[Federal Register Volume 82, Number 138 (Thursday, July 20, 2017)]
[Proposed Rules]
[Pages 33558-33724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-14883]



[[Page 33557]]

Vol. 82

Thursday,

No. 138

July 20, 2017

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 416 and 419





Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Proposed Rule

Federal Register / Vol. 82 , No. 138 / Thursday, July 20, 2017 / 
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 416 and 419

[CMS-1678-P]
RIN 0938-AT03


Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital 
outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for CY 2018 to 
implement changes arising from our continuing experience with these 
systems and certain provisions under the 21st Century Cures Act (Pub. 
L. 114-255). In this proposed rule, we describe the proposed 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 proposed rule would update and refine 
the requirements for the Hospital Outpatient Quality Reporting (OQR) 
Program and the ASC Quality Reporting (ASCQR) Program.

DATES: Comment period: To be assured consideration, comments on this 
proposed rule must be received at one of the addresses provided in the 
ADDRESSES section no later than 5 p.m. EST on September 11, 2017.

ADDRESSES: In commenting, please refer to file code CMS-1678-P when 
commenting on the issues in this proposed rule. 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-1678-P, 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-1678-P, 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:  (We note that public comments must be 
submitted through one of the four channels outlined in the ADDRESSES 
section above. Comments may not be submitted via email.)
    Advisory Panel on Hospital Outpatient Payment (HOP Panel), contact 
the HOP Panel mailbox at [email protected].
    Ambulatory Surgical Center (ASC) Payment System, contact Elisabeth 
Daniel at 410-786-0237 or via email [email protected].
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Administration, Validation, and Reconsideration Issues, contact Anita 
Bhatia at 410-786-7236 or via email [email protected].
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Measures, contact Vinitha Meyyur at 410-786-8819 or via email 
[email protected].
    Blood and Blood Products, contact Josh McFeeters at 410-786-9732 or 
via email Jo[email protected].
    Cancer Hospital Payments, contact Scott Talaga at 410-786-4142 or 
via email [email protected].
    Care Management Services, contact Scott Talaga at 410-786-4142 or 
via email [email protected].
    CPT Codes, contact Marjorie Baldo at 410-786-4617 or via email 
[email protected].
    CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck 
Braver at 410-786-6719 or via email [email protected].
    Composite APCs (Low Dose Brachytherapy and Multiple Imaging), 
contact Twi Jackson at 410-786-1159 or via email 
[email protected].
    Comprehensive APCs (C-APCs), contact Lela Strong at 410-786-3213 or 
via email [email protected].
    Hospital Outpatient Quality Reporting (OQR) Program Administration, 
Validation, and Reconsideration Issues, contact Anita Bhatia at 410-
786-7236 or via email [email protected].
    Hospital Outpatient Quality Reporting (OQR) Program Measures, 
contact Vinitha Meyyur at 410-786-8819 or via email 
[email protected].
    Hospital Outpatient Visits (Emergency Department Visits and 
Critical Care Visits), contact Twi Jackson at 410-786-1159 or via email 
[email protected].
    Inpatient Only (IPO) Procedures List, contact Lela Strong at 410-
786-3213 or via email [email protected].
    New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga at 
410-786-4142 or via email [email protected].
    No Cost/Full Credit and Partial Credit Devices, contact Twi Jackson 
at 410-786-1159 or via email [email protected].
    OPPS Brachytherapy, contact Scott Talaga at 410-786-4142 or via 
email [email protected].
    OPPS Data (APC Weights, Conversion Factor, Copayments, Cost-to-
Charge Ratios (CCRs), Data Claims, Geometric Mean Calculation, Outlier 
Payments, and Wage Index), contact Erick Chuang

[[Page 33559]]

at 410-786-1816 or via email [email protected] or contact 
Elisabeth Daniel at 410-786-0237 or via email 
[email protected].
    OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar 
Products, contact Elisabeth Daniel at 410-786-0237 or via email 
[email protected].
    OPPS New Technology Procedures/Services, contact the New Technology 
APC email at [email protected].
    OPPS Exceptions to the 2 Times Rule, contact Marjorie Baldo at 410-
786-4617 or via email [email protected].
    OPPS Packaged Items/Services, contact Elisabeth Daniel at 410-786-
0237 or via email [email protected].
    OPPS Pass-Through Devices, contact the Device Pass-Through email at 
[email protected].
    OPPS Status Indicators (SI) and Comment Indicators (CI), contact 
Marina Kushnirova at 410-786-2682 or via email 
[email protected].
    Partial Hospitalization Program (PHP) and Community Mental Health 
Center (CMHC) Issues, contact the PHP Payment Policy Mailbox at 
[email protected].
    Potential Revisions to the Laboratory Date of Service Policy, 
contact Rasheeda Johnson at 410-786-3434 or via email 
[email protected] or Susan Janeczko at 410-786-4529 or via 
email [email protected].
    Rural Hospital Payments, contact Josh McFeeters at 410-786-9732 or 
via email [email protected].
    Skin Substitