopharmaceuticals that function as supplies 
in a diagnostic test or procedure, and pay separately for its drug, 
Cysview. The commenter pointed out that CMS acknowledged in the CY 2004 
OPPS proposed rule that ``. . . packaging payments adversely affect 
beneficiary access to medically necessary services'' (68 FR 47995). The 
commenter also asserted that this packaging policy has had a negative 
effect on the quality of patient care because it has created a 
significant financial disincentive for hospitals to purchase Cysview. 
In addition, the commenter stated that Cysview costs $810, but because 
the APC payment amount for the cystoscopy procedures in which Cysview 
is used is based on the average costs of many different procedures 
(most of which do not use Cysview), the cost of Cysview is highly 
diluted and therefore the cystoscopy procedure payments do not fully 
reflect the cost of Cysview.
    Response: We begin with the complete quote from the CY 2004 OPPS 
proposed rule from which the commenter extracted its partial quote 
described earlier. The full quote is as follows: ``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. 
Notwithstanding our commitment to package as many costs as possible, we 
are aware that packaging payments for certain drugs and 
radiopharmaceuticals, especially those that are particularly expensive 
or rarely used, might result in insufficient payments to hospitals, 
which could adversely affect beneficiary access to medically necessary 
services'' (68 FR 47995) (emphasis added). Separate payment for all 
products, items, devices, among others, that are the components of a 
primary service furnished to a patient in the hospital would be 
inconsistent with a prospective payment system--doing so would make the 
OPPS essentially a fee schedule in which every coded item resulted in 
additional payment. Furthermore, the latter part of the quoted 
statement refers only to particularly expensive or rarely used drugs, 
and Cysview is neither. Cysview has a fairly broad indication as an 
adjunct to white light cystoscopy, and $810 is not ``particularly 
expensive'' for an OPPS drug (many of which cost several thousands of 
dollars). However, we do note that the price of Cysview has increased 
38 percent in the last 5 years (from approximately $588 in 2012). 
Finally, the commenter stated that the relevant bladder cancer APCs are 
APC 5373 (Level 3 Urology and Related Services) and APC 5374 (Level 4 
Urology and Related Services), and that these APCs contain the 
procedure codes that primarily use Cysview when blue light cystoscopy 
is performed. Both of these APCs are being finalized as C-APCs for CY 
2017. Part of the C-APC methodology is to package all drugs except for 
those in pass-through payment status, and this methodology would apply 
to Cysview because it is not in drug pass-through payment status. 
Therefore, aside from the diagnostic test supplies packaging policy, 
Cysview would be packaged when used with any procedure assigned to a C-
APC.
    In summary, We are not adopting any changes based on the comments 
received on these three policy-packaged drugs--Lexiscan[supreg], 
Omidria[supreg], and Cysview--for CY 2017.
d. High Cost/Low Cost Threshold for Packaged Skin Substitutes
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
74938), we unconditionally packaged skin substitute products into their 
associated surgical procedures as part of a broader policy to package 
all drugs and biologicals that function as supplies when used in a 
surgical procedure. As part of the policy to finalize the packaging of 
skin substitutes, we also finalized a methodology that divides the skin 
substitutes into a high cost group and a low cost group, in order to 
ensure adequate resource homogeneity among APC assignments for the skin 
substitute application procedures (78 FR 74933). We continued the high 
cost/low cost categories policy in CY 2015 and CY 2016, and in the CY 
2017 OPPS/ASC proposed rule (81 FR 45661 through 45662), we proposed to 
continue it for CY 2017. Under this current policy, skin substitutes in 
the high cost category are reported with the skin substitute 
application CPT codes and skin substitutes in the low cost category are 
reported with the analogous skin substitute HCPCS C-codes. For a

[[Page 79669]]

discussion of the CY 2014 and CY 2015 methodologies for assigning skin 
substitutes to either the high cost group or the low cost group, we 
refer readers to the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 74932 through 74935) and the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66882 through 66885).
    For CY 2017, as in CY 2016, we proposed to determine the high/low 
cost status for each skin substitute product based on either a 
product's geometric mean unit cost (MUC) exceeding the geometric MUC 
threshold or the product's per day cost (PDC) (the total units of a 
skin substitute multiplied by the mean unit cost and divided by the 
total number of days) exceeding the PDC threshold. For a discussion of 
the CY 2016 high cost/low cost methodology, we refer readers to the CY 
2016 OPPS/ASC final rule with comment period (80 FR 70434 through 
70435). We proposed to assign skin substitutes that exceed either the 
MUC threshold or the PDC threshold to the high cost group. We proposed 
to assign skin substitutes with a MUC or a PDC that does not exceed 
either the MUC threshold or the PDC threshold to the low cost group. 
For this CY 2017 OPPS/ASC final rule with comment period, we analyzed 
updated CY 2015 claims data to calculate the MUC threshold (a weighted 
average of all skin substitutes' MUCs) and the PDC threshold (a 
weighted average of all skin substitutes' PDCs). The final CY 2017 MUC 
threshold is $33 per cm\2\ (rounded to the nearest $1) (proposed at $25 
per cm\2\) and the final CY 2017 PDC threshold is $716 (rounded to the 
nearest $1) (proposed at $729).
    For CY 2017, as in CY 2016, we proposed to continue to assign skin 
substitutes with pass-through payment status to the high cost category, 
and to assign skin substitutes with pricing information but without 
claims data to calculate a geometric MUC or PDC to either the high cost 
or low cost category based on the product's ASP+6 percent payment rate 
as compared to the MUC threshold. If ASP is not available, we stated in 
the proposed rule that we would use WAC+6 percent or 95 percent of AWP 
to assign a product to either the high cost or low cost category. We 
also stated in the proposed rule that new skin substitutes without 
pricing information would be assigned to the low cost category until 
pricing information is available to compare to the CY 2017 MUC 
threshold. For a discussion of our existing policy under which we 
assign skin substitutes without pricing information to the low cost 
category until pricing information is available, we refer readers to 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70436). In 
addition, as in CY 2016, we proposed for CY 2017 that a skin substitute 
that is both assigned to the high cost group in CY 2016 and also 
exceeds either the MUC or PDC in the proposed rule for CY 2017 would be 
assigned to the high cost group for CY 2017, even if it no longer 
exceeds the MUC or PDC CY 2017 thresholds based on updated claims data 
and pricing information used in this CY 2017 final rule with comment 
period. Table 15 of the CY 2017 OPPS/ASC proposed rule (81 FR 45661 
through 45662) displayed the proposed CY 2017 high cost or low cost 
category assignment for each skin substitute product.
    Comment: One commenter notified CMS of an error in the calculation 
of the MUC threshold reported in the CY 2017 OPPS/ASC proposed rule (81 
FR 45661), and stated that the values for the MUC threshold are 
different from the values for the PDC threshold. The commenter also 
requested that skin substitute products that were assigned to the high 
cost group because of the incorrect lower MUC threshold in the proposed 
rule, and that would have been classified in the low cost group if the 
corrected higher MUC threshold had been used in the proposed rule, be 
reassigned to the low cost group in the final rule.
    Response: We reviewed our calculations and agreed with the 
commenter that the MUC threshold was incorrect in the proposed rule. We 
also found a calculation error with the PDC threshold. We have 
corrected our calculations and used more recent claims data from CY 
2015 to revise the MUC threshold and the PDC threshold for this final 
rule with comment period.
    We disagree with the request of the commenter to move skin 
substitute products back to the low cost group because of the erroneous 
calculation of a lower MUC threshold in the proposed rule. The policy 
we proposed to continue from CY 2016, and which we are finalizing for 
CY 2017, retains a skin substitute product in the high cost group if 
the product was assigned to the high cost group in CY 2016 and exceeded 
either the MUC threshold or the PDC threshold of the proposed rule for 
CY 2017. The policy does not make exceptions due to calculation errors 
or revisions by CMS. We will follow this policy and retain all skin 
substitute products in the high cost group that were assigned to the 
high cost group in CY 2016 and exceeded either the MUC threshold or the 
PDC threshold of the proposed rule for CY 2017.
    Comment: One commenter provided information to support that HCPCS 
code Q4163 (Amnion bio and woundex sq cm) should be assigned to the 
high cost skin substitute group. The commenter stated that HCPCS code 
Q4163 is a relatively new skin substitute product and there was not 
sufficient claims data or pricing information available for the product 
when the CY 2017 OPPS/ASC proposed rule was released. The commenter 
stated that regulatory guidance requires CMS to assign a nonpass-
through skin substitute product to the low cost group when there are no 
available cost data. The commenter supplied wholesale acquisition cost 
(WAC) and average wholesale price (AWP) data for HCPCS code Q4163 
showing that HCPCS code Q4163 should be assigned to the high cost 
group.
    Response: We reviewed WAC and ASP data for HCPCS code Q4163, and we 
agree with the findings of the commenter. After consideration of the 
public comment we received about HCPCS code Q4163, in this final rule 
with comment period, we are assigning HCPCS code Q4163 to the high cost 
skin substitute group for CY 2017.
    Comment: One commenter requested that PuraPly (described by HCPCS 
code Q4172; previously HCPCS code C9349) have its pass-through payment 
status end as of December 31, 2016, and not continue through CY 2017. 
The commenter stated that PuraPly received its pass-through payment 
status in January 2015 and will have 2 full years of pass-through 
payment status by December 2016. The commenter also asserted that 
PuraPly was not a new skin substitute product when approved for pass-
through payment status in the CY 2015 OPPS/ASC final rule with comment 
period. The commenter provided evidence that PuraPly, called by its 
previous name, FortaDerm, was introduced to the market as early as 
2002.
    Response: We disagree with the commenter. PuraPly (described by 
HCPCS code Q4172; previously HCPCS code C9349) was given pass-through 
payment status under the pass-through payment policy and process for 
drugs and biologicals that was in effect prior to CY 2015. Pass-through 
payment status products covered by the policy receive pass-through 
payments for at least 2 years but for no more than 3 years from the 
date the first OPPS payment for the product is generated. The assertion 
by the commenter that PuraPly will have reached 2 years of pass-through 
payment status by the end of December 2016 is incorrect. PuraPly will 
not achieve 2 years of pass-through

[[Page 79670]]

payment status until at least January 2017. The pass-through payment 
policy for drugs and biologicals that was in effect at the beginning of 
CY 2015 only allows changes to a pass-through payment designation for a 
product at the beginning of a calendar year. Therefore, PuraPly must 
continue to have pass-through status for all of CY 2017. The evidence 
presented by the commenter that PuraPly was available commercially in 
2002 is not relevant, as the product (under any name) did not have 
pass-through payment status prior to 2015, and there was no newness 
criterion for drug and biological pass-through payment status 
eligibility at the time of the PuraPly (formerly FortaDerm) pass-
through payment application evaluation.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to continue pass-through 
status for PuraPly (HCPCS code Q4172; previously HCPCS code C9349) for 
CY 2017.
    Comment: A few commenters supported the current methodology used by 
CMS to assign skin substitute products into high cost and low cost 
categories. Commenters appreciated that either the MUC threshold or the 
PDC threshold could be used to qualify skin substitute products as high 
cost. The commenter stated that including the PDC threshold reduces the 
risk that products with larger sizes would be assigned to the low cost 
category because of a low MUC. One commenter suggested that using the 
PDC threshold alone may improve on the current methodology. Another 
commenter supported the policy assigning skin substitute products to 
the high cost group that exceeded the MUC threshold or the PDC 
threshold in the CY 2016 final rule and in the CY 2017 proposed rule, 
even if analysis for the CY 2017 final rule indicate a product should 
be assigned to the low cost group.
    Response: We appreciate the commenters' support. We agree that 
using either a MUC methodology or a PDC methodology along with the 
policy of automatically assigning skin substitute products to the high 
cost group if they were identified as high cost for both the CY 2016 
final rule and the CY 2017 proposed rule stabilizes cost group 
assignments.
    Comment: Several commenters expressed concerns about aspects of the 
current CMS methodology for payment for the use of skin substitute 
products. The commenters stated that one issue is the accurate 
reporting of the cost of skin substitute products. The commenters 
believed that many providers report lower utilization of skin 
substitutes than what providers are actually using, which leads to 
lower payment rates. Some commenters were generally opposed to 
packaging or bundling skin substitute products with other services 
because of concerns that the cost of skin substitute products is not 
accurately accounted for in the packaged or bundled rates. Commenters 
continued to have concerns about the payment for wounds larger than 100 
cm\2\ that they believed are too low even after the addition of PDC 
methodology to determine if a skin substitute product should be in the 
high cost group.
    Several commenters also suggested changes to the system of 
assigning skin substitutes to either a high cost or low cost category. 
Suggestions included creating a three-tiered system to more accurately 
reflect the prices of individual products, monitoring the current 
methodology to determine if it was leading to lower reimbursements, and 
improving transparency by making available MUC and PDC calculations and 
claims data by product.
    Some commenters made a more general request for overall stability 
with skin substitute methodology and alternate ways to calculate the 
cost of products to compare to the MUC and PDC thresholds without using 
OPPS claims data. The most common suggestion was to use average sales 
price (ASP) + 6 percent as a primary source of cost data instead of 
using ASP + 6 percent when no claims data are available for a product.
    Response: We appreciate the feedback we received from the 
commenters. However, we believe the current cost estimation and payment 
policies for skin substitutes reasonably reflect the costs incurred to 
administer these products. Therefore, after consideration of the public 
comments we received, we are finalizing our proposal to maintain 
current policies regarding the payment of skin substitute products for 
CY 2017 without additional modifications.
    Comment: One commenter requested that CMS alter CPT coding 
instructions that prohibits wound healing products in the form of a 
gel, liquid, foam, ointment, powder, among others (a form other than a 
graft-type sheet) from using the skin substitute application CPT codes 
or that CMS pay separately for these products in the OPPS.
    Response: Skin substitutes and all of their variations and related 
wound products, regardless of the form or physical state, are packaged 
in the OPPS as surgical supplies under 42 CFR 419.2(b)(16). Skin 
substitutes is a broad class of wound products that includes all of the 
products in the HCPCS skin substitute Q code series and all related 
products. We cannot change AMA CPT coding guidance. We can (if we 
choose to do so) provide coding instructions or guidance specifically 
for Medicare coding and payment purposes. We believe that the AMA 
coding guidance for the skin substitute codes is sufficient as 
currently written. The skin substitute graft materials are applied to a 
wound in a manner that is different from how a liquid or particulate 
material is applied. In general, there are not very many codes for the 
application of topical medications such as liquids, creams or ointments 
because what the applier has to do to put the medication or other 
medical product on a patient's skin does not typically rise to the 
level of a service that would need to be described by a code depicting 
the professional services of a health care provider. In other words, it 
is generally a very minor activity that requires little time, effort or 
skill, and often such products are self-administered. Regarding the 
request that we pay separately for liquid, gel, particulate, powder, or 
other forms of skin substitutes, we do not agree with this request. It 
is common in the OPPS that the use of a surgical supply (whether 
expensive or not) does not correspond to a specific procedure code with 
a payment that covers the full cost of the supply. In this case, access 
to particular skin substitute products is generally not our concern 
because there are so many different skin substitute products available 
to Medicare beneficiaries in the HOPD that adequate treatment for 
wounds under the current payment scheme should always be available.
    After consideration of the public comments we received, we are 
finalizing as proposed our high cost/low cost skin substitute 
methodology as described above. Table 37 below displays the CY 2017 
high cost or low cost category assignment for each skin substitute 
product.

[[Page 79671]]



 Table 37--Skin Substitute Assignments to High Cost and Low Cost Groups
                               for CY 2017
------------------------------------------------------------------------
                                                     CY 2017  High/low
  CY 2017 HCPCS code    CY 2017 short descriptor        assignment
------------------------------------------------------------------------
C9363.................  Integra Meshed Bil Wound  High.
                         Mat.
Q4100.................  Skin Substitute, NOS....  Low.
Q4101.................  Apligraf................  High.
Q4102.................  Oasis Wound Matrix......  Low.
Q4103.................  Oasis Burn Matrix.......  High.
Q4104.................  Integra BMWD............  High.
Q4105.................  Integra DRT.............  High.
Q4106.................  Dermagraft..............  High.
Q4107.................  GraftJacket.............  High.
Q4108.................  Integra Matrix..........  High.
Q4110.................  Primatrix...............  High.
Q4111.................  Gammagraft..............  Low.
Q4115.................  Alloskin................  Low.
Q4116.................  Alloderm................  High.
Q4117.................  Hyalomatrix.............  Low.
Q4119.................  Matristem Wound Matrix..  Low.
Q4120.................  Matristem Burn Matrix...  High.
Q4121.................  Theraskin...............  High.
Q4122.................  Dermacell...............  High.
Q4123.................  Alloskin................  High.
Q4124.................  Oasis Tri-layer Wound     Low.
                         Matrix.
Q4126.................  Memoderm/derma/tranz/     High.
                         integup.
Q4127.................  Talymed.................  High.
Q4128.................  Flexhd/Allopatchhd/       High.
                         Matrixhd.
Q4129.................  Unite Biomatrix.........  High.
Q4131.................  Epifix..................  High.
Q4132.................  Grafix Core.............  High.
Q4133.................  Grafix Prime............  High.
Q4134.................  hMatrix.................  Low.
Q4135.................  Mediskin................  Low.
Q4136.................  Ezderm..................  Low.
Q4137.................  Amnioexcel or Biodexcel,  High.
                         1cm.
Q4138.................  Biodfence DryFlex, 1cm..  High.
Q4140.................  Biodfence 1cm...........  High.
Q4141.................  Alloskin ac, 1cm........  High.
Q4143.................  Repriza, 1cm............  High.
Q4146.................  Tensix, 1CM.............  High.
Q4147.................  Architect ecm, 1cm......  High.
Q4148.................  Neox 1k, 1cm............  High.
Q4150.................  Allowrap DS or Dry 1 sq   High.
                         cm.
Q4151.................  AmnioBand, Guardian 1 sq  High.
                         cm.
Q4152.................  Dermapure 1 square cm...  High.
Q4153.................  Dermavest 1 square cm...  High.
Q4154.................  Biovance 1 square cm....  High.
Q4156.................  Neox 100 1 square cm....  High.
Q4157.................  Revitalon 1 square cm...  High.
Q4158.................  MariGen 1 square cm.....  High.
Q4159.................  Affinity 1 square cm....  High.
Q4160.................  NuShield 1 square cm....  High.
Q4161.................  Bio-Connekt per square    Low.
                         cm.
Q4162.................  Amnio bio and woundex     Low.
                         flow.
Q4163.................  Amnion bio and woundex    High.
                         sq cm.
Q4164.................  Helicoll, per square cm.  High.
Q4165.................  Keramatrix, per square    Low.
                         cm.
Q4166.................  Cytal, per square cm....  Low.
Q4167.................  Truskin, per square cm..  Low.
Q4168.................  Amnioband, 1 mg.........  Low.
Q4169.................  Artacent wound, per       Low.
                         square cm.
Q4170.................  Cygnus, per square cm...  Low.
Q4171.................  Interfyl, 1 mg..........  Low.
Q4172*................  PuraPly, PuraPly antimic  High.
Q4173.................  Palingen or palingen      Low.
                         xplus, per sq cm.
Q4175.................  Miroderm, per square cm.  Low.
------------------------------------------------------------------------
* Pass-through payment status in CY 2017.


[[Page 79672]]

e. Packaging Determination for HCPCS Codes That Describe the Same Drug 
or Biological but Different Dosages
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 
through 60491), we finalized a policy to make a single packaging 
determination for a drug, rather than an individual HCPCS code, when a 
drug has multiple HCPCS codes describing different dosages because we 
believed that adopting the standard HCPCS code-specific packaging 
determinations for these codes could lead to inappropriate payment 
incentives for hospitals to report certain HCPCS codes instead of 
others. We continue to believe that making packaging determinations on 
a drug-specific basis eliminates payment incentives for hospitals to 
report certain HCPCS codes for drugs and allows hospitals flexibility 
in choosing to report all HCPCS codes for different dosages of the same 
drug or only the lowest dosage HCPCS code. Therefore, in the CY 2017 
OPPS/ASC proposed rule (81 FR 45662), 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 2017.
    For CY 2017, 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 2015 claims data 
and our pricing information at ASP+6 percent across all of the HCPCS 
codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. The following drugs 
did not have pricing information available for the ASP methodology for 
the CY 2017 OPPS/ASC proposed rule, and as is our current policy for 
determining the packaging status of other drugs, we used the mean unit 
cost available from the CY 2015 claims data to make the proposed 
packaging determinations for these drugs: HCPCS code J1840 (Injection, 
kanamycin sulfate, up to 500 mg), J1850 (Injection, kanamycin sulfate, 
up to 75 mg) and HCPCS code J3472 (Injection, hyaluronidase, ovine, 
preservative free, per 1000 usp units).
    For all other drugs and biologicals that have HCPCS codes 
describing different doses, we then multiplied the proposed weighted 
average ASP+6 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 the proposed CY 2017 drug packaging threshold of 
$110 (so that all HCPCS codes for the same drug or biological would be 
packaged) or greater than the proposed CY 2017 drug packaging threshold 
of $110 (so that all HCPCS codes for the same drug or biological would 
be separately payable). The proposed packaging status of each drug and 
biological HCPCS code to which this methodology would apply in CY 2017 
was displayed in Table 16 of the CY 2017 OPPS/ASC proposed rule (81 FR 
45663).
    We did not receive any public comments on this proposal. Therefore, 
for CY 2017, we are finalizing our CY 2017 proposal, without 
modification, 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. Table 38 below displays the final packaging status 
of each drug and biological HCPCS code to which the finalized 
methodology applies for CY 2017.

   Table 38--HCPCS Codes to Which the CY 2017 Drug-Specific Packaging
                    Determination Methodology Applies
------------------------------------------------------------------------
    CY 2017 HCPCS code        CY 2017 long descriptor       CY 2017 SI
------------------------------------------------------------------------
C9257.....................  Injection, bevacizumab,                   K
                             0.25 mg.
J9035.....................  Injection, bevacizumab, 10                K
                             mg.
J1460.....................  Injection, gamma globulin,                K
                             intramuscular, 1 cc.
J1560.....................  Injection, gamma globulin,                K
                             intramuscular over 10 cc.
J2788.....................  Injection, rho d immune                   N
                             globulin, human, minidose,
                             50 micrograms (250 i.u.).
J2790.....................  Injection, rho d immune                   N
                             globulin, human, full
                             dose, 300 micrograms (1500
                             i.u.).
J8520.....................  Capecitabine, oral, 150 mg.               N
J8521.....................  Capecitabine, oral, 500 mg.               N
J7515.....................  Cyclosporine, oral, 25 mg..               N
J7502.....................  Cyclosporine, oral, 100 mg.               N
J2920.....................  Injection,                                N
                             methylprednisolone sodium
                             succinate, up to 40 mg.
J2930.....................  Injection,                                N
                             methylprednisolone sodium
                             succinate, up to 125 mg.
J3471.....................  Injection, hyaluronidase,                 N
                             ovine, preservative free,
                             per 1 usp unit (up to 999
                             usp units).
J3472.....................  Injection, hyaluronidase,                 N
                             ovine, preservative free,
                             per 1000 usp units.
J1642.....................  Injection, heparin sodium,                N
                             (heparin lock flush), per
                             10 units.
J1644.....................  Injection, heparin sodium,                N
                             per 1000 units.
J1850.....................  Injection, kanamycin                      N
                             sulfate, up to 75 mg.
J1840.....................  Injection, kanamycin                      N
                             sulfate, up to 500 mg.
J7050.....................  Infusion, normal saline                   N
                             solution, 250 cc.
J7040.....................  Infusion, normal saline                   N
                             solution, sterile (500
                             ml=1 unit).
J7030.....................  Infusion, normal saline                   N
                             solution, 1000 cc.
J1020.....................  Injection,                                N
                             methylprednisolone
                             acetate, 20 mg.
J1030.....................  Injection,                                N
                             methylprednisolone
                             acetate, 40 mg.
J1040.....................  Injection,                                N
                             methylprednisolone
                             acetate, 80 mg.
J9250.....................  Methotrexate sodium, 5 mg..               N
J9260.....................  Methotrexate sodium, 50 mg.               N
------------------------------------------------------------------------


[[Page 79673]]

2. Payment for Drugs and Biologicals Without Pass-Through Status That 
Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other 
Separately Payable and Packaged Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' (known as a SCOD) is defined as a 
covered outpatient drug, as defined in section 1927(k)(2) of the Act, 
for which a separate APC has been established and that either is a 
radiopharmaceutical agent or is a drug or biological for which payment 
was made on a pass-through basis on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of SCODs. These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005, and later 
periodic surveys conducted by the Secretary as set forth in the 
statute. If hospital acquisition cost data are not available, the law 
requires that payment be equal to payment rates established under the 
methodology described in section 1842(o), section 1847A, or section 
1847B of the Act, as calculated and adjusted by the Secretary as 
necessary. We refer to this alternative methodology as the ``statutory 
default.'' Most physician Part B drugs are paid at ASP+6 percent in 
accordance with section 1842(o) and section 1847A of the Act.
    Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in 
OPPS payment rates for SCODs to take into account overhead and related 
expenses, such as pharmacy services and handling costs. Section 
1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead 
and related expenses and to make recommendations to the Secretary 
regarding whether, and if so how, a payment adjustment should be made 
to compensate hospitals for overhead and related expenses. Section 
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the 
weights for ambulatory procedure classifications for SCODs to take into 
account the findings of the MedPAC study.
    It has been our longstanding policy to apply the same treatment to 
all separately payable drugs and biologicals, which include SCODs, and 
drugs and biologicals that are not SCODs. Therefore, we apply the 
payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, 
as required by statute, but we also apply it to separately payable 
drugs and biologicals that are not SCODs, which is a policy 
determination rather than a statutory requirement. In the CY 2017 OPPS/
ASC proposed rule (81 FR 45664), we proposed to apply section 
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and 
biologicals, including SCODs. Although we do not distinguish SCODs in 
this discussion, we note that we are required to apply section 
1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying 
this provision to other separately payable drugs and biologicals, 
consistent with our history of using the same payment methodology for 
all separately payable drugs and biologicals.
    For a detailed discussion of our OPPS drug payment policies from CY 
2006 to CY 2012, we refer readers to the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68383 through 68385). In the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68386 through 68389), we 
first adopted the statutory default policy to pay for separately 
payable drugs and biologicals at ASP+6 percent based on section 
1833(t)(14)(A)(iii)(II) of the Act. We continued this policy of paying 
for separately payable drugs and biologicals at the statutory default 
for CY 2014, CY 2015, and CY 2016 (80 FR 70440).
b. CY 2017 Payment Policy
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45664), for CY 2017 
and subsequent years, we proposed to continue our payment policy that 
has been in effect from CY 2013 to present and pay for separately 
payable drugs and biologicals at ASP+6 percent in accordance with 
section 1833(t)(14)(A)(iii)(II) of the Act (the statutory default). We 
proposed that the ASP+6 percent payment amount for separately payable 
drugs and biologicals requires no further adjustment and represents the 
combined acquisition and pharmacy overhead payment for drugs and 
biologicals. We also proposed that payments for separately payable 
drugs and biologicals are included in the budget neutrality 
adjustments, under the requirements in section 1833(t)(9)(B) of the 
Act, and that the budget neutral weight scaler is not applied in 
determining payments for these separately paid drugs and biologicals.
    Comment: The majority of commenters supported CMS' proposal to 
continue to pay for separately payable drugs and biologicals based on 
the statutory default rate of ASP+6 percent. One commenter recommended 
that CMS increase payment for separately payable drugs and biologicals 
without pass-through payment status to adequately cover providers' 
acquisition and pharmacy overhead costs.
    Response: We thank commenters for their support. We continue to 
believe that ASP+6 percent based on the statutory default is 
appropriate for payment of separately payable drugs and biologicals for 
CY 2017 and that this percentage amount adequately covers acquisition 
and overhead cost. We see no evidence that an additional payment for 
overhead is required for separately payable drugs, biologicals, and 
therapeutic radiopharmaceuticals for CY 2017.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to pay for separately 
payable drugs and biologicals at ASP+6 percent based on section 
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). The ASP+6 
percent payment amount for separately payable drugs and biologicals 
requires no further adjustment and represents the combined acquisition 
and pharmacy overhead payment for drugs and biologicals for CY 2017. In 
addition, we are finalizing our proposal that payment for separately 
payable drugs and biologicals be included in the budget neutrality 
adjustments, under the requirements of section 1833(t)(9)(B) of the 
Act, and that the budget neutral weight scaler is not applied in 
determining payment of these separately paid drugs and biologicals.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to this final rule with comment period 
(available via the Internet on the CMS Web site), which illustrate the 
final CY 2017 payment of ASP+6 percent for separately payable

[[Page 79674]]

nonpass-through drugs and biologicals and ASP+6 percent for pass-
through drugs and biologicals, reflect either ASP information that is 
the basis for calculating payment rates for drugs and biologicals in 
the physician's office setting effective October 1, 2016, or WAC, AWP, 
or mean unit cost from CY 2015 claims data and updated cost report 
information available for this final rule with comment period. In 
general, these published payment rates are not the same as the actual 
January 2017 payment rates. This is because payment rates for drugs and 
biologicals with ASP information for January 2017 will be determined 
through the standard quarterly process where ASP data submitted by 
manufacturers for the third quarter of 2016 (July 1, 2016 through 
September 30, 2016) will be used to set the payment rates that are 
released for the quarter beginning in January 2017 near the end of 
December 2016. In addition, payment rates for drugs and biologicals in 
Addenda A and B to this final rule with comment period for which there 
was no ASP information available for October 2016 are based on mean 
unit cost in the available CY 2015 claims data. If ASP information 
becomes available for payment for the quarter beginning in January 
2017, we will price payment for these drugs and biologicals based on 
their newly available ASP information. Finally, there may be drugs and 
biologicals that have ASP information available for this final rule 
with comment period (reflecting October 2016 ASP data) that do not have 
ASP information available for the quarter beginning in January 2017. As 
stated in the CY 2017 OPPS/ASC proposed rule (81 FR 45664), these drugs 
and biologicals will then be paid based on mean unit cost data derived 
from CY 2015 hospital claims. Therefore, the payment rates listed in 
Addenda A and B to this final rule with comment period are not for 
January 2017 payment purposes and are only illustrative of the CY 2017 
OPPS payment methodology using the most recently available information 
at the time of issuance of this final rule with comment period.
c. Biosimilar Biological Products
    For CY 2016, we finalized a policy to pay for biosimilar biological 
products based on the payment allowance of the product as determined 
under section 1847A of the Act and to subject nonpass-through 
biosimilar biological products to our annual threshold-packaged policy 
(80 FR 70445 through 70446). In the CY 2017 OPPS/ASC proposed rule (81 
FR 45664), for CY 2017, we proposed to continue this same payment 
policy for biosimilar biological products.
    We received several public comments on the proposed HCPCS coding 
and modifiers for biosimilar biological products. As proposed, under 
the OPPS, we will use the HCPCS codes and modifiers for biosimilar 
biological products based on the policy established under the CY 2016 
MPFS final rule with comment period. Therefore, we are considering the 
public comments received on biosimilar biological product HCPCS coding 
and modifiers in response to the CY 2017 OPPS/ASC proposed rule to be 
outside the scope to the proposed rule and we are not addressing them 
in this CY 2017 OPPS/ASC final rule with comment period. We refer 
readers to the CY 2017 MPFS final rule with comment period.
    We are finalizing our proposal, without modification, to pay for 
biosimilar biological products based on the payment allowance of the 
product as determined under section 1847A of the Act. In addition, we 
are finalizing our proposal, without modification, to subject nonpass-
through biosimilar biological products to our annual threshold-packaged 
policy.
3. Payment Policy for Therapeutic Radiopharmaceuticals
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45664), for CY 2017, 
we proposed to continue the payment policy for therapeutic 
radiopharmaceuticals that began in CY 2010. We pay for separately paid 
therapeutic radiopharmaceuticals under the ASP methodology adopted for 
separately payable drugs and biologicals. If ASP information is 
unavailable for a therapeutic radiopharmaceutical, we base therapeutic 
radiopharmaceutical payment on mean unit cost data derived from 
hospital claims. We believe that the rationale outlined in the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60524 through 60525) for 
applying the principles of separately payable drug pricing to 
therapeutic radiopharmaceuticals continues to be appropriate for 
nonpass-through, separately payable therapeutic radiopharmaceuticals in 
CY 2017. Therefore, we proposed for CY 2017 to pay all nonpass-through, 
separately payable therapeutic radiopharmaceuticals at ASP+6 percent, 
based on the statutory default described in section 
1833(t)(14)(A)(iii)(II) of the Act. For a full discussion of ASP-based 
payment for therapeutic radiopharmaceuticals, we refer readers to the 
CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 
60521). We also proposed to rely on CY 2015 mean unit cost data derived 
from hospital claims data for payment rates for therapeutic 
radiopharmaceuticals for which ASP data are unavailable and to update 
the payment rates for separately payable therapeutic 
radiopharmaceuticals according to our usual process for updating the 
payment rates for separately payable drugs and biologicals on a 
quarterly basis if updated ASP information is available. For a complete 
history of the OPPS payment policy for therapeutic 
radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule 
with comment period (69 FR 65811), the CY 2006 OPPS final rule with 
comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60524). The proposed CY 2017 payment rates for 
nonpass-through, separately payable therapeutic radiopharmaceuticals 
were in Addenda A and B to the proposed rule (which are available via 
the Internet on the CMS Web site).
    Comment: Commenters supported CMS' proposal to pay for separately 
payable therapeutic radiopharmaceuticals under the statutory default 
payment rate of ASP+6 percent if ASP data are submitted to CMS.
    Response: We appreciate the commenters' support. We continue to 
believe that providing payment for therapeutic radiopharmaceuticals 
based on ASP or mean unit cost if ASP information is not available 
would provide appropriate payment for these products. When ASP data are 
not available, we believe that paying for therapeutic 
radiopharmaceuticals using mean unit cost will appropriately pay for 
the average hospital acquisition and associated handling costs of non-
pass-through separately payable therapeutic radiopharmaceuticals. As we 
stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60523), although using mean unit cost for payment for therapeutic 
radiopharmaceuticals when ASP data are not available is not the usual 
OPPS process (the usual process relies on alternative data sources such 
as WAC or AWP when ASP information is temporarily unavailable, prior to 
defaulting to the mean unit cost from hospital claims data), we 
continue to believe that WAC or AWP is not an appropriate proxy to 
provide OPPS payment for average therapeutic radiopharmaceutical 
acquisition cost and associated handling costs when manufacturers are 
not required to submit ASP data. Payment based on WAC or AWP under the 
established

[[Page 79675]]

OPPS methodology for payment of separately payable drugs and 
biologicals is usually temporary for a calendar quarter until a 
manufacturer is able to submit the required ASP data in accordance with 
the quarterly ASP submission timeframes for reporting under section 
1847A of the Act. Because ASP reporting for OPPS payment of separately 
payable therapeutic radiopharmaceuticals is not required, a 
manufacturer's choice to not submit ASP could result in payment for a 
separately payable therapeutic radiopharmaceutical based on WAC or AWP 
for a full year, a result that we believe would be inappropriate.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to pay all 
non-pass-through, separately payable therapeutic radiopharmaceuticals 
at ASP+6 percent. We also are finalizing our proposal to continue to 
rely on CY 2015 mean unit cost data derived from hospital claims data 
for payment rates for therapeutic radiopharmaceuticals for which ASP 
data are unavailable. The CY 2017 final rule payment rates for nonpass-
through separately payable therapeutic radiopharmaceuticals are 
included in Addenda A and B to this final rule with comment period 
(which are available via the Internet on the CMS Web site).
4. Payment Adjustment Policy for Radioisotopes Derived From Non-Highly 
Enriched Uranium Sources
    Radioisotopes are widely used in modern medical imaging, 
particularly for cardiac imaging and predominantly for the Medicare 
population. Some of the Technetium-99 (Tc-99m), the radioisotope used 
in the majority of such diagnostic imaging services, is produced in 
legacy reactors outside of the United States using highly enriched 
uranium (HEU).
    The United States would like to eliminate domestic reliance on 
these reactors, and is promoting the conversion of all medical 
radioisotope production to non-HEU sources. Alternative methods for 
producing Tc-99m without HEU are technologically and economically 
viable, and conversion to such production has begun. We expect that 
this change in the supply source for the radioisotope used for modern 
medical imaging will introduce new costs into the payment system that 
are not accounted for in the historical claims data.
    Therefore, beginning in CY 2013, we finalized a policy to provide 
an additional payment of $10 for the marginal cost for radioisotopes 
produced by non-HEU sources (77 FR 68323). Under this policy, hospitals 
report HCPCS code Q9969 (Tc-99m from non-highly enriched uranium 
source, full cost recovery add-on per study dose) once per dose along 
with any diagnostic scan or scans furnished using Tc-99m as long as the 
Tc-99m doses used can be certified by the hospital to be at least 95 
percent derived from non-HEU sources (77 FR 68321).
    We stated in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68321) that our expectation is that this additional payment will 
be needed for the duration of the industry's conversion to alternative 
methods to producing Tc-99m without HEU. We also stated that we would 
reassess, and propose if necessary, on an annual basis whether such an 
adjustment continued to be necessary and whether any changes to the 
adjustment were warranted (77 FR 68316). We have reassessed this 
payment for CY 2017 and did not identify any new information that would 
cause us to modify payment. Therefore, in the CY 2017 OPPS/ASC proposed 
rule (81 FR 45665), for CY 2017, we proposed to continue to provide an 
additional $10 payment for radioisotopes produced by non-HEU sources.
    Comment: Some commenters supported CMS' proposal to provide an 
additional $10 payment for radioisotopes produced by non-HEU sources 
and asked that CMS work with stakeholders regarding a phase-out plan 
based on utilization and adoption of non-HEU technetium by the 
radiopharmaceutical manufacturers. Another commenter requested that CMS 
provide an explanation for not applying an annual inflation update to 
the $10 payment for radioisotopes produced by non-HEU sources, provide 
details on plans to offset nuclear medicine procedures by the amount of 
cost paid through the non-HEU policy, and make available to the public 
data regarding claims submitted to date under this policy. The 
commenter also stated that CMS should assess whether the beneficiary 
copayment policy is adversely impacting patient access.
    Response: We appreciate commenters' support. As stated earlier, we 
support efforts by all of the involved stakeholders to convert all 
medical radioisotope production to non-HEU sources. Regarding the 
comment requesting that we increase the $10 payment for HCPCS code 
Q9969 (by an inflation update or some other amount) for CY 2017, we 
currently lack sufficient additional information to suggest that an 
add-on payment greater than $10 would be more appropriate. Regarding 
the request for payment information for services described by HCPCS 
code Q9969, the following are the most currently available total 
Medicare payments for services described by HCPCS code Q9969 for each 
year in which it has been in effect: CY 2013 ($17,164); CY 2014 
($66,609); and CY 2015 ($106,584). Also, we do not believe that 
beneficiary copayments for services described by HCPCS code Q9969 are 
adversely impacting beneficiary access to any medically necessary 
services. The 20-percent copayment amount on the $10 total payment for 
HCPCS code Q9969 is only $2. Any Medicare beneficiary who is unable to 
afford this $2 copayment would almost certainly have some form of 
government assistance that would cover this copayment amount. 
Therefore, we do not believe that the copayment requirements for 
services described by HCPCS code Q9969 are negatively impacting access 
to medical care for Medicare beneficiaries.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue the policy 
of providing an additional $10 payment for radioisotopes produced by 
non-HEU sources for CY 2017, which will be the fifth year in which this 
policy is in effect in the OPPS. We will continue to reassess this 
policy annually, consistent with the original policy in the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68321).
5. Payment for Blood Clotting Factors
    For CY 2016, we provided payment for blood clotting factors under 
the same methodology as other nonpass-through separately payable drugs 
and biologicals under the OPPS and continued paying an updated 
furnishing fee (80 FR 70441). That is, for CY 2016, we provided payment 
for blood clotting factors under the OPPS at ASP+6 percent, plus an 
additional payment for the furnishing fee. We note that when blood 
clotting factors are provided in physicians' offices under Medicare 
Part B and in other Medicare settings, a furnishing fee is also applied 
to the payment. The CY 2016 updated furnishing fee was $0.202 per unit.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45665), for CY 2017, 
we proposed to pay for blood clotting factors at ASP+6 percent, 
consistent with our proposed payment policy for other nonpass-through, 
separately payable drugs and biologicals, and to continue our policy 
for payment of the furnishing fee using an updated amount. Our policy 
to pay for a furnishing fee for blood clotting factors under the OPPS 
is

[[Page 79676]]

consistent with the methodology applied in the physician's office and 
in the inpatient hospital setting. These methodologies were first 
articulated in the CY 2006 OPPS final rule with comment period (70 FR 
68661) and later discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66765). The proposed furnishing fee update was 
based on the percentage increase in the Consumer Price Index (CPI) for 
medical care for the 12-month period ending with June of the previous 
year. Because the Bureau of Labor Statistics releases the applicable 
CPI data after the MPFS and OPPS/ASC proposed rules are published, we 
were not able to include the actual updated furnishing fee in the 
proposed rules. Therefore, in accordance with our policy, as finalized 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), 
we proposed to announce the actual figure for the percent change in the 
applicable CPI and the updated furnishing fee calculated based on that 
figure through applicable program instructions and posting on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    Comment: One commenter supported CMS' proposal to continue its 
longstanding policy for payment of the furnishing fee for blood 
clotting factors administered or dispensed in the hospital outpatient 
department at the same level as in the physician office setting.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to provide payment for 
blood clotting factors under the same methodology as other separately 
payable drugs and biologicals under the OPPS and to continue payment of 
an updated furnishing fee. We will announce the actual figure of the 
percent change in the applicable CPI and the updated furnishing fee 
calculation based on that figure through the applicable program 
instructions and posting on the CMS Web site.
6. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims 
Data
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45665), for CY 2017, 
we proposed to continue to use the same payment policy as in CY 2016 
for nonpass-through drugs, biologicals, and radiopharmaceuticals with 
HCPCS codes but without OPPS hospital claims data (80 FR 70443). The 
proposed CY 2017 payment status of each of the nonpass-through drugs, 
biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS 
hospital claims data was listed in Addendum B to the proposed rule, 
which is available via the Internet on the CMS Web site.
    We did not receive any specific public comments regarding our 
proposed payment for nonpass-through drugs, biologicals, and 
radiopharmaceuticals with HCPCS codes, but without OPPS hospital claims 
data. Therefore, we are finalizing our CY 2017 proposal without 
modification, including our proposal to assign drug or biological 
products status indicator ``K'' and pay for them separately for the 
remainder of CY 2017 if pricing information becomes available. The CY 
2017 payment status of each of the nonpass-through drugs, biologicals, 
and radiopharmaceuticals with HCPCS codes but without OPPS hospital 
claims data is listed in Addendum B to this final rule with comment 
period, which is available via the Internet on the CMS Web site.

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently not to exceed 2.0 percent of total 
program payments estimated to be made for all covered services under 
the OPPS furnished for that year. If we estimate before the beginning 
of the calendar year that the total amount of pass-through payments in 
that year would exceed the applicable percentage, section 
1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction 
in the amount of each of the transitional pass-through payments made in 
that year to ensure that the limit is not exceeded. We estimate the 
pass-through spending to determine whether payments exceed the 
applicable percentage and the appropriate prorata reduction to the 
conversion factor for the projected level of pass-through spending in 
the following year to ensure that total estimated pass-through spending 
for the prospective payment year is budget neutral, as required by 
section 1833(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
2017 entails estimating spending for two groups of items. The first 
group of items consists of device categories that are currently 
eligible for pass-through payment and that will continue to be eligible 
for pass-through payment in CY 2017. The CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66778) describes the methodology we have 
used in previous years to develop the pass-through spending estimate 
for known device categories continuing into the applicable update year. 
The second group of items consists of items that we know are newly 
eligible, or project may be newly eligible, for device pass-through 
payment in the remaining quarters of CY 2016 or beginning in CY 2017. 
The sum of the CY 2017 pass-through spending estimates for these two 
groups of device categories equals the total CY 2017 pass-through 
spending estimate for device categories with pass-through payment 
status. We base the device pass-through estimated payments for each 
device category on the amount of payment as established in section 
1833(t)(6)(D)(ii) of the Act, and as outlined in previous rules, 
including the CY 2014 OPPS/ASC final rule with comment period (78 FR 
75034 through 75036). We note that, beginning in CY 2010, the pass-
through evaluation process and pass-through payment for implantable 
biologicals newly approved for pass-through payment beginning on or 
after January 1, 2010, that are surgically inserted or implanted 
(through a surgical incision or a natural orifice) use the device pass-
through process and payment methodology (74 FR 60476). As has been our 
past practice (76 FR 74335), in the CY 2017 OPPS/ASC proposed rule (81 
FR 45666), for CY 2017, we proposed to include an estimate of any 
implantable biologicals eligible for pass-through payment in our 
estimate of pass-through spending for devices. Similarly, we finalized 
a policy in CY 2015 that applications for pass-through payment for skin 
substitutes and similar products be evaluated using the medical device 
pass-through process and payment methodology (76 FR 66885 through 
66888). Therefore, as we did beginning in CY 2015, for CY 2017, we also 
proposed to include an estimate of any skin substitutes and similar 
products in our estimate of pass-through spending for devices.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the amount by which the amount authorized under 
section 1842(o) of the

[[Page 79677]]

Act (or, if the drug or biological is covered under a competitive 
acquisition contract under section 1847B of the Act, an amount 
determined by the Secretary equal to the average price for the drug or 
biological for all competitive acquisition areas and year established 
under such section as calculated and adjusted by the Secretary) exceeds 
the portion of the otherwise applicable fee schedule amount that the 
Secretary determines is associated with the drug or biological. Because 
we proposed to pay for most nonpass-through separately payable drugs 
and biologicals under the CY 2017 OPPS at ASP+6 percent, and because we 
proposed to pay for CY 2017 pass-through drugs and biologicals at ASP+6 
percent, as we discussed in section V.A. of the proposed rule, our 
estimate of drug and biological pass-through payment for CY 2017 for 
this group of items was $0, as discussed below.
    Furthermore, payment for certain drugs, specifically diagnostic 
radiopharmaceuticals and contrast agents without pass-through payment 
status, is packaged into payment for the associated procedures, and 
these products will not be separately paid. In addition, we policy-
package all nonpass-through drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure and drugs and biologicals that function as 
supplies when used in a surgical procedure, as discussed in section 
II.A.3. of the proposed rule and this final rule with comment period. 
In the CY 2017 OPPS/ASC proposed rule (81 FR 45666), we proposed that 
all of these policy-packaged drugs and biologicals with pass-through 
payment status would be paid at ASP+6 percent, like other pass-through 
drugs and biologicals, for CY 2017. Therefore, our estimate of pass-
through payment for policy-packaged drugs and biologicals with pass-
through payment status approved prior to CY 2017 was not $0, as 
discussed below. In section V.A.5. of the proposed rule, we discussed 
our policy to determine if the costs of certain policy-packaged drugs 
or biologicals are already packaged into the existing APC structure. If 
we determine that a policy-packaged drug or biological approved for 
pass-through payment resembles predecessor drugs or biologicals already 
included in the costs of the APCs that are associated with the drug 
receiving pass-through payment, we proposed to offset the amount of 
pass-through payment for the policy-packaged drug or biological. For 
these drugs or biologicals, the APC offset amount is the portion of the 
APC payment for the specific procedure performed with the pass-through 
drug or biological, which we refer to as the policy-packaged drug APC 
offset amount. If we determine that an offset is appropriate for a 
specific policy-packaged drug or biological receiving pass-through 
payment, we proposed to reduce our estimate of pass-through payments 
for these drugs or biologicals by this amount.
    Similar to pass-through estimates for devices, the first group of 
drugs and biologicals requiring a pass-through payment estimate 
consists of those products that were recently made eligible for pass-
through payment and that will continue to be eligible for pass-through 
payment in CY 2017. The second group contains drugs and biologicals 
that we know are newly eligible, or project will be newly eligible in 
the remaining quarters of CY 2016 or beginning in CY 2017. The sum of 
the CY 2017 pass-through spending estimates for these two groups of 
drugs and biologicals equals the total CY 2017 pass-through spending 
estimate for drugs and biologicals with pass-through payment status.

B. Estimate of Pass-Through Spending

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45666), we proposed to 
set the applicable pass-through payment percentage limit at 2.0 percent 
of the total projected OPPS payments for CY 2017, consistent with 
section 1833(t)(6)(E)(ii)(II) of the Act and our OPPS policy from CY 
2004 through CY 2016 (80 FR 70446 through 70448).
    For the first group, consisting of device categories that are 
currently eligible for pass-through payment and will continue to be 
eligible for pass-through payment in CY 2017, there are three active 
categories for CY 2017. For CY 2016, we established one new device 
category subsequent to the publication of the CY 2016 OPPS/ASC proposed 
rule, HCPCS code C1822 (Generator, neurostimulator (implantable), high 
frequency, with rechargeable battery and charging system), that was 
effective January 1, 2016. We estimated that the device described by 
HCPCS code C1822 will cost $1 million in pass-through expenditures in 
CY 2017. Effective April 1, 2015, we established that the device 
described by HCPCS code C2623 (Catheter, transluminal angioplasty, 
drug-coated, non-laser) will be eligible for pass-through payment. We 
estimated that the device described by HCPCS code C2623 will cost $97 
million in pass-through expenditures in CY 2017. Effective July 1, 
2015, we established that the device described by HCPCS code C2613 
(Lung biopsy plug with delivery system) will be eligible for pass-
through payment. We estimated that the device described by HCPCS code 
C2613 will cost $4.7 million in pass-through expenditures in CY 2017. 
Based on the three device categories of HCPCS codes C1822, C2623, and 
C2613, we proposed an estimate for the first group of devices of $102.7 
million.
    We did not receive any public comments on our proposed estimate for 
the first group of devices that included HCPCS codes C1822, C2623 and 
C2613. Therefore, we are finalizing the proposed estimate for this 
first group of devices of $102.7 million for CY 2017.
    In estimating our proposed CY 2017 pass-through spending for device 
categories in the second group, we included: device categories that we 
knew at the time of the development of the proposed rule will be newly 
eligible for pass-through payment in CY 2017; additional device 
categories that we estimated could be approved for pass-through status 
subsequent to the development of the proposed rule and before January 
1, 2017; and contingent projections for new device categories 
established in the second through fourth quarters of CY 2017. In the CY 
2017 OPPS/ASC proposed rule (81 FR 45667), we proposed to use the 
general methodology described in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66778), while also taking into account recent 
OPPS experience in approving new pass-through device categories. For 
the proposed rule, the estimate of CY 2017 pass-through spending for 
this second group of device categories was $10 million.
    We did not receive any public comments on our proposed estimate for 
the second group of devices. Therefore, we are finalizing the proposed 
estimate for this second group of devices of $10 million for CY 2017.
    To estimate proposed CY 2017 pass-through spending for drugs and 
biologicals in the first group, specifically those drugs and 
biologicals recently made eligible for pass-through payment and 
continuing on pass-through payment status for CY 2017, we proposed to 
use the most recent Medicare physician claims data regarding their 
utilization, information provided in the respective pass-through 
applications, historical hospital claims data, pharmaceutical industry 
information, and clinical information regarding those drugs or 
biologicals to project the CY 2017 OPPS utilization of the products.
    For the known drugs and biologicals (excluding policy-packaged 
diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, 
and

[[Page 79678]]

radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure, and drugs and biologicals that function 
as supplies when used in a surgical procedure) that will be continuing 
on pass-through payment status in CY 2017, we estimated the pass-
through payment amount as the difference between ASP+6 percent and the 
payment rate for nonpass-through drugs and biologicals that will be 
separately paid at ASP+6 percent, which is zero for this group of 
drugs. Because payment for policy-packaged drugs and biologicals is 
packaged if the product was not paid separately due to its pass-through 
payment status, we proposed to include in the CY 2017 pass-through 
estimate the difference between payment for the policy-packaged drug or 
biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if 
ASP or WAC information is not available) and the policy-packaged drug 
APC offset amount, if we determine that the policy-packaged drug or 
biological approved for pass-through payment resembles a predecessor 
drug or biological already included in the costs of the APCs that are 
associated with the drug receiving pass-through payment. For the 
proposed rule, using the proposed methodology described above, we 
calculated a CY 2017 proposed spending estimate for this first group of 
drugs and biologicals of approximately $19.0 million.
    We did not receive any public comments on our proposed spending 
estimate for this first group of drugs and biologicals. For this final 
rule with comment period, we calculated a CY 2017 spending estimate for 
this first group of drugs and biologicals of approximately $20.2 
million.
    To estimate proposed CY 2017 pass-through spending for drugs and 
biologicals in the second group (that is, drugs and biologicals that we 
knew at the time of development of the proposed rule were newly 
eligible for pass-through payment in CY 2017, additional drugs and 
biologicals that we estimated could be approved for pass-through status 
subsequent to the development of the proposed rule and before January 
1, 2016, and projections for new drugs and biologicals that could be 
initially eligible for pass-through payment in the second through 
fourth quarters of CY 2017), we proposed to use utilization estimates 
from pass-through applicants, pharmaceutical industry data, clinical 
information, recent trends in the per unit ASPs of hospital outpatient 
drugs, and projected annual changes in service volume and intensity as 
our basis for making the CY 2017 pass-through payment estimate. We also 
proposed to consider the most recent OPPS experience in approving new 
pass-through drugs and biologicals. Using our proposed methodology for 
estimating CY 2017 pass-through payments for this second group of 
drugs, we calculated a proposed spending estimate for this second group 
of drugs and biologicals of approximately $16.6 million.
    We did not receive any public comments on our proposed methodology 
or the proposed spending estimate for this second group of drugs. 
Therefore, for CY 2017, we are continuing to use the general 
methodology described above. For this final rule with comment period, 
we calculated a CY 2017 spending estimate for this second group of 
drugs and biologicals of approximately $17.7 million.
    In summary, in accordance with the methodology described earlier in 
this section, for this final rule with comment period, we estimate that 
total pass-through spending for the device categories and the drugs and 
biologicals that are continuing to receive pass-through payment in CY 
2017 and those device categories, drugs, and biologicals that first 
become eligible for pass-through payment during CY 2017 is 
approximately $150.6 million (approximately $112.7 million for device 
categories and approximately $37.9 million for drugs and biologicals), 
which represents 0.24 percent of total projected OPPS payments for CY 
2017. Therefore, we estimate that pass-through spending in CY 2017 will 
not amount to 2.0 percent of total projected OPPS CY 2017 program 
spending.

VII. OPPS Payment for Hospital Outpatient Visits and Critical Care 
Services

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45667), for CY 2017, 
we proposed to continue with and did not propose any changes to our 
current clinic and emergency department (ED) hospital outpatient visits 
payment policies. For a description of the current clinic and ED 
hospital outpatient visits policies, we refer readers to the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70448). We also proposed 
to continue with and did not propose any change to our payment policy 
for critical care services for CY 2017. For a description of the 
current payment policy for critical care services, we refer readers to 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70449), and 
for the history of the payment policy for critical care services, we 
refer readers to the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 75043). In the proposed rule, we sought public comments on any 
changes to these codes that we should consider for future rulemaking 
cycles. We encouraged those parties who comment to provide the data and 
analysis necessary to justify any proposed changes.
    We did not receive any public comments on this proposal. Therefore 
we are finalizing our CY 2017 proposal, without modification, to 
continue our current clinic and ED hospital outpatient visits and 
critical care services payment policies.

VIII. Payment for Partial Hospitalization Services

A. Background

    A partial hospitalization program (PHP) is an intensive outpatient 
program of psychiatric services provided as an alternative to inpatient 
psychiatric care for individuals who have an acute mental illness. 
Section 1861(ff)(1) of the Act defines partial hospitalization services 
as the items and services described in paragraph (2) prescribed by a 
physician and provided under a program described in paragraph (3) under 
the supervision of a physician pursuant to an individualized, written 
plan of treatment established and periodically reviewed by a physician 
(in consultation with appropriate staff participating in such program), 
which sets forth the physician's diagnosis, the type, amount, 
frequency, and duration of the items and services provided under the 
plan, and the goals for treatment under the plan. Section 1861(ff)(2) 
of the Act describes the items and services included in partial 
hospitalization services. Section 1861(ff)(3)(A) of the Act specifies 
that a PHP is a program furnished by a hospital to its outpatients or 
by a community mental health center (CMHC) (as defined in subparagraph 
(B)), and which is a distinct and organized intensive ambulatory 
treatment service offering less than 24-hour-daily care other than in 
an individual's home or in an inpatient or residential setting. Section 
1861(ff)(3)(B) of the Act defines a CMHC for purposes of this benefit.
    Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the 
authority to designate the OPD services to be covered under the OPPS. 
The Medicare regulations that implement this provision specify, under 
42 CFR 419.21, that payments under the OPPS will be made for partial 
hospitalization services furnished by CMHCs as well as Medicare Part B 
services furnished to hospital outpatients designated by the

[[Page 79679]]

Secretary, which include partial hospitalization services (65 FR 18444 
through 18445).
    Section 1833(t)(2)(C) of the Act requires the Secretary to 
establish relative payment weights for covered OPD services (and any 
groups of such services described in section 1833(t)(2)(B) of the Act) 
based on median (or, at the election of the Secretary, mean) hospital 
costs using data on claims from 1996 and data from the most recent 
available cost reports. In pertinent part, section 1833(t)(2)(B) of the 
Act provides that the Secretary may establish groups of covered OPD 
services, within a classification system developed by the Secretary for 
covered OPD services, so that services classified within each group are 
comparable clinically and with respect to the use of resources. In 
accordance with these provisions, we have developed the PHP APCs. 
Because a day of care is the unit that defines the structure and 
scheduling of partial hospitalization services, we established a per 
diem payment methodology for the PHP APCs, effective for services 
furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under 
this methodology, the median per diem costs were used to calculate the 
relative payment weights for the PHP APCs. Section 1833(t)(9)(A) of the 
Act requires the Secretary to review, not less often than annually, and 
revise the groups, the relative payment weights, and the wage and other 
adjustments described in section 1833(t)(2) of the Act 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.
    We began efforts to strengthen the PHP benefit through extensive 
data analysis and policy and payment changes finalized in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66670 through 66676). In 
that final rule, we made two refinements to the methodology for 
computing the PHP median: The first remapped 10 revenue codes that are 
common among hospital-based PHP claims to the most appropriate cost 
centers; and the second refined our methodology for computing the PHP 
median per diem cost by computing a separate per diem cost for each day 
rather than for each bill.
    In CY 2009, we implemented several regulatory, policy, and payment 
changes, including a two-tiered payment approach for partial 
hospitalization services under which we paid one amount for days with 3 
services under PHP APC 0172 (Level 1 Partial Hospitalization) and a 
higher amount for days with 4 or more services under PHP APC 0173 
(Level 2 Partial Hospitalization) (73 FR 68688 through 68693). We also 
finalized our policy to deny payment for any PHP claims submitted for 
days when fewer than 3 units of therapeutic services are provided (73 
FR 68694). Furthermore, for CY 2009, we revised the regulations at 42 
CFR 410.43 to codify existing basic PHP patient eligibility criteria 
and to add a reference to current physician certification requirements 
under 42 CFR 424.24 to conform our regulations to our longstanding 
policy (73 FR 68694 through 68695). We also revised the partial 
hospitalization benefit to include several coding updates (73 FR 68695 
through 68697).
    For CY 2010, we retained the two-tiered payment approach for 
partial hospitalization services and used only hospital-based PHP data 
in computing the PHP APC per diem costs, upon which PHP APC per diem 
payment rates are based. We used only hospital-based PHP data because 
we were concerned about further reducing both PHP APC per diem payment 
rates without knowing the impact of the policy and payment changes we 
made in CY 2009. Because of the 2-year lag between data collection and 
rulemaking, the changes we made in CY 2009 were reflected for the first 
time in the claims data that we used to determine payment rates for the 
CY 2011 rulemaking (74 FR 60556 through 60559).
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71994), we established four separate PHP APC per diem payment rates: 
Two for CMHCs (APC 0172 (for Level 1 services) and APC 0173 (for Level 
2 services)) and two for hospital-based PHPs (APC 0175 (for Level 1 
services) and 0176 (for Level 2 services)), based on each provider 
type's own unique data. In addition, in accordance with section 1301(b) 
of the Health Care and Education Reconciliation Act of 2010 (HCERA 
2010), we amended the description of a PHP in our regulations to 
specify that a PHP must be a distinct and organized intensive 
ambulatory treatment program offering less than 24-hour daily care 
other than in an individual's home or in an inpatient or residential 
setting. In accordance with section 1301(a) of HCERA 2010, we revised 
the definition of a CMHC in the regulations to conform to the revised 
definition now set forth under section 1861(ff)(3)(B) of the Act (75 FR 
71990). For CY 2011, we also instituted a 2-year transition period for 
CMHCs to the CMHC APC per diem payment rates based solely on CMHC data. 
Under the transition methodology, CMHC APCs Level 1 and Level 2 per 
diem costs were calculated by taking 50 percent of the difference 
between the CY 2010 final hospital-based PHP median costs and the CY 
2011 final CMHC median costs and then adding that number to the CY 2011 
final CMHC median costs. A 2-year transition under this methodology 
moved us in the direction of our goal, which is to pay appropriately 
for partial hospitalization services based on each provider type's 
data, while at the same time allowing providers time to adjust their 
business operations and protect access to care for Medicare 
beneficiaries. We also stated that we would review and analyze the data 
during the CY 2012 rulemaking cycle and, based on these analyses, we 
might further refine the payment mechanism. We refer readers to section 
X.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71991 through 71994) for a full discussion.
    For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74348 through 74352), we determined the relative 
payment weights for partial hospitalization services provided by CMHCs 
based on data derived solely from CMHCs and the relative payment 
weights for partial hospitalization services provided by hospital-based 
PHPs based exclusively on hospital data.
    In the CY 2013 OPPS/ASC final rule with comment period, we 
finalized our proposal to base the relative payment weights that 
underpin the OPPS APCs, including the four PHP APCs (APCs 0172, 0173, 
0175, and 0176), on geometric mean costs rather than on the median 
costs. We established these four PHP APC per diem payment rates based 
on geometric mean cost levels calculated using the most recent claims 
and cost data for each provider type. For a detailed discussion on this 
policy, we refer readers to the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68406 through 68412).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43621 through 43622), 
we solicited comments on possible future initiatives that may help to 
ensure the long-term stability of PHPs and further improve the accuracy 
of payment for PHP services, but proposed no changes. In the CY 2014 
OPPS/ASC final rule with comment period (78 FR 75050 through 75053), we 
summarized the comments received on those possible future initiatives. 
We also continued to apply our established policies to calculate the 
four PHP APC per diem payment rates based on geometric mean per diem 
costs using the most recent claims data for each provider type. For a 
detailed discussion on this policy, we

[[Page 79680]]

refer readers to the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 75050 through 75053).
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66902 
through 66908), we continued to apply our established policies to 
calculate the four PHP APC per diem payment rates based on PHP APC 
geometric mean per diem costs, using the most recent claims and cost 
data for each provider type.
    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70455 
through 70465), we again continued to apply our established policies to 
calculate the four PHP APC per diem payment rates based on PHP APC 
geometric mean per diem costs, using the most recent claims and cost 
data for each provider type. We also implemented a trim to remove 
hospital-based PHP service days that use a CCR that was greater than 5 
(CCR>5) to calculate costs for at least one of their component 
services, and a trim on CMHCs with an average cost per day that is 
above or below 2 (2) standard deviations from the mean. We 
also renumbered the PHP APCs which were previously 0172, 0173, 0175, 
and 0176, to 5851, 5852, 5861, and 5862, respectively. For a detailed 
discussion of the PHP ratesetting process, we refer readers to the CY 
2016 OPPS/ASC final rule with comment period (80 FR 70462 through 
70467).
    In the effort to increase the accuracy of the PHP per diem costs, 
in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70455 
through 70461), we completed an extensive analysis of the claims and 
cost data, which included provider service usage, coding practices, and 
the ratesetting methodology. This extensive analysis identified 
provider coding errors that were inappropriately removing costs from 
ratesetting, and aberrant data from several providers that were 
affecting the calculation of the proposed PHP geometric mean per diem 
costs. Aberrant data are claims and/or cost data that are so abnormal 
that they skew the resulting geometric mean per diem costs. For 
example, we found claims with excessive CMHC charges resulting in CMHC 
geometric mean costs per day that were approximately the same as or 
more than the daily payment for inpatient psychiatric facility 
services. For an outpatient program like the PHP, which does not incur 
room and board costs such as an inpatient stay would, these costs per 
day were excessive. In addition, we found some CMHCs had very low costs 
per day (less than $25 per day). We stated in the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70456) that, without using a 
trimming process, the data from these providers would inappropriately 
skew the geometric mean per diem cost for Level 2 CMHC services. 
Further analysis of the data confirmed that there were a few providers 
with extreme cost per day values, which led us to propose and finalize 
a 2 standard deviation trim on CMHC costs per day.
    During our claims and cost data analysis, we also found aberrant 
data from some hospital-based PHP providers. The existing OPPS 3 standard deviation trim removed very extreme CCRs by defaulting 
two providers that failed this trim to their overall hospital ancillary 
CCR. However, the calculation of the 3 standard deviations 
used to define the trim was influenced by these two providers, which 
had extreme CCRs greater than 175. Because these two hospital-based PHP 
providers remained in the data when we calculated the boundaries of the 
OPPS 3 standard deviation trim in the CY 2016 ratesetting, 
the upper limit of the trim boundaries was fairly high, at 28.3446. As 
such, some aberrant CCRs were not trimmed out, and still had high 
values ranging from 6.3840 to 19.996. We note that, as stated in the CY 
2016 OPPS/ASC proposed rule (80 FR 39242 and 39293) and reiterated in 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70456), OPPS 
defines a biased CCR as one that falls outside the predetermined 
ceiling threshold for a valid CCR; using CY 2014 cost report data, that 
threshold is 1.5.
    In order to reduce or eliminate the impact of aberrant data 
received from a few CMHCs and hospital-based PHP providers in the 
claims data used for ratesetting, we finalized the application of a 
2 standard deviation trim on cost per day for CMHCs and a 
CCR>5 hospital service day trim for hospital-based PHP providers for CY 
2016 and subsequent years (80 FR 70456 through 70459). In addition, in 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70459 
through 70460), a cost inversion occurred in the final rule data with 
respect to hospital-based PHP providers. A cost inversion exists when 
the Level 1 PHP APC geometric mean per diem cost for providing exactly 
3 services per day exceeds the Level 2 PHP APC geometric mean per diem 
cost for providing 4 or more services per day. We corrected the cost 
inversion with an equitable adjustment to the actual geometric mean per 
diem costs by increasing the Level 2 hospital-based PHP APC geometric 
mean per diem costs and decreasing the Level 1 hospital-based PHP APC 
geometric mean per diem costs by the same factor, to result in a 
percentage difference equal to the average percent difference between 
the hospital-based Level 1 PHP APC and the Level 2 PHP APC for partial 
hospitalization services from CY 2013 through CY 2015.
    For a comprehensive description on the background of PHP payment 
policy, we refer readers to the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70453 through 70455).

B. PHP APC Update for CY 2017

1. PHP APC Changes and Effects on Geometric Mean Per Diem Costs
    For CY 2017, in the CY 2017 OPPS/ASC proposed rule (81 FR 45669 
through 45673), we proposed to continue to apply our established 
policies to calculate the PHP APC per diem payment rates based on 
geometric mean per diem costs using the most recent claims and cost 
data for each provider type. However, as explained in greater detail 
below, we proposed to combine the Level 1 and Level 2 PHP APCs for 
CMHCs and to combine the Level 1 and Level 2 APCs for hospital-based 
PHPs because we believe this would best reflect actual geometric mean 
per diem costs going forward, provide more predictable per diem costs, 
particularly given the small number of CMHCs, and generate more 
appropriate payments for these services by avoiding the cost inversions 
that hospital-based PHPs experienced in the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70459).
a. Changes to PHP APCs
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45669 through 45673), 
we proposed to combine the existing two-tiered PHP APCs for CMHCs into 
a single PHP APC and the existing two-tiered hospital-based PHP APCs 
into a single PHP APC. Specifically, we proposed to replace existing 
CMHC APCs 5851 (Level 1 Partial Hospitalization (3 services) for CMHCs) 
and 5852 (Level 2 Partial Hospitalization (4 or more services) for 
CMHCs) with proposed new CMHC APC 5853 (Partial Hospitalization (3 or 
More Services Per Day)), and to replace existing hospital-based PHP 
APCs 5861 (Level 1 Partial Hospitalization (3 services) for Hospital-
based PHPs) and 5862 (Level 2 Partial Hospitalization (4 or more 
services) for Hospital-based PHPs) with proposed new hospital-based PHP 
APC 5863 (Partial Hospitalization (3 or More Services Per Day)). In 
conjunction with this proposal, we proposed to combine the geometric 
mean per diem costs for the existing Level 1 and Level 2 PHP APCs for

[[Page 79681]]

CMHCs (APC 5851 and APC 5852, respectively) to calculate the proposed 
geometric mean per diem costs for proposed new PHP APC 5853 for CMHCs 
using only CY 2015 CMHC claims data and the most recent cost data, and 
to combine the geometric mean per diem costs for the existing Level 1 
and Level 2 PHP APCs for hospital-based PHPs (APC 5861 and APC 5862, 
respectively) to calculate the proposed geometric mean per diem costs 
for proposed new PHP APC 5863 for hospital-based PHPs using only CY 
2015 hospital-based PHP claims data and the most recent cost data, for 
CY 2017 and subsequent years. We discuss these computations in section 
VIII.B.2 of this preamble. The proposed geometric mean per diem costs 
were shown in Table 19 in section VIII.B.2. of the proposed rule.
    Comment: MedPAC supported the proposal to combine the existing 
Level 1 and Level 2 APCs into a single new APC for providing 3 or more 
services. MedPAC stated that the logic in payment rates is vital to 
having a meaningful payment system, and further added that payment 
rates that are higher for an APC that provides fewer of the same types 
of services as another APC is not reasonable. However, several 
commenters opposed the proposal.
    One commenter stated that the proposal would violate the Mental 
Health Parity and Addiction Equity Act of 2008 (MHPAEA, Pub. L. 110-
343) because it limits mental health care to a cap of 3 or fewer 
treatment groups per day and reduces payments to below payments for 
comparable acute care services.
    One commenter urged CMS to monitor the effects of combining the 
existing two-tiered APCs into a single PHP APC, by provider type, to 
ensure that these changes do not cause or contribute to any unintended 
consequences such as reducing access to PHP services, or incentivizing 
reductions in services provided under the single APC.
    Response: We appreciate the commenters' support. We agree that it 
is reasonable to combine similar costs and services into the same APC 
payment. It is also worth noting that in CY 2014, when we requested 
public comments on possible future initiatives, we received several 
public comments requesting a single APC payment for PHP services (78 FR 
75051).
    We also agree that it is possible that the combined PHP APCs could 
incentivize a reduction in services under a single APC, with PHP 
providers providing more days with only 3 services per day, but 
receiving an APC payment that is heavily weighted toward providing 4 or 
more services. We have monitored utilization of 3-service days over the 
years, and found that 3-service days are appropriately infrequent. In 
the updated CY 2015 claims data reviewed for this final rule with 
comment period, we found that 5 percent of CMHC paid days and 12 
percent of hospital-based PHP paid days indicated that exactly 3 
services were provided. In addition, given the intensive nature of 
partial hospitalization services and that PHP services are provided in 
lieu of inpatient hospitalization, we have a longstanding eligibility 
requirement that PHP beneficiaries require at least 20 hours per week 
in services, as evidenced in their plan of care. We discuss this 
requirement more fully in section VIII.B.1.b. of this final rule with 
comment period. We will be monitoring PHP claims beginning in January 
2017, to determine whether PHP participants are receiving at least 20 
hours per week in partial hospitalization services. In particular, we 
will monitor whether the frequency of providing 3-service days 
increases now that the payment incentive to provide 4 or more services 
per day, as opposed to 3 services per day, has been removed through 
combining the two PHP APCs. Payments for claims will not be affected at 
this time. Rather, our goal is to implement claims edits in the future 
to ensure that eligible Medicare beneficiaries are receiving the 
intense level of services that the statute and regulations require PHPs 
to provide. We are soliciting public comments on what facility types, 
treatment patterns, and other indicators are most important to monitor 
to ensure adequate provision of services.
    We disagree with the commenter who believed that combining the 
existing two-tiered PHP APCs would violate the provisions of the 
MHPAEA. The MHPAEA generally prevents group health plans and health 
insurance issuers that provide mental health or substance use disorder 
benefits from imposing less favorable benefit limitations on those 
benefits than on medical/surgical benefits. The mental health parity 
requirements of MHPAEA do not apply to Medicare. More information is 
available about the MHPAEA on the CMS Web site at: https://www.cms.gov/cciio/programs-and-initiatives/other-insurance-protections/mhpaea_factsheet.html.
    In addition, we believe that the commenter is misinterpreting the 
proposal in stating that combining the two-tiered PHP APCs, by provider 
type, limits outpatient mental health care to a cap of 3 or fewer group 
therapy treatments per day. The combined PHP APCs will generate 
payments for 3 or more services per day, not for 3 or fewer services 
provided per day. A different policy, the outpatient mental health 
treatment cap, limits the maximum payment for a day of individually 
billed outpatient mental health services to the highest hospital-based 
PHP APC per diem, and is derived from the most recent provider claims 
and cost data. It does not cap the number of services that can be 
provided to a beneficiary. Beneficiaries may receive as many services 
as are reasonable and necessary for their treatment. As noted in the 
April 7, 2000 OPPS final rule (65 FR 18454 through 18455), our 
rationale for implementing the mental health treatment cap was that the 
costs associated with administering a PHP represent the most resource-
intensive of all outpatient mental health treatment services. 
Therefore, we do not believe it would be appropriate to pay more for a 
day of individually billed outpatient mental health services than what 
is paid for a day providing 3 or more partial hospitalization services. 
We also are concerned that a provider may disregard a patient's need 
for the intensive active treatment offered by a PHP and opt to bill for 
individual services. The geometric mean per diem payment amount 
represents the cost of an average day of partial hospitalization 
services (the data used to calculate the geometric mean per diem costs 
were derived from all of the PHP data and include the most and least 
intensive days). It would not be appropriate for a provider to obtain 
more payment through component billing.
    For CY 2017, the outpatient mental health treatment cap will be 
equal to the combined PHP APC 5863 geometric mean per diem rate for 
hospital-based PHPs. Because 88 percent of hospital-based PHP service 
days provide 4 or more services, the mental health cap is heavily 
weighted toward the cost of providing 4 or more services per day. This 
cap is applied to each day of outpatient mental health treatment 
provided outside of the PHP benefit.
    After consideration of the public comments we received, we are 
finalizing our proposal to replace existing CMHC APCs 5851 (Level 1 
Partial Hospitalization (3 services) for CMHCs) and 5852 (Level 2 
Partial Hospitalization (4 or more services) for CMHCs) with new CMHC 
APC 5853 (Partial Hospitalization (3 or More Services Per Day)), and to 
replace existing hospital-based PHP APCs 5861 (Level 1 Partial 
Hospitalization (3 services) for Hospital-Based PHPs) and 5862 (Level 2 
Partial Hospitalization (4

[[Page 79682]]

or more services) for Hospital-Based PHPs) with new hospital-based PHP 
APC 5863 (Partial Hospitalization (3 or More Services Per Day)). We 
also are finalizing our proposal to combine the geometric mean per diem 
costs for the existing Level 1 and Level 2 PHP APCs for CMHCs (APC 5851 
and APC 5852, respectively) to calculate the final geometric mean per 
diem costs for new PHP APC 5853 for CMHCs using only CY 2015 CMHC 
claims data and the most recent cost data, and to combine the geometric 
mean per diem costs for the existing Level 1 and Level 2 PHP APCs for 
hospital-based PHPs (APC 5861 and APC 5862, respectively) to calculate 
the final geometric mean per diem costs for new PHP APC 5863 for 
hospital-based PHPs using only CY 2015 hospital-based PHP claims data 
and the most recent cost data, for CY 2017 and subsequent years.
    As we previously noted, we believe that these finalized policies 
will best reflect actual geometric mean per diem costs in the future; 
provide more predictable geometric mean per diem costs, particularly 
given the small number of CMHCs; simplify and reduce administrative 
burden by only having one APC for each provider type; and generate more 
appropriate payments for these services by avoiding the cost inversions 
that hospital-based PHPs experienced in the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70459), and which were noted in the CY 2017 
OPPS/ASC proposed rule (81 FR 45670 through 45672), and occurred again 
in geometric mean per diem cost calculations for this final rule with 
comment period as described in section VIII.B.1.b. of this final rule 
with comment period. The CY 2017 final geometric mean per diem costs 
are shown in Table 41 in section VIII.B.2. of this final rule with 
comment period. As noted earlier, we are soliciting public comments on 
how we can best target monitoring efforts to ensure adequate provision 
of services by hospital-based PHPs and CMHC.
b. Rationale for Changes in PHP APCs
    One of the primary reasons for our decision to replace the existing 
Level 1 and Level 2 PHP APCs with a single PHP APC, by provider type, 
is because the new PHP APCs will avoid any further issues with cost 
inversions and, therefore, generate more appropriate payment for the 
services provided by specific provider types. As previously stated, a 
cost inversion exists when the Level 1 PHP APC geometric mean per diem 
cost for providing exactly 3 services per day exceeds the Level 2 PHP 
APC geometric mean per diem cost for providing 4 or more services per 
day, and, as we noted in last year's final rule with comment period, we 
do not believe that it is reasonable or appropriate to pay more for 
fewer services provided per day and to pay less for more services 
provided per day (80 FR 70459 through 70460).
    To determine if the issue with hospital-based cost inversions that 
occurred in the data used for the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70459) would continue, we calculated the CY 2017 
hospital-based PHP APC geometric mean per diem costs separately for 
Level 1 and Level 2 partial hospitalization services provided by 
hospital-based PHPs. After applying our established trims and 
exclusions, we determined that the CY 2017 Level 1 hospital-based PHP 
APC geometric mean per diem cost is $281.35 (proposed at $241.08) and 
the CY 2017 Level 2 hospital-based PHP APC geometric mean per diem cost 
is $210.50 (proposed at $187.06), which again demonstrates an 
inversion.
    For the CY 2017 OPPS/ASC proposed rule, we analyzed the CY 2015 
hospital-based PHP claims data used for the CY 2017 proposed rule to 
determine the source of the inversion between the Level 1 and Level 2 
hospital-based PHP APCs geometric mean per diem costs, and found that 
13 hospital-based PHPs had high geometric mean per diem costs per day. 
Two of those providers account for 11.5 percent of Level 1 hospital-
based PHP service days, but only 1.9 percent of Level 2 hospital-based 
PHP service days. Eleven of those 13 providers only reported costs for 
Level 1 hospital-based PHP service days, which increased the geometric 
mean per diem costs for the Level 1 hospital-based PHP APC. There also 
were 3 hospital-based PHP providers with very low geometric mean costs 
per day that accounted for approximately 28 percent of the Level 2 
hospital-based PHP service days, which decreased the geometric mean per 
diem costs for the Level 2 hospital-based PHP APC.
    For this CY 2017 final rule with comment period, we found that the 
inversion of the Level 1 and Level 2 hospital-based PHP geometric mean 
per diem costs was caused by 3 providers with high-cost Level 1 service 
days, accounting for 16 percent of all Level 1 service days, and 1 low-
cost provider accounting for 15 percent of all Level 2 service days. 
High volume providers heavily influence the cost data, and we believe 
that the high volume providers with very low Level 2 hospital-based PHP 
geometric mean per diem costs per day and high volume providers with 
very high Level 1 hospital-based PHP geometric mean per diem costs per 
day contributed to the inversion between the hospital-based PHP APCs 
Level 1 and Level 2 geometric mean per diem costs. In developing the 
policy to combine the Level 1 and Level 2 PHP APCs into one APC each 
for CMHCs and hospital-based providers, we reviewed the reasons why we 
structured the existing PHP APCs into a two-tiered payment 
distinguished by Level 1 and Level 2 services for both provider types 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 
through 68693), to determine whether the rationales continued to be 
applicable. In the CY 2009 OPPS/ASC final rule with comment period, we 
referenced the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66672), which noted that a significant portion of PHP service days 
actually provided fewer than 3 services to Medicare beneficiaries. In 
our CY 2009 OPPS/ASC final rule with comment period, we noted that PHP 
service days that provide exactly 3 services should only occur in 
limited circumstances. We were concerned about paying providers a 
single per diem payment rate when a significant portion of the PHP 
service days provided 3 services, and believed it was appropriate to 
pay a higher rate for more intensive service days.
    We evaluated the frequency of claims reporting Level 1 and Level 2 
PHP service days in Table 17 of the proposed rule to determine if a 
significant portion of PHP service days only provided exactly 3 
services (81 FR 45671). Table 17 showed that the frequency of claims 
reporting PHP service days providing exactly 3 services (Level 1 
services) has decreased greatly from 73 percent of CMHC service days in 
the CY 2009 rulemaking to 4 percent of CMHC service days in the CY 2017 
proposed rule, and from 29 percent of hospital-based PHP service days 
in the CY 2009 rulemaking to 12 percent of hospital-based PHP service 
days in the CY 2017 proposed rule. We have updated this table, as shown 
below, to reflect updated CY 2015 claims data used for this final rule 
with comment period, and found that 5 percent of CMHC service days and 
12 percent of hospital-based PHP service days have exactly 3 services 
provided. Level 1 PHP service days represent a small portion of PHP 
service days, particularly for CMHCs, as shown in Table 39 below. Based 
on this decline in the frequency of claims reporting Level 1 service 
days, we believe that the need for the PHP APC Level 1 and Level 2 
payment tiers that was present in CY 2009 no longer exists.

[[Page 79683]]

The utilization data in Table 39 indicate that for the CY 2017 
rulemaking year, the Level 2 CMHC service days and the hospital-based 
PHP Level 2 service days are 95 percent and 88 percent, respectively. 
Because Level 1 service days are now less common for both provider 
types, we believe it is no longer necessary to pay a separate rate when 
4 or more services are provided compared to when only 3 services are 
provided. Our new PHP APCs 5853 and 5863 are based on cost data for 3 
or more services per day (by provider type). Therefore, the combined 
cost data used to derive new PHP APCs 5853 and 5863 result in 
appropriate per diems based on costs for providing 3 or more services 
per day. We are sensitive to the fact that our payment policy may have 
influenced this change in service provision because providers were able 
to obtain higher payment for providing 4 or more services than for 
providing only 3 services. Therefore, as discussed earlier, we remain 
concerned that providers may inappropriately provide too few services 
to beneficiaries enrolled in PHPs, and we are working expeditiously to 
implement coding edits that will better monitor whether PHP providers 
are furnishing at least 20 hours of services per week, which eligible 
beneficiaries require.
    Table 39 below reflects the utilization data used for this CY 2017 
final rule with comment period, using the updated CY 2015 claims data.

Table 39--Utilization of PHP Level 1 Days (Providing Exactly 3 Services Per Day) and PHP Level 2 Days (Providing
                   4 or More Services Per Day), From CY 2007 Through Final CY 2015 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                                                  Hospital-based  Hospital-based
        Rulemaking year            Claims year     CMHC Level 1    CMHC Level 2     PHP Level 1     PHP Level 2
                                                     days (%)        days (%)        days (%)        days (%)
----------------------------------------------------------------------------------------------------------------
CY 2009.......................  CY 2007.........              73              27              29              71
CY 2010.......................  CY 2008.........              66              34              25              75
CY 2011.......................  CY 2009.........               2              98              18              82
CY 2012.......................  CY 2010.........               2              98              19              81
CY 2013.......................  CY 2011.........               3              97              11              89
CY 2014.......................  CY 2012.........               4              96              11              89
CY 2015.......................  CY 2013.........               6              94              11              89
CY 2016.......................  CY 2014.........               5              95              11              89
CY 2017.......................  CY 2015.........               5              95              12              88
----------------------------------------------------------------------------------------------------------------

    When we implemented the PHP APCs Level 1 and Level 2 payment tiers 
in our CY 2009 rulemaking, we noted that we wanted to provide PHPs with 
flexibility in scheduling patients. Both the industry and CMS 
recognized that there may be limited circumstances when it is 
appropriate for PHPs to receive payment for days when exactly 3 units 
of service are provided (73 FR 68688 through 68689). Allowing PHPs to 
receive payment for a Level 1 service day where exactly 3 services are 
provided gives PHPs some flexibility in scheduling their patients. Our 
decision to replace the existing two-tiered PHP APCs with new PHP APCs 
5853 and 5863 will provide payment for providing 3 or more services per 
day by CMHCs and hospital-based PHPs, respectively. Therefore, this 
flexibility in scheduling will remain.
    Another primary reason for our decision to replace the Level 1 and 
Level 2 PHP APCs with a single PHP APC, by provider type, is the 
decrease in the number of PHPs, particularly CMHCs. With a small number 
of providers, data from large providers with a high percentage of all 
PHP service days and unusually high or low geometric mean costs per day 
will have a more pronounced effect on the PHP APCs geometric mean per 
diem costs, skewing the costs up or down. That effect would be 
magnified by continuing to split the geometric mean per diem costs 
further by distinguishing Level 1 and Level 2 PHP services. Creating a 
single PHP APC for each provider type providing 3 or more partial 
hospitalization services per day will reduce these cost fluctuations 
and provide more stability in the PHP APC geometric mean per diem 
costs.
    We also note that our decision to replace the existing Level 1 and 
Level 2 PHP APCs, by provider type, with a single PHP APC for each 
provider type is permissible under the applicable statute and 
regulatory provisions. Section 1833(t)(2)(B) of the Act provides that 
the Secretary may establish groups of covered OPD services, within a 
classification system developed by the Secretary for covered OPD 
services, so that services classified within each group are comparable 
clinically and with respect to the use of resources. Moreover, the 
language that follows paragraph (t)(2) of section 1833 of the Act 
provides that, for purposes of subparagraph (B), items and services 
within a group shall not be treated as comparable with respect to use 
of resources if the highest mean cost for an item or service is more 
than two times greater than the lowest mean cost for an item or service 
within the group, with some exceptions. Section 419.31 of our 
regulations implements this statutory provision, providing that CMS 
classify outpatient services and procedures that are comparable 
clinically and in terms of resource use into APC groups. We believe our 
policy to replace the existing Level 1 and Level 2 PHP APCs for both 
provider types with a single PHP APC, by provider type, is supported by 
the statute and regulations and will continue to pay for partial 
hospitalization services appropriately based upon actual provider 
costs.
    Both of the existing Level 1 and Level 2 PHP APCs are comprised of 
services described by the same HCPCS codes. Therefore, the types of 
services provided under the two payment tiers are the same. The 
difference is in the quantity of the services provided, where the Level 
1 PHP APCs provide for payment for providing exactly 3 services per 
day, while the Level 2 PHP APCs provide for payment for providing 4 or 
more services per day. Because the difference in the Level 1 and the 
Level 2 PHP APCs is in the quantity of the services provided, we expect 
that the resource use (that is, the geometric mean per diem cost) for 
providing partial hospitalization services under Level 1 will represent 
approximately 75 percent or less of the resource use for providing 
partial hospitalization services under Level 2, by provider type. Table 
18 of the proposed rule showed a clear trend for hospital-based PHPs, 
where the geometric mean per diem costs for providing Level 1 partial 
hospitalization services have approached the geometric mean per

[[Page 79684]]

diem costs for providing Level 2 partial hospitalization services, 
until they exceed the geometric mean per diem costs for providing Level 
2 partial hospitalization services beginning in CY 2016. As the 
percentages in Table 18 of the proposed rule approach 100 percent, the 
Level 1 and the Level 2 PHP APC geometric mean per diem costs become 
closer to each other, demonstrating similar resource use. The trend is 
less clear for CMHCs, but the data still show the cost difference 
between the two tiers narrowing, except in CY 2016. We are not sure why 
the cost difference is wider among CMHCs in CY 2016. In the CY 2017 
OPPS/ASC proposed rule, we welcomed public comments that could help 
explain the difference. However, we did not receive any public comments 
on this issue.
    The data trends reflected in Table 40 below, which is an update of 
Table 18 in the proposed rule based on final CY 2015 claims data for 
this final rule with comment period, continue to support the proposals 
we made, and our decision to change from a two-tiered APC system for 
CMHCs and for hospital-based PHPs to a combined APC for providing 3 or 
more services per day for each provider type.

              Table 40--Trends in Level 1 Per Diem Costs as a Percentage of Level 2 Per Diem Costs
----------------------------------------------------------------------------------------------------------------
                                    CY 2013 (%)     CY 2014 (%)     CY 2015 (%)     CY 2016 (%)    CY 2017 * (%)
----------------------------------------------------------------------------------------------------------------
CMHCs; Level 1 PHP APC per diem             77.5            88.6            84.4            66.1            94.4
 costs/Level 2 PHP APC per diem
 costs..........................
Hospital-based PHPs; Level 1 PHP            79.2            89.0            91.6         * 110.0        ** 133.7
 APC per diem costs/Level 2 PHP
 APC per diem costs.............
----------------------------------------------------------------------------------------------------------------
* Based on CY 2015 final claims data.
** Cost inversions occurred with the Level 1 PHP APC per diem costs exceeding the Level 2 PHP APC per diem
  costs.

    We evaluated the provision of more costly individual therapy in our 
CY 2017 analyses to determine if there were differences in its 
provision for PHP APC Level 1 service days compared to PHP APC Level 2 
service days, by provider type, because this could affect our expected 
difference in resource use (that is, geometric mean per diem costs) 
between the two payment tiers. Using the updated CY 2015 claims data 
for this final rule with comment period, we found that individual 
therapy was provided less frequently on days where exactly 3 services 
were provided by hospital-based PHPs (in 4.0 percent of PHP APC Level 1 
service days and in 6.2 percent of PHP APC Level 2 service days). 
However, we found that individual therapy was provided more frequently 
under the Level 1 CMHC service days than under the Level 2 CMHC service 
days (7.9 percent versus 4.4 percent). The greater frequency of CMHCs' 
providing more costly individual therapy under Level 1 PHP service days 
should increase resource use for these service days, narrowing the cost 
difference between Level 1 and Level 2 CMHC service days. This result 
reflects the updated claims data used for this final rule with comment 
period.
    As we described earlier, the services provided under the Level 1 
and Level 2 PHP APC payment tiers are comparable clinically and in 
terms of resource use. Therefore, based on the authority provided under 
section 1833(t)(2)(B) of the Act and our regulations at Sec.  
419.31(a)(1), and to mitigate the policy concerns noted above, as we 
proposed, we are replacing the Level 1 and Level 2 PHP APCs, for each 
provider type, with a single PHP APC by provider type for CY 2017 and 
subsequent years.
    Our decision to replace the existing Level 1 and Level 2 PHP APCs 
for both provider types with a single PHP APC, by provider type, is 
designed to continue to pay for partial hospitalization services 
appropriately based upon actual provider costs. We believe that section 
1833(t)(2)(B) of the Act and our regulations at Sec.  419.31(a)(1) 
provide the Secretary with the authority to classify services that are 
comparable clinically and in terms of resource use under a single APC 
grouping, which is the basis for our decision to replace the existing 
Level 1 and Level 2 PHP APCs for CMHCs and hospital-based PHPs for 
providing partial hospitalization services with a single PHP APC for 
each specific provider type. In addition, we believe that our decision 
to combine the PHP APCs two-tiered payment structure by provider type 
will more appropriately pay providers for partial hospitalization 
services provided to Medicare beneficiaries and avoid cost inversions 
in the future. Our decision to combine the PHP APC payment tiers, by 
provider type, also will provide more predictable geometric mean per 
diem costs, particularly given the small number of CMHCs and the cost 
inversions that hospital-based PHPs have experienced. The cost 
inversions between PHP APC Level 1 and Level 2 service days in the 
hospital-based PHP claims data and the small number of CMHCs are the 
two primary reasons for our policy to replace the two-tiered PHP APCs 
with a single PHP APC for each provider type. The small percentage of 
all PHP service days for partial hospitalization services provided 
under the Level 1 PHP APCs further supports our policy to replace the 
two-tiered PHP APCs with a single PHP APC for each provider type. As 
noted previously, we believe that the need for the PHP APC Level 1 and 
Level 2 payment tiers that was present in CY 2009 no longer exists.
    In summary, we are creating new CMHC APC 5853 to pay CMHCs for 
partial hospitalization services provided to Medicare beneficiaries for 
providing 3 or more services per PHP service day to replace existing 
CMHC APCs 5851 and 5852 for CY 2017 and subsequent years. We also are 
creating new hospital-based PHP APC 5863 to pay hospital-based PHPs for 
partial hospitalization services provided to Medicare beneficiaries for 
providing 3 or more services per PHP service day to replace existing 
hospital-based PHP APCs 5861 and 5862 for CY 2017 and subsequent years. 
We discuss the final geometric mean per diem cost for new CMHC APC 5853 
and the final geometric mean per diem cost for new hospital-based PHP 
APC 5863 in section VIII.B.2. of this final rule with comment period.
    By finalizing these proposals, we will pay both CMHCs and hospital-
based PHP providers the same payment rate for providing 3 partial 
hospitalization services in a single service day as is paid for 
providing 4 or more services in a single service day, by the specific 
provider type. We remind providers that because partial hospitalization 
services are intensive outpatient services, our regulations at 
Sec. Sec.  410.43(a)(3) and (c)(1) require that PHP beneficiaries need 
at least 20 hours of services each week and that PHPs furnish services 
in accordance with the plan of care

[[Page 79685]]

reflecting that need. We reiterate that this 20 hour per week 
requirement is a minimum requirement, and have noted in multiple prior 
OPPS/ASC final rules with comment periods that a typical PHP would 
include 5 to 6 hours per day (70 FR 68548, 71 FR 67999, 72 FR 66671, 
and 73 FR 68687). We want providers to continue to have flexibility in 
providing PHP services, and we will continue to monitor the utilization 
of providing 3 services per service day for those limited circumstances 
when a 3-service day is appropriate. We are considering multiple 
options for enhancing monitoring of providers to ensure that they 
furnish appropriate services under PHPs which, according to our 
regulations at Sec.  410.43(c), are intended for patients who require a 
minimum of 20 hours per week of therapeutic services as evidenced in 
their plan of care, and which, according to our regulations at Sec.  
424.24(e), require that the services be furnished in accordance with a 
plan of care that sets forth the frequency and duration of the 
services, taking into account a reasonable expectation of improvement 
in the patient's condition. We will communicate how we intend to 
undertake such enhanced monitoring in subregulatory guidance within the 
next year.
    Finally, we are concerned about the low frequency of providing 
individual therapy, which we noted earlier in this section, and we will 
be monitoring its provision. The PHP is intensive by nature, and PHP 
services are provided in lieu of inpatient hospitalization. 
Furthermore, section 1861(ff) of the Act describes the items and 
services to be included in a PHP, including individual and group 
therapy. Therefore, we believe that appropriate treatment for PHP 
patients includes individual therapy. We encourage providers to examine 
their provision of individual therapy to PHP patients to ensure that 
patients are receiving all of the services that they may need.
    Comment: One commenter believed that the combined PHP APCs do not 
appear to have included all of the data from the original Level 1 and 
Level 2 PHP APCs, and would result in a payment reduction because of 
implementation of the new policy.
    Response: As described earlier, the combined PHP APCs' geometric 
mean costs used available CY 2015 claims data and were calculated by 
following the existing methodology for ratesetting, except that the 
geometric mean per diem costs for each provider type were calculated 
for days providing 3 or more partial hospitalization services, rather 
than calculated separately for days with exactly 3 services, and for 
days with 4 or more services. The combined PHP APCs' geometric mean 
costs are similar to a weighted average of actual provider costs. 
Therefore, the total payments resulting from the combined PHP APC 
geometric mean per diem cost, by provider type, would be roughly equal 
to the total payments resulting from the two-tiered PHP APC per diem 
costs, by provider type. As such, combining the PHP APCs geometric mean 
per diem costs does not reduce total costs or total payments by 
provider type. We refer readers to section VIII.B.2. for more detailed 
specifics on the CY 2017 PHP geometric mean per diem cost calculations.
    Comment: A few commenters stated that the current two-tiered 
payment structure fostered a continuum of care, and contended that CMS' 
current policy of distinguishing 3 services per day and 4 or more 
services per day offers the flexibility of intermediate levels of care 
between outpatient, office-based visits, and inpatient psychiatric 
care, and further are differentiated from each other by the provider 
community as ``Intensive Outpatient Programs'' (IOPs) and PHPs, 
respectively. The commenters believed that, consequently, replacing the 
two-tiered payment methodology with a single APC and calculating the 
geometric mean per diem costs for 3 or more services per day would not 
recognize the importance and need for the continuum of care.
    Response: We are concerned about the potential misuse of the PHP 
benefit. A few commenters indicated that some in the provider community 
recognize an IOP level of care. However, there is no Medicare benefit 
category for IOPs. Therefore, we cannot recognize or pay for what 
providers term ``IOPs'' using the PHP benefit. If the individual 
services that make up these IOPs meet all applicable requirements for 
non-PHP outpatient services, including coding definitions, and are 
reasonable and necessary, then conceivably these services could be 
billed individually under the OPPS. IOPs are typically not only less 
intensive than PHPs, but, as previously noted, are also a nonexistent 
Medicare category. In equating IOPs with the statutorily mandated PHP 
benefit, we believe commenters misunderstood the purpose of the PHP 
benefit. Specifically, a PHP requires physician certification that the 
individual would need inpatient psychiatric care if the partial 
hospitalization services were not provided, as described in Sec.  
424.24(e) of the regulations. Furthermore, as required by section 
1861(ff) of the Act and by Sec.  424.24(e) of the regulations, a PHP 
must be prescribed by a physician, and the services provided under the 
physician's care must be certified and recertified as being reasonable 
and necessary and under a plan of treatment that sets forth the 
duration and frequency of services, taking into account a reasonable 
expectation of improvement in the patient's condition. If a beneficiary 
is certified for PHP but provided services that meet some lesser level 
of care, this action could be some indication of fraud. We plan to work 
with the MACs in order to better educate providers on PHP requirements.
    Finally, combining the PHP APCs does not affect the continuum of 
care available to Medicare beneficiaries seeking treatment for mental 
health issues. Our decision to combine the PHP APCs for Level 1 and 
Level 2 services into a single APC for 3 or more services per day, by 
provider type, is simply a change in how we pay for PHP services, and 
does not affect access to mental health care or the ways that non-PHP 
patients may receive mental health services.
    Comment: One commenter stated that the requirement for a minimum of 
20 hours per week of therapeutic services conflicts with accepted 
treatment parameters and other managed care options, where attendance 
and minimum hours are not required. The commenter believed that the 20 
hour per week minimum imposes a burden on older patients, is not 
necessary to receive a positive outcome, provides no flexibility, would 
result in a patient attending the program 5 days a week and, therefore, 
creates a barrier to providing the most appropriate treatment for a 
patient's needs.
    Response: When Congress established the PHP benefit in statute, it 
described a PHP as an intensive program that is provided in lieu of 
inpatient treatment (we refer readers to sections 1835(a)(2)(F), 
1861(ff)(2), and 1861(ff)(3)(A) of the Act). Congress provided 
discretion to the Secretary to determine the frequency of PHP services. 
In our CY 2009 rulemaking, we promulgated regulations to establish an 
eligibility requirement at 42 CFR 410.43(c)(1), which states that PHPs 
are intended for patients who require a minimum of 20 hours per week of 
therapeutic services as evidenced in their plan of care. Under Sec.  
410.43(a)(3), we also require PHP services to be furnished in 
accordance with the plan of care and a physician certification.
    Because a PHP is intended for patients who would otherwise be in an 
inpatient psychiatric setting, and who require an intensive level of 
services of at least 20 hours per week, it is not an

[[Page 79686]]

appropriate program for patients who need less intensive mental health 
services. Medicare provides a number of ways in which patients can 
receive covered mental health services, which range from inpatient 
psychiatric care, to PHPs, to other outpatient care provided by 
physicians or other health professionals in a variety of settings. Our 
Medicare Benefit Policy Manual (IOM 100-02, Chapter 6) states that PHP 
patients must be able to cognitively and emotionally participate in the 
active treatment process, and to tolerate the intensity of a PHP 
program (we refer readers to section 70.3, Chapter 6 of IOM 100-02, 
which is available via the Internet on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c06.pdf). It is possible that mental health treatment provided 
outside of the PHP benefit may be a more appropriate venue for some 
patients for whom the 20 hour per week minimum requirement is deemed to 
be burdensome.
    We are concerned that some PHPs are admitting patients who do not 
meet the eligibility requirements required by the statute. Many of 
these PHPs are not providing at least 20 hours per week of services to 
their patients. As such, in March 2016, we issued a MedLearn Special 
Edition article to notify PHPs of edits to the claims processing 
system, which would begin July 1, 2016, and would systematically 
enforce our existing regulations related to the 20-hour per week 
minimum requirement. However, in early July 2016, we inactivated the 
edits, effective July 1, 2016, so that we could consider adding more 
flexibility to the editing process. (We refer readers to MedLearn 
Matters SE1607, which is available via the Internet on the CMS Web site 
at: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE1607.pdf.)
    In addition, we are considering proposing clarifications to our 
regulations in our CY 2018 rulemaking to more strongly tie a 
beneficiary's receipt of at least 20 hours per week of partial 
hospitalization services under a PHP to payment for those services. We 
are informing hospital-based PHPs and CMHCs so that they can review 
their admission procedures, and ensure that the patients they serve are 
truly eligible for the PHP benefit. In this final rule with comment 
period, we are requesting public comments on the advantages, 
disadvantages, and potential challenges of strengthening the tie 
between payment and furnishing at least 20 hours of services per week 
to eligible beneficiaries, for consideration in our development of the 
CY 2018 rulemaking. Individuals should submit their comments as 
indicated under the DATES section of this final rule with comment 
period. Finally, as noted previously in this section, we will monitor 
PHP claims, beginning in January 2017, to determine whether PHP 
beneficiaries are receiving at least 20 hours per week of partial 
hospitalization services.
    PHP services can be extremely beneficial to eligible patients and, 
at the same time, can provide a more cost-effective method for 
providing care outside of an inpatient setting. We are working to 
protect vulnerable beneficiaries with mental health conditions by 
helping to ensure that eligible beneficiaries receive the level of care 
that is appropriate to the PHP setting.
c. Alternatives Considered
    As we discussed in the CY 2017 OPPS/ASC proposed rule (81 FR 45672 
through 45673), we considered several alternatives to replacing the 
Level 1 and Level 2 PHP APCs with a single new APC for each PHP 
provider type. We investigated whether we could maintain the Level 1 
and Level 2 PHP APCs if the PHP APC per diem costs were based upon unit 
costs. However, the same data issues that affected per diem costs also 
affected unit costs. The hospital-based unit cost data also were 
inverted such that a Level 1 service day would be more costly than a 
Level 2 service day. As we have previously noted, we do not believe 
that it is appropriate to pay more for providing Level 1 services than 
for providing Level 2 services because only 3 services are provided 
during Level 1 service days and 4 or more services are provided during 
Level 2 service days.
    We also considered continuing the two-tiered PHP APC payment 
structure by provider type, and addressing future cost inversions as 
they arise. Under this alternative, we could have proposed to use a 
default methodology for handling cost inversions by only combining the 
two-tiered PHP APC structure for the provider type with inverted data, 
and only for the affected calendar year. However, we believe that it 
could be confusing if one provider type was paid for PHP services based 
on a two-tiered payment structure, while the other provider type was 
paid based on a single APC grouping. We also believe that providers 
would prefer the predictability of knowing whether they would be paid 
using a single PHP APC or using two-tiered PHP APCs for Level 1 and 
Level 2 services.
    Another alternative for handling cost inversions could be to apply 
an equitable adjustment. However, the level of adjustment required 
would vary depending on the degree of the inversion, which also could 
fluctuate from year to year. Again, we believe, and providers and their 
representative associations have informed us, that providers would 
prefer the predictability afforded by avoiding cost inversions 
altogether, rather than being subject to an ad hoc adjustment as cost 
inversions arise.
    We considered whether we should adjust our data trims, but we 
determined that the cause of the cost inversion was not due to 
providers with aberrantly high CCRs or costs per day. Rather, we 
believe that the cause of the cost inversion was largely the influence 
of high volume providers with high (but not inappropriately high) Level 
1 service day costs and low (but not inappropriately low) Level 2 
service day costs in the CY 2015 hospital-based PHP claims data used 
for the CY 2017 rulemaking. This suggested that adjusting data trims 
may not be an effective method for resolving the inversion. 
Nevertheless, we reconsidered our analysis of the preliminary CY 2015 
claims data for hospital-based PHPs by testing a stricter trim on 
hospital-based PHP data using the published upper limit CCR that 
hospitals use for calculating outliers rather than the existing CCR>5 
trim. This test of a stricter CCR trim did not remove the inversion, 
and as a result, we did not propose to change the existing CCR>5 trim 
on hospital-based PHP service days for our CY 2017 ratesetting.
    Comment: One commenter recommended that CMS maintain the two-tiered 
system, but combine the APCs for CMHCs and hospital-based PHPs. The 
commenter noted that CMHCs and hospital-based PHPs provide the exact 
same services, but are paid differently, although the commenter 
acknowledged that hospital-based PHPs have higher costs, largely due to 
overhead allocation. The commenter believed that the APCs distinguished 
by provider type ``punish'' rather than reward CMHCs for being more 
cost-effective than hospital-based PHPs. The commenter believed that 
freestanding CMHCs should not be paid less than hospital-based PHPs, 
and noted that, in 2015, MedPAC recommended that Congress decrease or 
eliminate the payment differences between hospital outpatient 
departments and physician offices. The commenter stated that setting 
CMHCs' payment rates based on the small

[[Page 79687]]

number of remaining CMHCs does not reflect the actual cost of providing 
these services.
    Response: The OPPS system pays for outpatient services, including 
partial hospitalization services. This system bases payment on the 
geometric mean per diem costs of providing services using provider data 
from claims and cost reports. We calculate the PHP APC geometric mean 
per diem costs based on the data provided for each type of provider to 
determine payment for these services. We believe that this system 
provides appropriate payment for partial hospitalization services based 
on actual provider costs. The final PHP APC geometric mean per diem 
costs for CY 2017 reflect the costs of what providers expend to 
maintain such programs, as reported on their claims and cost reports.
    We believe the commenter has misunderstood MedPAC's recommendation 
in its March 2015 Report to Congress. MedPAC recommended that payment 
rates be adjusted for more costly hospital outpatient departments so 
that they more closely align with those of less costly freestanding 
physician offices providing the same services (Medicare Payment 
Advisory Commission Report to the Congress: Medicare Payment Policy, 
Chapter 3, ``Hospital Inpatient and Outpatient Services,'' page 51, 
March 2015). Congress has since addressed a portion of this 
recommendation in section 603 of the Bipartisan Budget Act of 2015. We 
refer readers to section X.A. of this final rule with comment period 
for a full discussion of the provisions of section 603. The provisions 
of section 603 do not apply to CMHCs because CMHCs are not a department 
of a hospital. The difference in payment between CMHCs and hospital-
based PHPs is based upon differences in resource use (or costs). When 
Congress required the Secretary to implement an outpatient prospective 
payment system, it required that this payment system group clinically 
similar covered services with respect to resource use (section 
1833(t)(2) of the Act). Because CMHCs and hospital-based PHPs resource 
uses are different, these two provider types are paid under different 
APCs, based on their actual resource use.
    Because the cost of providing partial hospitalization services 
differs significantly by site of service, we established different PHP 
payment rates for hospital-based PHPs and CMHCs in the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71991 through 71994). However, we 
allowed a 2-year transition to CMHC payment rates based solely on CMHC 
data. With respect to the continued use of PHP APC geometric mean per 
diem costs for determining payment rates by provider type (rather than 
median costs, which commenters mistakenly referenced), we refer readers 
to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68406 
through 68412) for a discussion of the implementation of this policy. 
The resulting payment rates reflect the geometric mean cost of what 
providers expend to maintain such programs, based on data provided by 
CMHCs and hospital-based PHPs, which we believe is an improvement over 
the two-tiered methodology calculated based on median costs using only 
hospital-based data.
    Comment: One commenter suggested that CMS consider paying PHPs 
using a quality-based payment system, and that CMS use value-based 
purchasing.
    Response: We responded to a similar public comment in the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70462) and refer readers 
to a summary of that comment and our response. To reiterate, sections 
1833(t)(2) and 1833(t)(9) of the Act set forth the requirements for 
establishing and adjusting OPPS payment rates, which include PHP 
payment rates. Section 1833(t)(17) of the Act authorizes the Hospital 
OQR Program, which applies a payment reduction to subsection (d) 
hospitals that fail to meet program requirements. In the CY 2015 OPPS/
ASC proposed rule (79 FR 41040), we considered future inclusion of, and 
requested comments on, the following quality measures addressing PHP 
issues that would apply in the hospital outpatient setting: (1) 30-day 
Readmission; (2) Group Therapy; and (3) No Individual Therapy. We also 
refer readers to the CY 2015 OPPS/ASC final rule with comment period 
(79 FR 66957 through 66958) for a more detailed discussion of PHP 
measures considered for inclusion in the Hospital OQR Program in future 
years. The Hospital OQR Program does not apply to CMHCs. Further, 
currently, there is no statutory language explicitly authorizing a 
value-based purchasing program for PHPs.
2. Development of the PHP APC Geometric Mean Per Diem Costs and Payment 
Rates
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45667 through 45678), 
for CY 2017 and subsequent years, we proposed to follow the detailed 
PHP ratesetting methodology described in section VIII.B.2. of the CY 
2016 OPPS/ASC final rule with comment period (80 FR 70462 through 
70466) to determine the PHP APCs' geometric mean per diem costs and to 
calculate the payment rates for the new single hospital-based PHP APC 
and CMHC APC. However, as discussed in section VIII.B.1. of this CY 
2017 final rule with comment period, in support of our CY 2017 policies 
to establish single PHP APCs for hospital-based PHPs and CMHCs, we also 
are combining the geometric mean per diem costs for the two existing 
hospital-based PHP APCs to calculate a geometric mean per diem cost for 
new hospital-based PHP APC 5863. Currently, hospital-based PHP service 
days with exactly 3 service units (based on allowable PHP HCPCS codes) 
are assigned to Level 1 PHP APC 5861, and hospital-based PHP service 
days with 4 or more service units (based on allowable PHP HCPCS codes) 
are assigned to Level 2 PHP APC 5862. Under our CY 2017 proposal, 
instead of separating the service days between these two APCs, we 
proposed to combine the service days so that hospital-based PHP service 
days that provide 3 or more service units per day (based on allowable 
PHP HCPCS codes) are assigned to new hospital-based PHP APC 5863. We 
then proposed to continue to follow the existing methodology described 
in section VIII.B.2.e. of the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70465 through 70466) to its end to calculate the 
geometric mean per diem cost for new hospital-based PHP APC 5863. 
Therefore, the geometric mean per diem cost for new hospital-based PHP 
APC 5863 would be based upon actual hospital-based PHP claims and costs 
for PHP service days providing 3 or more services.
    Similarly, we proposed to combine the geometric mean per diem costs 
for the two existing CMHC APCs to calculate a geometric mean per diem 
cost for new CMHC APC 5853. Currently, CMHC service days with exactly 3 
service units (based on allowable PHP HCPCS codes) are assigned to 
Level 1 CMHC APC 5851, and CMHC service days with 4 or more service 
units (based on allowable PHP HCPCS codes) are assigned to Level 2 CMHC 
APC 5852. Under our CY 2017 proposal, instead of separating the service 
days between these two APCs, we proposed to combine the service days so 
that CMHC service days that provide 3 or more service units (based on 
allowable PHP HCPCS codes) are assigned to proposed new CMHC APC 5853. 
We then proposed to continue to follow the existing PHP ratesetting 
methodology described in section VIII.B.2.e. of the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70465 through 70466) to its end 
to

[[Page 79688]]

calculate the geometric mean per diem cost for new CMHC APC 5853. 
Therefore, the geometric mean per diem cost for new CMHC APC 5853 would 
be based upon actual CMHC claims and costs for CMHC service days 
providing 3 or more services.
    To prevent confusion, we referred to the per diem costs listed in 
Table 19 of the proposed rule as the proposed CMHC or hospital-based 
PHP APC per diem costs or the proposed CMHC or hospital-based PHP APC 
geometric mean per diem costs. We referred to the CMHC or hospital-
based PHP per diem payment rates listed in Addendum A to the proposed 
rule (which is available via the Internet on the CMS Web site) as the 
proposed CMHC or hospital-based PHP APC per diem payment rates or the 
proposed CMHC or hospital-based PHP APC geometric mean per diem payment 
rates. The CMHC or hospital-based PHP APC per diem costs are the 
provider-specific costs derived from the most recent claims and cost 
data. The CMHC or hospital-based PHP APC per diem payment rates are the 
national unadjusted payment rates calculated from the CMHC or hospital-
based PHP APC per diem costs, after applying the OPPS budget neutrality 
adjustments described in section II.A.4. of this final rule with 
comment period.
    We proposed to apply our established methodologies in developing 
the geometric mean per diem costs and payment rates under this 
proposal, including the application of a 2 standard 
deviation trim on costs per day for CMHCs and a CCR>5 hospital service 
day trim for hospital-based PHP providers. These two trims were 
finalized in our CY 2016 OPPS/ASC final rule with comment period (80 FR 
70455 through 70462) for CY 2016 and subsequent years.
a. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments
    For the proposed rule, prior to calculating the proposed geometric 
mean per diem cost for new CMHC APC 5853, we prepared the data by first 
applying trims and data exclusions, and assessing CCRs as described in 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70463 
through 70465), so that ratesetting is not skewed by providers with 
extreme data. Under the 2 standard deviation trim policy, 
we excluded any data from a CMHC for ratesetting purposes when the 
CMHC's geometric mean cost per day is more than 2 standard 
deviations from the geometric mean cost per day for all CMHCs. By 
applying this trim for CY 2017 ratesetting, in the proposed rule, three 
CMHCs with geometric mean per diem costs per day below the trim's lower 
limit of $42.83 were excluded from the proposed ratesetting for CY 2017 
(81 FR 45674). We also applied the OPPS 3 standard 
deviation trim on CCRs to exclude any data from CMHCs with CCRs above 
or below this range. This trim resulted in the exclusion of one CMHC 
with a very low CCR of 0.001. Both of these standard deviation trims 
removed four providers from ratesetting whose data would have skewed 
the calculated proposed geometric mean per diem cost downward.
    In accordance with our PHP ratesetting methodology, in the proposed 
rule, we also removed service days with no wage index values because we 
use the wage index data to remove the effects of geographic variation 
in costs prior to APC geometric mean per diem cost calculation (80 FR 
70465). In our CY 2017 proposed rule ratesetting, one CMHC was excluded 
because it was missing wage index data for all of its service days.
    In addition to our trims and data exclusions, before determining 
the PHP APC geometric mean per diem costs, we also assess CCRs (80 FR 
70463). Our longstanding PHP OPPS ratesetting methodology defaults any 
CMHC CCR>1 to the statewide hospital ancillary CCR (80 FR 70457). In 
our CY 2017 proposed rule ratesetting, we identified one CMHC that had 
a CCR>1. This CMHC's CCR was 1.185 and was defaulted to its appropriate 
statewide hospital ancillary CCR for CY 2017 ratesetting purposes.
    These data preparation steps adjusted the CCR for 1 CMHC and 
excluded 5 CMHCs, resulting in the inclusion of a total of 46 CMHCs in 
our CY 2017 proposed rule ratesetting modeling, and the removal of 643 
CMHC claims from the 17,033 total CMHC claims used. We believe that 
excluding providers with extremely low geometric mean costs per day or 
extremely low CCRs protects CMHCs from having that data inappropriately 
skew the calculation of the CMHC APC geometric mean per diem cost. 
Moreover, we believe that these trims, exclusions, and adjustments help 
prevent inappropriate fluctuations in the PHP APC geometric mean per 
diem payment rates.
    For the CMHC final rule results, we used updated CY 2015 final 
claims data. The final CY 2015 Outpatient Standard Analytic File used 
for CY 2017 ratesetting showed that 52 CMHCs had claims in CY 2015. As 
described in the discussion of the PHP ratesetting process in the CY 
2016 final rule (80 FR 70462 through 70467), in section II.A. of this 
final rule with comment period, and in the OPPS Claims Accounting 
Document under supporting documentation ``Downloads'' for the CY 2017 
OPPS/ASC final rule with comment period (available online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html), in developing the claims eligible for ratesetting we 
excluded CMHCs with outlier overall CCRs (1 CMHC). After making this 
exclusion, our updated CY 2015 claims data showed 51 CMHCs with claims 
that were eligible for ratesetting. We then applied our ratesetting 
trims and exclusions. Our 2 standard deviation trim policy 
excluded 3 CMHCs with geometric mean per diem costs per day below the 
trim's lower limit of $39.77, and 1 CMHC with geometric mean per diem 
costs per day above the trim's upper limit of $403.50. This 2 standard deviation trim removed 4 CMHCs from our final rule 
ratesetting whose data would have skewed the calculation of the final 
geometric mean per diem cost. For this final rule with comment period, 
we also applied the OPPS 3 standard deviation trim on CCRs 
to exclude any data from CMHCs with CCRs above or below this range, but 
no CMHCs were excluded as a result.
    In accordance with our PHP ratesetting methodology, we also removed 
service days with no wage index values because we use the wage index 
data to remove the effects of geographic variation in costs prior to 
APC geometric mean per diem cost calculation (80 FR 70465). In this CY 
2017 final rule ratesetting, 2 CMHCs were excluded because they were 
missing wage index data for all of their service days.
    In addition to our trims and data exclusions, before determining 
the PHP APC geometric mean per diem costs, we also assess CCRs (80 FR 
70463 through 70464). Our longstanding PHP OPPS ratesetting methodology 
defaults any CMHC CCR>1 to the statewide hospital ancillary CCR (80 FR 
70457). In this CY 2017 final rule ratesetting, we identified 1 CMHC 
that had a CCR>1. This CMHC's CCR was 1.185 and was defaulted to its 
appropriate statewide hospital ancillary CCR for CY 2017 final rule 
ratesetting purposes.
    These data preparation steps adjusted the CCR for 1 CMHC and 
excluded 6 CMHCs, resulting in the inclusion of a total of 45 CMHCs in 
our CY 2017 final rule ratesetting modeling, and the removal of 2,395 
CMHC claims from the 18,990 total CMHC claims used.
    After applying all of the above trims, exclusions, or adjustments, 
the geometric mean per diem cost for all

[[Page 79689]]

CMHCs for providing 3 or more services per day (new CMHC APC 5853) is 
$124.92 (compared to the proposed $135.30).
b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions
    For the CY 2017 proposed rule, we followed a data preparation 
process for hospital-based PHP providers that is similar to that used 
for CMHCs by applying trims and data exclusions as described in the CY 
2016 OPPS/ASC final rule with comment period (80 FR 70463 through 
70465) so that our ratesetting is not skewed by providers with extreme 
data. Before any trimming or exclusions, in the proposed rule there 
were 404 hospital-based PHP providers in the claims data. For hospital-
based PHP providers, we applied a trim on hospital service days when 
the CCR was greater than 5 at the cost center level. The CCR>5 hospital 
service day trim removed hospital-based PHP service days that use a 
CCR>5 to calculate costs for at least one of their component services. 
Unlike the 2 standard deviation trim, which excluded CMHC 
providers that failed the trim, the CCR>5 trim excluded any hospital-
based PHP service day where any of the services provided on that day 
are associated with a CCR>5. Applying this trim removed service days 
from 8 hospital-based PHP providers with CCRs ranging from 5.8763 to 
19.9996 from our proposed rule ratesetting. However, all of the service 
days for these eight hospital-based PHP providers had at least one 
service associated with a CCR>5, so the trim removed these providers 
entirely from our proposed rule ratesetting. In addition, the OPPS 
3 standard deviation trim on costs per day removed four 
providers from proposed rule ratesetting.
    Finally, in our proposed rule ratesetting, we excluded 13 hospital-
based PHP providers that reported zero daily costs on their claims, in 
accordance with our proposed rule PHP ratesetting policy (80 FR 70465). 
Therefore, we excluded a total of 25 hospital-based PHP providers, 
resulting in 379 hospital-based PHP providers in the data used for 
proposed rule ratesetting. After completing these data preparation 
steps, we calculated the geometric mean per diem cost for proposed new 
hospital-based PHP APC 5863 for hospital-based PHP services. The 
proposed geometric mean per diem cost for hospital-based PHP providers 
that provide 3 or more services per service day (new hospital-based PHP 
APC 5863) was $192.57.
    The proposed CY 2017 PHP APC geometric mean per diem costs for the 
new CMHC and hospital-based PHP APCs were shown in Table 19 of the 
proposed rule (81 FR 45674). The proposed PHP APC payment rates were 
included in Addendum A to the proposed rule (which is available via the 
Internet on the CMS Web site).
    For this final rule with comment period, for hospital-based PHPs, 
we used updated CY 2015 final claims data. The final CY 2015 Outpatient 
Standard Analytic File showed that 482 hospital-based PHPs had claims 
in CY 2015. As described in the discussion of the PHP ratesetting 
process in the CY 2016 final rule with comment period (80 FR 70462 
through 70467), in section II.A. of this final rule with comment 
period, and in the OPPS Claims Accounting Document under supporting 
documentation ``Downloads'' for the CY 2017 OPPS/ASC final rule with 
comment period (available online at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html), in developing the claims 
eligible for ratesetting, we excluded providers paid outside of the 
OPPS (39 hospital-based PHPs), providers without cost report data (9 
hospital-based PHPs), and providers with outlier overall CCRs (14 
hospital-based PHPs). After making those exclusions, the updated CY 
2015 claims data for this final rule with comment period showed 420 
hospital-based PHP providers that were eligible for ratesetting. We 
then applied our ratesetting trims and exclusions.
    For hospital-based PHP providers, for this final rule with comment 
period, we applied a trim on hospital service days when the CCR was 
greater than 5 at the cost center level. Applying this trim removed 
service days from 8 hospital-based PHP providers with CCRs ranging from 
5.411 to 17.603. However, all of the service days for these 8 hospital-
based PHP providers had at least one service associated with a CCR>5, 
so the trim removed these providers entirely from ratesetting. Also, 
the OPPS 3 standard deviation trim on costs per day removed 
1 provider with costs per day over $4,000 from this final rule 
ratesetting.
    For this final rule with comment period, we also excluded 15 
hospital-based PHP providers that reported zero daily costs on all of 
their claims, in accordance with our PHP ratesetting policy (80 FR 
70465). Finally, we excluded 1 hospital-based PHP without valid wage 
index data. Therefore, we excluded a total of 25 hospital-based PHP 
providers, resulting in 395 hospital-based PHP providers in the data 
used for ratesetting. After completing these data preparation steps, we 
calculated the geometric mean per diem cost for new hospital-based PHP 
APC 5863 for hospital-based PHP services. The final geometric mean per 
diem cost for hospital-based PHP providers that provide 3 or more 
services per service day (new hospital-based PHP APC 5863) is $213.14 
(compared to the proposed $192.57).
    Currently, the highest hospital-based PHP per diem rate, which for 
CY 2016 was the Level 2 hospital-based PHP per diem rate for APC 5862, 
serves as the cap for all non-PHP outpatient mental health services 
provided in a single service day. Because we are finalizing our 
proposal to replace the existing two-tiered PHP APCs structure with a 
single APC grouping for these services by specific provider type, the 
outpatient mental health treatment cap for CY 2017 is the geometric 
mean per diem rate for new hospital-based PHP APC 5863.
    In the CY 2017 OPPS/ASC proposed rule, we solicited comments on our 
proposals related to CMHCs and hospital-based PHP APC geometric mean 
per diem cost calculations and data exclusions.
    Comment: Several commenters expressed concern that the proposed CY 
2017 PHP APC geometric mean per diem costs and payment rates were lower 
than the current CY 2016 PHP APC geometric mean per diem costs and 
payment rates, and stated that the proposed payment rates would not 
provide adequate payment of these services.
    Several commenters suggested an alternative payment methodology. 
Some commenters suggested that CMS delay implementation of the CY 2017 
PHP APC per diem payment rates until it can capture and adequately 
cover hospital-based PHP costs, or that CMS ``freeze'' the CY 2017 PHP 
APC per diem payment rates at the CY 2016 level. Several commenters 
recommended that CMS use a median cost phase-in of at least 3 years to 
allow PHP providers to assess their programs and make necessary 
changes, using a rolling average of the per diem costs. One commenter 
stated that this method could minimize the major fluctuations in the 
payment rates from year to year and provide a more stable basis for 
hospitals and CMHCs when budgeting and planning. Another commenter 
stated that the decrease in the PHP APC payment rate would discourage 
hospitals from offering the PHP benefit to Medicare beneficiaries, 
ultimately creating a barrier to access to these services, which could 
place the

[[Page 79690]]

population at risk. Some commenters stated that the payment rate 
reduction would impair services and affect the provider network of both 
service organization types, or that the lower payment rates will force 
providers to restructure their organization and programs. Other 
commenters stated that a payment reduction will force providers to cut 
costs, staff and programming, which would cause them to assist fewer 
people, and would lead to higher ED visits. Another commenter stated 
that providers would be unable to absorb the impact of the reduction. 
Some commenters noted that PHP costs had increased due to rising wages, 
the new CMHC conditions of participation (CoPs), and a reduction in bad 
debt reimbursement.
    One commenter mentioned that since last year, another 11 CMHCs 
closed or discontinued PHP services, and the policy would further 
decrease valuable resources for the mentally ill. Several commenters 
believed that PHPs will continue to decrease in numbers without 
adequate payment. One commenter stated that establishing payment rates 
that are lower than geometric mean costs is a disincentive for PHPs to 
continue providing services. Another commenter stated that the 13 
percent reduction in hospital-based PHP geometric mean per diem payment 
rates may prohibit high quality providers from continuing to provide 
PHP services and exacerbate existing access constraints. A number of 
commenters noted that PHPs are a vital part of the mental health care 
continuum, and noted the benefits of the program, which include 
providing needed care to a vulnerable population, avoiding more costly 
and less efficient emergency department visits and more costly 
inpatient stays, and increasing the time between readmission.
    Response: We appreciate the commenters' input regarding the CY 2017 
proposed PHP APC payment rates. The final hospital-based PHP APC 
geometric mean per diem cost for new APC 5863 is higher than the 
proposed hospital-based PHP per diem cost ($213.14 for this final rule 
versus $192.57 in the proposed rule). However, the final CMHC geometric 
mean per diem cost for new APC 5853 is lower than the proposed CMHC 
geometric mean per diem costs ($124.92 for this final rule versus 
$135.30 in the proposed rule). As we explained in the CY 2014 OPPS/ASC 
final rule (78 FR 75049), our calculation of geometric mean per diem 
costs is based on the actual provider-reported claims and cost data 
and, therefore, represents the cost of providing PHP services, 
including, for example, rising staff wages. The resulting PHP APC 
geometric mean per diem costs and specific payment amounts and the APC 
payment structure reflect the cost providers expend to maintain such 
programs. While we proposed the geometric mean per diem costs in this 
section, section 1833(t)(9)(B) of the Act requires that we apply a 
budget neutrality adjustment before determining final payment rates, as 
described in section II.A.4. of this final rule with comment period. 
That adjustment can result in geometric mean per diem payment rates 
that are higher or lower than the calculated geometric mean per diem 
costs. It is also important to note that the reduction to bad debt 
reimbursement was a result of provisions of section 3201 of the Middle 
Class Tax Extension and Job Creation Act of 2012. The reduction to bad 
debt impacted all providers eligible to receive bad debt reimbursement, 
as discussed in the CY 2013 ESRD final rule (77 FR 67518).
    We remind PHPs that the services of physicians, clinical 
psychologists, clinical nurse specialists (CNSs), nurse practitioners 
(NPs), and physician assistants (PAs) furnished to partial 
hospitalization patients will continue to be billed separately as 
professional services and costs for these professional services are not 
considered to be partial hospitalization services. Therefore, payment 
for partial hospitalization services represents the provider's overhead 
costs, support staff, and the services of clinical social workers 
(CSWs) and occupational therapists (OTs), whose professional services 
are considered to be partial hospitalization services for which payment 
is made to the provider (65 FR 18452). We encourage CMHCs and hospital-
based PHPs to review their cost reporting procedures, to ensure that 
they are accurately reporting PHP costs on their cost reports, and 
hospital-based PHPs to follow the revenue-code-to-cost-center 
hierarchy.
    We recognize the commenters' concern regarding variance in payment 
rates from year to year. As we explained in the CY 2014 OPPS/ASC final 
rule (78 FR 75049), payment rates for PHP services fluctuate from year 
to year based on a variety of factors, including direct changes to the 
PHP APC per diem payment rate, changes to the OPPS, and provider-driven 
changes. Over the past several years, we have made changes to the PHP 
APC per diem payment rates to more accurately align the payments with 
costs. The changes have included establishing separate APCs and 
associated per diem payment rates for CMHCs and hospital-based 
providers based on each provider's costs. We also believe that 
combining the two tiers into one payment tier for 3 or more services 
will reduce fluctuations and better stabilize the payment rate 
variance. Combining the tiers systematically addresses chronic issues 
with inverted costs leading to inverted payment rates and creates a 
more stable geometric mean per diem cost, given the small number of PHP 
providers.
    Regarding the recommendation to use median cost, we note that, in 
the CY 2013 OPPS/ASC final rule with comment period, we finalized our 
proposal to base the relative payment weights that underpin the OPPS 
APCs, including the PHP APCs, on geometric mean costs rather than on 
the median costs (77 FR 68406 through 68412). The use of geometric mean 
data supports our goal of aligning resource use with appropriate 
payment.
    In response to commenters' suggestions to delay implementation of 
the CY 2017 per diem payment rates, or to ``freeze'' the PHP APC per 
diem payment rates at the CY 2016 level, as we discussed in the CY 2014 
OPPS/ASC final rule with comment period (78 FR 75049), we cannot 
establish payment rates that do not accurately reflect current claims 
and cost report data. Providers attest to the accuracy of the cost 
reports from which we obtain PHP claims and cost data. In addition, the 
ratesetting methodology for calculating OPPS APC payment rates as 
stated in the regulations at 42 CFR 419.31 does not allow us to take an 
average of prior year and current PHP per diem payment rate data to 
determine the PHP geometric mean per diem payment rates. Rather, the 
regulations at Sec.  419.31(b)(1) require us to use the most current 
available cost data in ratesetting. Therefore, we cannot delay or 
``freeze'' the CY 2017 PHP APC per diem payment rates, or base the 
calculations upon an average of multiple years of data.
    We appreciate the commenters' input regarding the effect any 
reduction in PHP payment rates would have on access to care. As noted 
earlier, the final PHP geometric mean per diem cost increased for 
hospital-based PHPs, but decreased for CMHCs. Our calculated geometric 
mean per diem costs are based on the actual provider-reported claims 
and cost data and, therefore, represent the cost of providing PHP 
services.
    We are working to strengthen continued access to the PHP benefit 
for eligible beneficiaries. For example, in CY 2016 ratesetting, we 
conducted an extensive analysis of the ratesetting process, and 
discovered errors providers

[[Page 79691]]

had made in claims coding of revenue and HCPCS codes that were leading 
to lower geometric mean per diem costs. In the CY 2016 OPPS/ASC final 
rule with comment period (80 FR 70462 through 70467), we also included 
a detailed description of the ratesetting process to help PHPs record 
costs correctly so that we can more fully capture PHP costs in 
ratesetting.
    To address fluctuations in payments and to protect ratesetting from 
aberrant data, we also implemented trims on the PHP data used in 
ratesetting in the CY 2016 rulemaking. For example, the CMHC 2 standard deviation trim has protected CMHCs by removing from 
ratesetting several providers with aberrantly low costs per day, which 
would have lowered total CMHC geometric mean per diem costs, and thus 
lowered CMHC geometric mean per diem payment rates.
    We agree that PHPs serve a vulnerable population, and appreciate 
the care that PHPs provide to Medicare beneficiaries. We also believe 
that PHPs can help patients avoid emergency department visits and 
inpatient stays in a cost-efficient fashion. We remain concerned about 
access to PHP services, and particularly about the declining numbers of 
CMHCs. We will continue to explore policy options for strengthening the 
PHP benefit.
    Comment: A few commenters stated that the lack of a required 
standardized PHP cost center on the Medicare cost report may be 
creating some cost-finding nuances in the cost report itself (for 
example, inaccurate step-down of overhead cost allocations to the PHP 
program, diluted CCRs by the comingling of PHP and ``Intensive 
Outpatient Program (IOP)'' on the cost report, among others) that may 
have contributed to this decreased PHP median [sic] cost. These 
commenters believed that the cost decreases observed with hospital-
based PHP costs may not be ``real'' cost decreases, but rather a result 
of Medicare cost accounting.
    Response: We agree that if PHP costs are combined with other less 
intensive outpatient mental health treatment costs in the same cost 
center, the CCR could be diluted, leading to lower geometric mean per 
diem costs being calculated. We will analyze this further and consider 
adding a cost center to the hospital cost report for PHP costs only.
    After consideration of the public comments we received, we are 
finalizing our proposals to replace the four PHP APCs (5851, 5852, 
5861, and 5862) with the two new PHP APCs (5853 and 5863) and to 
calculate the geometric mean per diem costs using the most recent 
claims and cost data for each provider type. The final CY 2017 PHP APC 
geometric mean per diem costs for the new CMHC and hospital-based PHP 
APCs are shown in Table 41 below. The final PHP APC payment rates are 
included in Addendum A to this final rule with comment period (which is 
available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html).

         Table 41--CY 2017 PHP APC Geometric Mean Per Diem Costs
------------------------------------------------------------------------
                                                              PHP APC
          CY 2017 APC                  Group title        geometric mean
                                                          per diem costs
------------------------------------------------------------------------
5853..........................  Partial Hospitalization          $124.92
                                 (3 or more services per
                                 day) for CMHCs.
5863..........................  Partial Hospitalization           213.14
                                 (3 or more services per
                                 day) for hospital-based
                                 PHPs.
------------------------------------------------------------------------

3. PHP Ratesetting Process
    While PHP services are part of the OPPS, PHP ratesetting has some 
unique aspects. To foster understanding and transparency, we provided a 
detailed explanation of the PHP APC ratesetting process in the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70462 through 70466). 
The OPPS ratesetting process includes various steps as part of its data 
development process, such as CCR determination and calculation of 
geometric mean per diem costs, identification of allowable charges, 
development of the APC relative payment weights, calculation of the APC 
payment rates, and establishment of outlier thresholds. We refer 
readers to section II. of this final rule with comment period and 
encourage readers to review these discussions to increase their overall 
understanding of the entire OPPS ratesetting process. We also refer 
readers to the OPPS Claims Accounting narrative, which is a supporting 
document to this final rule with comment period, available on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html; click on the link to this final rule with comment period 
to find the Claims Accounting narrative. We encourage CMHCs and 
hospital-based PHPs to review their accounting and billing processes to 
ensure that they are following these procedures, which should result in 
greater accuracy in setting the PHP payment rates.

C. Outlier Policy for CMHCs

1. Estimated Outlier Threshold
    As discussed in the CY 2004 OPPS final rule with comment period (68 
FR 63469 through 63470), after examining the costs, charges, and 
outlier payments for CMHCs, we believed that establishing a separate 
OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific 
outlier policy would direct OPPS outlier payments towards the genuine 
cost of outlier cases, and address situations where charges were being 
inflated to enhance outlier payments.
    We created a separate outlier policy that would be specific to the 
estimated costs and OPPS payments provided to CMHCs. Beginning in CY 
2004, we designated a portion of the estimated OPPS outlier threshold 
specifically for CMHCs, consistent with the percentage of projected 
payments to CMHCs under the OPPS each year, excluding outlier payments, 
and established a separate outlier threshold for CMHCs.
    The separate outlier threshold for CMHCs resulted in $1.8 million 
in outlier payments to CMHCs in CY 2004, and $0.5 million in outlier 
payments to CMHCs in CY 2005. In contrast, in CY 2003, more than $30 
million was paid to CMHCs in outlier payments. We note that, in the CY 
2009 OPPS/ASC final rule with comment period, we also established an 
outlier reconciliation policy to address charging aberrations related 
to OPPS outlier payments (73 FR 68594 through 68599).
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45675 through 45678), 
we proposed to continue to designate a portion of the estimated 1.0 
percent outlier threshold specifically for CMHCs, consistent with the 
percentage of projected payments to CMHCs under

[[Page 79692]]

the OPPS in CY 2017, excluding outlier payments. CMHCs are projected to 
receive 0.03 percent of total OPPS payments in CY 2017, excluding 
outlier payments. This policy results in CMHC outliers being paid under 
limited circumstances associated with costs from complex cases, rather 
than as a substitute for the standard PHP payment to CMHCs. Therefore, 
we proposed to designate less than 0.01 percent of the estimated 1.0 
percent outlier threshold for CMHCs. As we do for each rulemaking 
cycle, we have updated the CMHC CCRs and claims data used to model the 
PHP payments rates.
    Based on our simulations of CMHC payments for CY 2017, in the 
proposed rule, we proposed to continue to set the cutoff point for CY 
2017 at 3.4 times the highest CMHC APC payment rate implemented for 
that calendar year, which for CY 2017 is the payment rate for new CMHC 
APC 5853. In addition, we proposed to continue to apply the same 
outlier payment percentage that applies to hospitals. Therefore, for CY 
2017, we proposed to continue to pay 50 percent of CMHC APC geometric 
mean per diem costs over the cutoff point. For example, for CY 2017, if 
a CMHC's cost for partial hospitalization services paid under new CMHC 
APC 5853 exceeds 3.4 times the proposed payment rate for proposed new 
CMHC APC 5853, the outlier payment would be calculated as 50 percent of 
the amount by which the cost exceeds 3.4 times the payment rate for new 
CMHC APC 5853.
    In section II.G. of the proposed rule, for the hospital outpatient 
outlier payment policy, we proposed to set a fixed dollar threshold in 
addition to an APC multiplier threshold. APC 5853 is the only APC for 
which CMHCs may receive payment under the OPPS, and is for providing a 
defined set of services which are relatively low cost when compared to 
other OPPS services. As such, it is not necessary to also impose a 
fixed dollar threshold on CMHCs. Therefore, we did not propose to set a 
dollar threshold for CMHC outlier payments.
    In summary, in this section, we proposed to continue to calculate 
our CMHC outlier threshold and CMHC outlier payments according to our 
established policies.
    We did not receive any public comments on these proposals, and are 
finalizing them without modification.
2. CMHC Outlier Cap
a. Summary of Proposal
    As discussed in the CY 2017 OPPS/ASC proposed rule (81 FR 45675 
through 45678), prior to receipt of CY 2015 preliminary claims data, we 
analyzed CY 2014 CMHC final claims data and found that CMHC outlier 
payments began to increase similarly to the way they had prior to CY 
2004. While many CMHCs had small outlier payments or no outlier 
payments, three CMHCs had very high charges for their CMHC services, 
which resulted in their collecting large outlier payments that exceeded 
their total per diem payments. CMHC total per diem payments are 
comprised of the Medicare CMHC total per diem payments and the 
beneficiary share of those per diem payments. In total, Medicare paid 
CMHCs $6.2 million in outlier payments in CY 2014, which was 36 percent 
of all CMHC total per diem payments. The 36 percent is a stark contrast 
to the OPPS outlier threshold of 1 percent of total OPPS payments, 
especially because the CMHC threshold is a fraction of that 1 percent, 
based on the percentage of projected per diem payments to CMHCs under 
the OPPS. In CY 2014, three CMHCs accounted for 98 percent of all CMHC 
outlier payments that year and received outlier payments that ranged 
from 104 percent to 713 percent of their total per diem payments.
    When a CMHC's outlier payments approach or exceed its total per 
diem payments, it suggests that outlier payments are not being used as 
intended, specifically for exceptionally high-cost cases, but instead 
as a routine supplement to the per diem payment because outlier 
payments are being made for nearly all patients. The OPPS outlier 
policy is intended to compensate providers for treating exceptionally 
resource-intensive cases. As we noted in our CY 2004 OPPS/ASC final 
rule with comment period (68 FR 63470), outlier payments were never 
intended to be made for all patients and used as a supplement to the 
per diem payment amount. Sections 1833(t)(5)(A) and (B) of the Act 
specify that outlier payments are to approximate the marginal cost of 
care when charges, adjusted to cost, exceed a cutoff point established 
by the Secretary. As stated previously, for CMHCs, that cutoff point is 
3.4 times the highest CMHC APC payment rate (PHP APC 0173). In the CY 
2014 claims, that meant a CMHC was eligible for an outlier payment for 
a given day if the cost for that day was greater than 3.4 times the 
CMHC APC 0173 payment rate for Level II services, or 3.4 times $111.73, 
which equals $379.88 before wage adjustment.
    We examined the total average cost per day for the three CMHCs with 
outlier payments that were more than 100 percent of their regular 
payments. In CY 2014, these three CMHCs had a total average cost per 
day of $1,065, which exceeded the FY 2014 unadjusted daily payment rate 
for inpatient psychiatric care of $713.19. We do not believe that the 
cost of a day of intensive outpatient CMHC services, which usually 
comprises 4 hours of services (mostly group therapy), should equal or 
exceed the cost of a 24-hour period of inpatient care, which includes 
24-hour nursing care, active psychiatric treatment, room and board, 
drugs, and laboratory tests. Because the outpatient PHP daily payment 
rate includes payment for fewer items and services than the inpatient 
psychiatric facility daily payment rate, we believe that the cost of a 
day of outpatient PHP services should be significantly less than the 
cost of a day of inpatient psychiatric care. Therefore, we believe that 
those three CMHCs with total average cost per day of $1,065 
demonstrated excessive outlier payments.
    We believe that these excessive outlier payments to some CMHCs are 
the result of inflated costs, which result from artificially inflated 
charges. Costs are calculated by multiplying charges by the CCR. The 
CCR used for calculating outlier payments has established upper limits 
for hospitals and for CMHCs (we refer readers to the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70456) and the Medicare Claims 
Processing Internet-only Manual, Chapter 4, Section 10.11.9, available 
at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf). We also believe that these excessive outlier 
payments do not approximate the marginal cost of care when costs exceed 
the established cutoff point, as specified in sections 1833(t)(5)(A) 
and (B) of the Act. The resulting outlier payments would be 
inappropriate. We are entrusted with accurately paying CMHCs 
participating in Medicare. Therefore, we are addressing outlier 
payments resulting from inflated costs. By continuing this pattern of 
inflated charges for partial hospitalization services, CMHCs will 
receive a disproportionate share of outlier payments compared to other 
OPPS providers that do not artificially inflate their charges, thereby 
limiting outlier payments for truly deserving cases.
    Based on our available claims data, we chose to apply 30 percent of 
total per diem payments as a cutoff point for reasonable outlier 
payments. In the CY 2014 claims data, the average charge per day for 
the 3 CMHCs that received outlier payments greater than or equal to 30 
percent of their total per diem payments was $3,233, which was nearly 8 
times greater than the average charge

[[Page 79693]]

per day for the CMHCs that received outlier payments that were less 
than 30 percent of their total per diem payments. In our review of CY 
2015 claims data for the CY 2017 OPPS/ASC proposed rule, the average 
charge per day for the CMHCs that received outlier payments greater 
than or equal to 30 percent of their total per diem payments was 
$1,583, which was more than 3 times greater than the average charge per 
day for the CMHCs that received outlier payments that were less than 30 
percent of their total per diem payments.
    In our review of CY 2015 claims data for the CY 2017 proposed 
rulemaking, Medicare paid CMHCs $3.2 million in outlier payments, with 
over 99 percent of those payments made to 4 CMHCs. These outlier 
payments were 26 percent of all CMHC total per diem payments, and 
ranged from 39 percent to 179 percent of the individual CMHC's total 
per diem payments. Total outlier payments to CMHCs decreased from $6.2 
million in CY 2014 to $3.2 million in CY 2015 because the CMHC that 
received the largest outlier payments in CY 2014 no longer had outlier 
payments in CY 2015. This CMHC revised its charge structure downward. 
However, two additional CMHCs that did not receive outlier payments in 
CY 2014 began receiving outlier payments in CY 2015 that were greater 
than or equal to 30 percent of their total payments, which suggests a 
continuing, if not growing problem.
    Under the current outlier reconciliation process, a MAC will 
reconcile a CMHC's outlier payments at the time of final cost report 
settlement if the CMHC's CCR has changed by 0.10 or more and if the 
CMHC received any outlier payments. This process is described in 
Section 10.7.2, Chapter 4, of the Medicare Claims Processing Manual, 
which is available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf. Typically, final cost report 
settlement occurs within 12 months of the MAC's acceptance of the cost 
report. However, because cost reports are filed up to 5 months after 
the CMHC's fiscal year end, CMHC outlier reconciliation can occur more 
than a year after outlier overpayments are made. Long timeframes 
between outlier payment and outlier reconciliation at final cost report 
settlement have also allowed cases with outlier overpayments to 
continue and to grow. For example, one CMHC with inflated charges in CY 
2013 continued to have inflated charges in CY 2014, and received more 
than double its CY 2013 outlier payments in CY 2014. This CMHC did not 
receive outlier payments in CY 2015 because it revised its charge 
structure downward and, therefore, no longer had costs qualifying for 
outlier payments.
    Although efforts geared towards limiting very high outlier payments 
to CMHCs are occurring, such as the outlier reconciliation process, 
these efforts typically occur after the outlier payments are made. We 
would prefer to focus on stopping questionable outlier payments before 
they occur, to avoid the risk that a provider would be unable to repay 
Medicare after those overpayments occur. Therefore, we considered 
whether a broader, supplementary policy change to our CMHC outlier 
payment policy might also be warranted to mitigate possible billing 
vulnerabilities associated with very high outlier payments, while at 
the same time ensuring that we adhere to the existing statutory 
requirements related to covering the marginal cost of care for 
exceptionally resource-intensive cases. We want to ensure that CMHCs 
that provide services that represent the cost of care for legitimate 
high-cost cases are able to continue to receive outlier payments.
    Given these program integrity concerns and our longstanding history 
of introducing CMHC-specific outlier policies when necessary (the CMHC-
specific outlier threshold and the CMHC-specific reconciliation 
process), we proposed to implement a CMHC outlier payment cap to be 
applied at the provider level, such that in any given year, an 
individual CMHC would receive no more than a set percentage of its CMHC 
total per diem payments in outlier payments. This outlier payment cap 
would only affect CMHCs, and would not affect other provider types. 
This outlier payment cap would be in addition to and separate from the 
current outlier policy and reconciliation policy in effect. We proposed 
that the CMHC outlier payment cap be set at 8 percent of the CMHC's 
total per diem payments. As noted previously, each CMHC's total per 
diem payments are comprised of its Medicare CMHC total per diem 
payments plus the total beneficiary share of those per diem payments. 
If implemented, this proposal would mean that a CMHC's total outlier 
payments in a calendar year could not exceed 8 percent of its total per 
diem payments in that year.
    To determine this CMHC outlier cap percentage, we performed 
analyses to model the impact that a variety of cap percentages would 
have on CMHC outlier payments. We want to ensure that any outlier cap 
policy would not disadvantage CMHCs with truly high-cost cases that 
merit an outlier payment, while also protecting the benefit from making 
payments for outlier cases that exceed the marginal cost of care. In 
the CY 2017 OPPS/ASC proposed rule, we used CY 2015 claims data to 
perform a detailed impact analysis of CMHC outlier payments. That 
analysis showed that out of 51 CMHCs with paid claims in CY 2015, 9 
CMHCs received outlier payments. We separated these 9 CMHCs into 4 
CMHCs that received outlier payments that were greater than or equal to 
30 percent of their total CMHC payments in CY 2015, and 5 CMHCs that 
received outlier payments that were less than 30 percent of their total 
CMHC payments in CY 2015.
    In the CY 2017 proposed rule, the 5 CMHCs that received outlier 
payments that were less than 30 percent of their total per diem 
payments received a total of $11,496 in outlier payments. We believe 
that these 5 CMHCs are representative of the types of CMHCs we are most 
concerned about that would be disadvantaged with an outlier payment 
policy that includes a cap at the individual CMHC level. We tested the 
effects of CMHC outlier caps ranging from 3 percent to 10 percent on 
these two groups of CMHCs. Our analysis focused on total CMHC per diem 
payments, total CMHC outlier payments, and percentage reductions in 
payments if a CMHC outlier payment cap were imposed, as shown in Table 
20 of the proposed rule (81 FR 45677).
    Table 20 of the proposed rule showed that 4 out of the 5 CMHCs that 
received outlier payments that were less than 30 percent of their total 
per diem payments received outlier payments that were less than 1 
percent of their total per diem payments and, therefore, would be 
unaffected by a CMHC outlier payment cap. The fifth CMHC received 
outlier payments that were 9.4 percent of its total per diem payments 
and is the only CMHC that would have been affected by a CMHC outlier 
payment cap applied at the provider level. The effect on this CMHC was 
shown under the various cap percentage options. At the 8 percent level, 
this CMHC's outlier payments would have been reduced by $1,628. A 10-
percent cap would have had no effect on this CMHC. The difference in 
total outlier payments to all CMHCs between the 8 percent and 10 
percent cap levels was relatively small (approximately $58,000).
    We also conducted our CMHC outlier cap analysis using final CY 2014 
claims data. When we evaluated the effect of the different CMHC 
provider-level outlier cap percentages on the CMHCs with outlier 
payments that were less than 30 percent of their total per diem

[[Page 79694]]

payments, using the final CY 2014 claims data, we found that 5 CMHCs 
would be affected by an 8-percent cap, and 4 CMHCs would be affected by 
a 10-percent cap, with a difference in outlier payments of only $4,069. 
However, an 8-percent cap compared to a 10-percent cap saved more than 
$37,000 in outlier payments to the CMHCs that were charging excessively 
(data not shown).
    We considered both the CY 2014 and CY 2015 claims data as we sought 
to balance our concern about disadvantaging CMHCs with our interest in 
protecting the benefit from excessive outlier payments by proposing an 
8-percent CMHC outlier payment cap. An 8-percent CMHC outlier payment 
cap would mitigate potential inappropriate outlier billing 
vulnerabilities by limiting the impact of inflated CMHC charges on 
outlier payments. The 8-percent cap would have reduced outlier payments 
to the 4 CMHCs that received outlier payments that were greater than or 
equal to 30 percent of their total per diem payments in CY 2015 by $3.0 
million dollars, or 93.3 percent.
    Therefore, for CY 2017 and subsequent years, we proposed to apply a 
CMHC outlier payment cap of 8 percent to each CMHC's total per diem 
payments, such that in any given calendar year, an individual CMHC 
would not receive more than 8 percent of its CMHC total per diem 
payments in outlier payments.
    We invited public comments on the CMHC provider-level outlier cap 
percentage. We also proposed to revise Sec.  419.43(d) of the 
regulations by adding a paragraph (7) to require that CMHC outlier 
payments for the calendar year be subject to a CMHC outlier payment 
cap, applied at the individual CMHC level, that is, 8 percent of each 
CMHC's total per diem payments for that same calendar year.
    We did not receive any public comments on these proposals.
b. CY 2017 Final Rule Update and Policy
    Updated analysis using CY 2015 final claims data for this CY 2017 
final rule with comment period continued to show that Medicare paid 
CMHCs $3.2 million in outlier payments, with over 99 percent of those 
payments made to 4 CMHCs. These outlier payments were 23 percent of all 
CMHC total per diem payments, and ranged from 42 percent to 163 percent 
of the individual CMHC's total per diem payments. The updated CY 2015 
data showed that out of 52 CMHCs with paid claims in CY 2015, 9 CMHCs 
received outlier payments.
    Five CMHCs with outlier payments that were less than 30 percent of 
their total per diem payments received a total of $11,643 in outlier 
payments. Four CMHCs with outlier payments that were greater than or 
equal to 30 percent of their total per diem payments received $3.2 
million in outlier payments, which was 99.6 percent of all CMHC outlier 
payments made in CY 2015. The average charge per day for the 4 CMHCs 
that received outlier payments that were greater than or equal to 30 
percent of their total per diem payments was $1,566, which was 3 times 
greater than the average charge per day for the 5 CMHCs that received 
outlier payments that were less than 30 percent of their total per diem 
payments.
    We tested the effects of CMHC outlier caps ranging from 3 percent 
to 10 percent on these two groups of CMHCs using the final CY 2015 
claims data as shown in Table 42 below. Our analysis focused on total 
CMHC per diem payments, total CMHC outlier payments, and percentage 
reductions in payments if a CMHC outlier payment cap were imposed. 
Because 4 out of the 5 CMHCs that received outlier payments that were 
less than 30 percent of their total per diem payments received outlier 
payments that were less than 1 percent of their total per diem 
payments, Table 42 below shows that these providers would be unaffected 
by a CMHC outlier payment cap. The fifth CMHC with outlier payments 
that were less than 30 percent of its total per diem payments received 
outlier payments that were 8.0 percent of its total per diem payments. 
This CMHC would not have been affected by an 8 percent or 10 percent 
CMHC outlier payment cap applied at the provider level because its 
outlier payments did not exceed 8 or 10 percent.

                                           Table 42--Effect of CMHC Outlier Cap Simulation on Outlier Payments
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Simulated CMHC outlier payments using final CY 2015 claims data
                                                             -------------------------------------------------------------------------------------------
                                                                Total per      Actual
                                                                  diem        outlier       3% cap       5% cap       6% cap       8% cap      10% cap
                                                                payments      payments
--------------------------------------------------------------------------------------------------------------------------------------------------------
All 52 CMHCs................................................   $14,022,861   $3,245,624  ...........  ...........  ...........  ...........  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Outlier Payments <30% of Total Per Diem Payments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Actual Payments (n = 5)...............................    $1,419,316       11,643  ...........  ...........  ...........  ...........  ...........
Simulated Outlier Payments..................................  ............  ...........       $4,869       $7,581       $8,936      $11,643      $11,643
Reduction in Outlier Payments...............................  ............  ...........       $6,775       $4,063       $2,707  ...........  ...........
% Reduction.................................................  ............  ...........        58.2%        34.9%        23.2%         0.0%         0.0%
CMHCs Affected..............................................  ............  ...........            1            1            1  ...........  ...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Outlier Payments =30% of Total Per Diem Payments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Actual Payments (n = 4)...............................    $3,154,279   $3,233,981  ...........  ...........  ...........  ...........  ...........
Simulated Outlier Payments..................................  ............  ...........      $94,628     $157,714     $189,257     $252,342     $315,428
Reduction in Outlier Payments...............................  ............  ...........   $3,150,996   $3,087,910   $3,056,367   $2,993,282   $2,930,196
% Reduction.................................................  ............  ...........        97.4%        95.5%        94.5%        92.6%        90.6%
CMHCs Affected..............................................  ............  ...........            4            4            4            4            4
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As noted in the CY 2017 OPPS/ASC proposed rule, we sought to 
balance our concern about disadvantaging CMHCs with our interest in 
protecting the benefit from excessive outlier payments by proposing an 
8-percent CMHC outlier payment cap. The updated CY 2015 claims data for 
this final rule with comment period shows that an 8-percent CMHC 
outlier payment cap would mitigate potential inappropriate outlier 
billing vulnerabilities by limiting

[[Page 79695]]

the impact of inflated CMHC charges on outlier payments. The 8-percent 
cap would have reduced outlier payments to the CMHCs that received 
outlier payments that were greater than or equal to 30 percent of their 
total per diem payments in CY 2015 by $3.0 million dollars, or 92.6 
percent, without affecting any of the CMHCs that received outlier 
payments that were less than 30 percent of their CY 2015 total per diem 
payments.
    We did not receive any public comments on our proposals and are 
finalizing them as proposed. As we noted in the proposed rule, our 
existing outlier reconciliation policy will continue to remain in 
effect with the final 8 percent CMHC outlier payment cap serving as a 
complement. We also are finalizing our proposed revision of Sec.  
419.43(d) of the regulations by adding a paragraph (7) to require that 
CMHC outlier payments for the calendar year be subject to a CMHC 
outlier payment cap, applied at the individual CMHC level, that is, 8 
percent of each CMHC's total per diem payments for that same calendar 
year.
    We will continue to monitor the trends in outlier payments and also 
monitor these policy effects. Also, we will analyze CMHC outlier 
payments at the provider level, relative to the 8 percent CMHC outlier 
cap. Finally, we will continue to utilize program integrity efforts, as 
necessary, for those CMHCs receiving excessive outlier payments.
3. Implementation Strategy for the 8-Percent Cap on CMHC Outlier 
Payments
    CMS envisions that the 8-percent CMHC cap on outlier payments will 
be managed by the claims processing system. We will provide detailed 
information on our implementation strategy through sub-regulatory 
channels. However, to foster a clearer understanding of the CMHC 
outlier payment cap, we are providing the following high-level summary 
of the preliminary approach we envision.
    For each CMHC, for a given calendar year, the claims processing 
system will maintain a running tally of year-to-date (YTD) total CMHC 
per diem payments (Medicare payments and the beneficiary share) and YTD 
actual CMHC outlier payments. YTD outlier payments for that calendar 
year could never exceed 8 percent of YTD CMHC total per diem payments 
for that CMHC for that calendar year. For example, we will determine 
whether or not a given provider-specific outlier payment exceeds the 8-
percent cap on a ``rolling'' basis. Under such an implementation 
approach, for each CMHC, the claims processing system will maintain a 
running tally of the YTD total CMHC per diem payments. The claims 
processing system will ensure that each time an outlier claim for a 
CMHC is processed, actual outlier payments will never exceed 8 percent 
of the CMHC's YTD total payments. While a CMHC will receive its per 
diem payment timely, the outlier portion of the claim will be paid as 
the CMHC's YTD payments support payment of the outlier. As part of our 
routine claims processing, we will utilize a periodic review process 
under which outlier payments that were withheld will subsequently be 
paid if the CMHC's total payments have increased to the point that its 
outlier payments can be made. This process will result in additional 
cash flow to CMHCs. As noted previously, we will also maintain our 
existing outlier reconciliation policy, which is applied at the time of 
cost report final settlement if the CMHC's CCR changed by 0.10 or more. 
With regard to revenue tracking by CMHCs, distinct coding will be used 
on the CMHC's remittance advice when outlier payments are withheld, 
assisting receivables accountants in identifying and accounting for the 
differences between expected and actual payments.
4. Summary of Policies
    In summary, for CY 2017, we are finalizing our proposals to:
     Continue to designate a portion of the estimated 1.0 
percent outlier threshold specifically for CMHCs, consistent with the 
percentage of projected payments to CMHCs under the OPPS in CY 2017, 
excluding outlier payments;
     Implement an 8-percent cap on CMHC outlier payments at the 
individual CMHC provider level for CY 2017 and subsequent years and 
change the regulations at Sec.  419.43(d) accordingly;
     Continue to set the cutoff point for CMHC outlier payments 
in CY 2017 at 3.4 times the highest CMHC APC payment rate implemented 
for that calendar year, which for CY 2017 is new CMHC APC 5853; and
     Continue to pay 50 percent of CMHC APC geometric mean per 
diem costs over the cutoff point in CY 2017.
    We believe that these CMHC outlier policies will minimize the 
impact of inflated CMHC charges on outlier payments, result in a better 
approximation of the marginal cost of care beyond the applicable cutoff 
point compared to the current process, and better target outlier 
payments to truly exceptionally high-cost cases.

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74352 through 74353) for a full historical discussion of 
our longstanding policies on how we identify procedures that are 
typically provided only in an inpatient setting (referred to as the 
inpatient only (IPO) list) and, therefore, will not be paid by Medicare 
under the OPPS, and on the criteria that we use to review the IPO list 
each year to determine whether or not any procedures should be removed 
from the list. The complete list of codes (IPO list) that will be paid 
by Medicare in CY 2017 as inpatient only procedures is included as 
Addendum E to this final rule with comment period (which is available 
via the Internet on the CMS Web site).

B. Changes to the Inpatient Only (IPO) List

    In the CY 2017 OPPS/ASC proposed rule (81 FR 45678 through 45679), 
for CY 2017, we proposed to use the same methodology (described in the 
November 15, 2004 final rule with comment period (69 FR 65834)) of 
reviewing the current list of procedures on the IPO list to identify 
any procedures that may be removed from the list. The established 
criteria upon which we make such a determination are as follows:
    1. Most outpatient departments are equipped to provide the services 
to the Medicare population.
    2. The simplest procedure described by the code may be performed in 
most outpatient departments.
    3. The procedure is related to codes that we have already removed 
from the IPO list.
    4. A determination is made that the procedure is being performed in 
numerous hospitals on an outpatient basis.
    5. A determination is made that the procedure can be appropriately 
and safely performed in an ASC, and is on the list of approved ASC 
procedures or has been proposed by us for addition to the ASC list.
    Using the above-listed criteria, we proposed to remove the 
following six codes (four spine procedure codes and two laryngoplasty 
codes) from the IPO list for CY 2017:
     CPT code 22840 (Posterior non-segmental instrumentation 
(e.g., Harrington rod technique, pedicle fixation across 1 interspace, 
atlantoaxial transarticular screw fixation, sublaminar wiring at C1, 
facet screw fixation) (List

[[Page 79696]]

separately in addition to code for primary procedure));
     CPT code 22842 (Posterior segmental instrumentation (eg., 
pedicle fixation, dual rods with multiple hooks and sublaminar wires); 
3 to 6 vertebral segments (List separately in addition to code for 
primary procedure));
     CPT code 22845 (Anterior instrumentation; 2 to 3 vertebral 
segments (List separately in addition to code for primary procedure));
     CPT code 22858 (Total disc arthroplasty (artificial disc), 
anterior approach, including discectomy with end plate preparation 
(includes osteophytectomy for nerve root or spinal cord decompression 
and microdissection); second level, cervical (List separately in 
addition to code for primary procedure));
     CPT code 31584 (Laryngoplasty; with open reduction of 
fracture); and
     CPT code 31587 (Laryngoplasty, cricoid split).
    We reviewed the clinical characteristics of the four spine 
procedure codes and related evidence, including input from multiple 
physician specialty societies whose members specialize in spine 
surgery, and determined the four spine procedure codes listed above to 
be appropriate candidates for removal from the IPO list. These four 
spine procedure codes are add-on codes to procedures that are currently 
performed in the HOPD and describe variations of (including additional 
instrumentation used with) the base code procedure. Therefore, we 
believe these spine procedures satisfy criterion 3 listed above as they 
are related to codes that we have already removed from the IPO list. 
Because these four spine procedure codes are add-on codes, in 
accordance with the regulations at 42 CFR 419.2(b)(18), we proposed to 
package them with the associated procedure and assign them status 
indicator ``N.''
    We also reviewed the clinical characteristics of the two 
laryngoplasty procedure codes and related evidence, and determined that 
the two laryngoplasty procedure codes listed above are appropriate 
candidates for removal from the IPO list because we believe they 
satisfy criterion 3 listed above (that is, the procedure is related to 
codes that we have already removed from the IPO list). These two codes 
are related to and clinically similar to CPT code 21495 (Open treatment 
of hyoid fracture), which is currently not on the IPO list. We proposed 
that the two laryngoplasty procedure codes would be assigned to APC 
5165 (Level 5 ENT Procedures) with status indicator ``J1.''
    Comment: Several commenters supported the proposal to remove CPT 
codes 22840, 22842, 22845, 22858, 31584, and 31587 from the IPO list 
for CY 2017. One commenter opposed the proposal to remove these codes 
from the IPO list, stating that although the spine codes were add-on 
codes for procedures currently performed in the HOPD, these codes 
represented variations in the instrumentation used which made them more 
complex than the base code procedures. The commenter also believed that 
the two laryngoplasty codes were too complex to be performed in the 
HOPD.
    Another commenter opposed the removal of CPT codes 31584 and 31587 
from the IPO list, stating that these procedures often require 
prolonged use of intravenous pain medications and close monitoring of 
drainage tubes. The commenter also stated that both procedures 
frequently involve patient admission to the intensive care unit 
postoperatively, as they warrant assessments of respiratory status and 
oxygenation at frequent intervals to evaluate for postoperative 
swelling.
    Response: We appreciate the commenters' support. We disagree with 
the commenter that CPT codes 22840, 22842, 22845, 22858, 31584, and 
31587 should remain on the IPO list. As discussed in the CY 2017 OPPS/
ASC proposed rule (81 FR 45678 through 45679), we believe that these 
codes satisfy criterion 3 for removal from the IPO list; that is, being 
a procedure that is related to codes that we have already removed from 
the IPO list. We remind the commenter and the public that removal of a 
code from the IPO list does not mean that all procedures described by 
the code or even a majority of procedures must or should be performed 
in the outpatient setting. Removal of a procedure from the IPO list 
only means that the procedure is no longer precluded from being paid 
under the OPPS if it is performed in the outpatient setting. The cases 
that the commenters are concerned about can all still be performed on 
an inpatient basis if appropriate.
    Comment: Several commenters disagreed with the proposal to package 
the four spine codes proposed to be removed from the IPO list with 
associated procedure and assign them status indicator ``N.'' The 
commenters requested that CMS allow for separate payment for these 
procedures.
    Response: As specified in 42 CFR 419.2(b)(18), services described 
by add-on codes are packaged costs that are integral, ancillary, 
supportive, dependent, or adjunctive to performing a procedure or 
furnishing a service on an outpatient basis. The procedures described 
by the four spinal codes are all procedures described by add-on codes. 
The costs for the procedures described by these codes are included in 
the payment rate for the related procedure or service. Therefore, we 
will not provide separate payment for these codes.
    Comment: Other commenters requested that the following additional 
codes be removed from the IPO list:
     CPT code 22585 (Arthrodesis, anterior interbody, including 
disc space preparation, discectomy, osteophytectomy, and decompression 
of spinal cord and/or nerve roots; each additional interspace (List 
separately in addition to code for primary procedure));
     CPT code 22633 (Arthrodesis, combined posterior or 
posterolateral technique with posterior interbody technique including 
laminectomy and/or discectomy sufficient to prepare interspace (other 
than for decompression), single interspace and segment; lumbar;
     CPT code 22850 (Removal of posterior nonsegmental 
instrumentation (eg., Harrington rod);
     CPT code 23472 (Arthroplasty, glenohumeral joint; total 
shoulder (glenoid and proximal humeral replacement (eg., total 
shoulder); and
     CPT code 27130 (Arthroplasty, acetabular and proximal 
femoral prosthetic replacement (total hip arthroplasty), with or 
without autograft or allograft.
    Response: We agree with the commenter at this time only for removal 
of the procedure described by CPT code 22585, which is an add-on code, 
from the IPO list. The base code for CPT code 22585, CPT code 22554 
(Arthrodesis, anterior interbody technique, including minimal 
discectomy to prepare interspace (other than for decompression); 
cervical below C2), is assigned to APC 5115 (Level 5 Musculoskeletal 
Procedures). We believe that cases involving CPT codes 22554 and 22585 
are sufficiently comparable to cases involving only CPT code 22554, 
such that it is appropriate to remove CPT code 22585 from the IPO list. 
Because CPT code 22585 is an add-on code, it is being assigned status 
indicator ``N.'' After reviewing the clinical characteristics of these 
procedures described by CPT codes 22633, 22850, 23472, and 27130, we do 
not believe that removal from the IPO list is warranted at this time.
    After consideration of the public comments we received, we are 
removing CPT codes 22585, 22840, 22842, 22845, 22858, 31584, and 31587 
from the IPO

[[Page 79697]]

list for CY 2017. The complete list of codes (the IPO list) that will 
be paid by Medicare in CY 2017 as inpatient only procedures is included 
as Addendum E to this final rule with comment period (which is 
available via the Internet on the CMS Web site).

C. Response To Solicitation of Public Comments on the Possible Removal 
of Total Knee Arthroplasty (TKA) Procedure From the IPO List

1. Background
    Total knee arthroplasty (TKA) or total knee replacement, CPT code 
27447 (Arthroplasty, knee, condyle and plateau; medical and lateral 
compartments with or without patella resurfacing (total knee 
arthroplasty)), has traditionally been considered an inpatient surgical 
procedure. The procedure described by CPT code 27447 was placed on the 
original IPO list in the 2000 OPPS final rule (65 FR 18781). In 2000, 
the primary factors that were used to determine the assignment of a 
procedure to the IPO list were as follows: (1) The invasive nature of 
the procedure; (2) the need for at least 24 hours of postoperative 
care; and (3) the underlying physical condition of the patient who 
would require the surgery (65 FR 18443 and 18455). In 2000, the 
geometric mean average length of stay for the DRG to which an 
uncomplicated TKA procedure was assigned was 4.6 days, and in 2016, the 
average length of stay for a current uncomplicated TKA procedure for 
the MS-DRG is 2.8 days.
    Recent innovations have enabled surgeons to perform TKA on an 
outpatient basis on non-Medicare patients (both in the HOPD and in the 
ASC). In this context, ``outpatient'' services include both same day 
outpatient surgery (that is, the patient goes home on the same day that 
the outpatient surgery was performed) and outpatient surgery that 
includes one overnight hospital stay for recovery from the surgery. 
These innovations in TKA care include minimally invasive techniques, 
improved perioperative anesthesia, alternative postoperative pain 
management, and expedited rehabilitation protocols. Patients generally 
benefit from a shorter hospital stay. Some of these benefits include a 
likelihood of fewer complications, more rapid recovery, increased 
patient satisfaction, recovery at home with the assistance of family 
members, and a likelihood of overall improved outcomes. On the 
contrary, unnecessary inpatient hospitalization exposes patients to the 
risk of hospital-acquired conditions such as infections and a host of 
other iatrogenic mishaps.
    Like most surgical procedures, TKA needs to be tailored to the 
individual patient's needs. Patients with a relatively low anesthesia 
risk and without significant comorbidities who have family members at 
home who can assist them would likely be good candidates for an 
outpatient TKA procedure. On the other hand, patients with severe 
illnesses aside from their osteoarthritis would more likely require 
inpatient hospitalization and possibly postacute care in a skilled 
nursing facility or other facility. Surgeons who have discussed 
outpatient TKA procedures with us have emphasized the importance of 
careful patient selection and strict protocols to optimize outpatient 
TKA outcomes. These protocols typically manage all aspects of the 
patient's care, including the at-home preoperative and postoperative 
environment, anesthesia, pain management, and rehabilitation to 
maximize rapid recovery and ambulation.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45153), we proposed to 
remove the procedure described by CPT code 27447 from the IPO list. We 
proposed to remove the procedure described by CPT code 27447 from the 
IPO list because we believed that the procedure could be appropriately 
provided and paid for as a hospital outpatient procedure for some 
Medicare beneficiaries, based upon the five evaluation criteria for 
removal from the IPO list discussed earlier. The public comments we 
received on the CY 2013 proposal varied. There were several surgeons 
and other stakeholders who supported the proposal. They believed that, 
given thorough preoperative screening by medical teams with significant 
experience and expertise involving knee replacement procedures, the TKA 
procedure could be provided on an outpatient basis for some Medicare 
beneficiaries. These commenters discussed recent advances in total knee 
replacement technology and surgical care protocols, including improved 
perioperative anesthesia, and expedited rehabilitation protocols, as 
well as significant enhancements to the postoperative process, such as 
improvements in pain management, early mobilization, and careful 
monitoring. These commenters also stated that early preventive 
intervention for the most common medical complications has decreased 
the average length of hospital stays to the point that a TKA procedure 
can now be performed on an outpatient basis in certain cases. The 
commenters noted significant success involving same day discharge for 
patients who met the screening criteria and whose experienced medical 
teams were able to perform the procedure early enough in the day for 
the patients to achieve postoperative goals, allowing home discharge by 
the end of the day. The commenters believed that the benefits of 
furnishing a TKA procedure on an outpatient basis will lead to 
significant enhancements in patient well-being and cost savings to the 
Medicare program, including shorter hospital stays resulting in fewer 
medical complications, improved results, and enhanced patient 
satisfaction. However, the majority of the commenters disagreed with 
the CY 2013 proposal and believed that it would be unsafe to perform 
outpatient TKA for Medicare beneficiaries. (We refer readers to 77 FR 
68419 for a discussion of these comments.) After consideration of these 
public comments, we decided not finalize the proposal, and the 
procedure described by CPT code 27447 remains on the IPO list.
    We also note that, not uncommonly, we receive questions from the 
public about the IPO list that lead us to believe that some members of 
the public may misunderstand certain aspects of the IPO list. 
Therefore, two important principles of the IPO list must be reiterated 
at the outset of this discussion. First, just because a procedure is 
not on the IPO list does not mean that the procedure cannot be 
performed on an inpatient basis. IPO list procedures must be performed 
on an inpatient basis (regardless of the expected length of the 
hospital stay) in order to qualify for Medicare payment, but procedures 
that are not on the IPO list can be and very often are performed on 
individuals who are inpatients (as well as individuals who are hospital 
outpatients and ASC patients). Second, the IPO list status of a 
procedure has no effect on the MPFS professional payment for the 
procedure. Whether or not a procedure is on the IPO list is not in any 
way a factor in the MPFS payment methodology.
2. Discussion of TKA and the IPO List
    Since 2000, when the IPO list was established, there have been 
significant developments in both TKA technique and patient care. The 
advances in TKA technique and patient care are discussed in general 
terms above. As noted above, in 2000, the criteria by which procedures 
were reviewed to determine IPO list assignment were as follows: (1) The 
invasive nature of the procedure; (2) the need for at least 24 hours of 
postoperative care; and (3) the underlying physical condition of the 
patient who would require the surgery.

[[Page 79698]]

In order to discuss the possibility of removing TKA procedures from the 
IPO list, we believe it is helpful to explore each of these criteria in 
turn as they apply to present-day TKA. In the CY 2017 OPPS/ASC proposed 
rule (81 FR 45680), we solicited comment from the public on a list of 
questions that relate to considering removing TKA from the IPO list in 
the future.
    The first criterion was ``the invasive nature of the procedure.'' 
We elaborated on this criterion in the 2000 OPPS final rule by stating: 
``We believe that certain surgically invasive procedures on the brain, 
heart, and abdomen, such as craniotomies, coronary artery bypass 
grafting, and laparotomies, indisputably require inpatient care, and 
therefore are outside the scope of outpatient services'' (65 FR 18456). 
TKA does not invade the brain, heart, or abdomen; instead, like several 
other outpatient orthopedic surgeries, it is an operation on the knee 
joint. A similar procedure described by CPT code 27446 (Arthroplasty, 
knee, condyle and plateau; medical OR lateral compartment) 
(unicompartmental knee replacement) was removed from the IPO list on 
January 1, 2002, and also was added to the ASC covered surgical 
procedures list in 2008. The degree of invasiveness of TKA as compared 
to other major surgical procedures would not appear to prohibit its 
removal from the IPO list.
    The second IPO list criterion from the 2000 OPPS final rule is 
``the need for at least 24 hours of postoperative recovery time or 
monitoring before the patient can be safely discharged.'' Currently, 
for procedures that are not on the IPO list, services furnished to 
patients requiring 24 hours of postoperative recovery time may be 
payable as either outpatient services or inpatient services, depending 
on the condition of the patient. Therefore, the need for at least 24 
hours of postoperative recovery time or monitoring in many cases should 
not require IPO list placement.
    The third criterion is ``the underlying physical condition of the 
patient who would require the surgery.'' For this criterion to be the 
basis of an IPO list assignment seems to presume a relatively 
homogeneous and morbid patient population undergoing the surgical 
procedure. Otherwise, patients with a good underlying physical 
condition could be considered for outpatient surgery while those with a 
poor underlying physical condition might be more appropriate for 
inpatient admission. TKA candidates, although they all have 
osteoarthritis severe enough to warrant knee replacement, are a varied 
group in which the anticipated length of hospitalization is dictated 
more by comorbidities and diseases of other organ systems. Some 
patients may be appropriate for outpatient surgery while others may be 
appropriate for inpatient surgery.
3. Topics and Questions for Public Comment
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45680), we sought 
public comments on whether we should remove the procedure described by 
CPT code 27447 from the IPO list from all interested parties, including 
the following groups or individuals: Medicare beneficiaries and 
advocate associations for Medicare beneficiaries; orthopedic surgeons 
and physician specialty societies that represent orthopedic surgeons 
who perform TKA procedures; hospitals and hospital trade associations; 
and any other interested stakeholders. We sought public comments on any 
of the topics discussed earlier in addition to the following questions:
    1. Are most outpatient departments equipped to provide TKA to some 
Medicare beneficiaries?
    2. Can the simplest procedure described by CPT code 27447 be 
performed in most outpatient departments?
    3. Is the procedure described by CPT code 27447 sufficiently 
related to or similar to the procedure described by CPT code 27446 such 
that the third criterion listed at the beginning of this section for 
identifying procedures that may be removed from the IPO list, that is, 
the procedure under consideration for removal from the IPO list is 
related to codes that we have already removed from the IPO, is 
satisfied?
    4. How often is the procedure described by CPT code 27447 being 
performed on an outpatient basis (either in an HOPD or ASC) on non-
Medicare patients?
    5. Would it be clinically appropriate for some Medicare 
beneficiaries in consultation with his or her surgeon and other members 
of the medical team to have the option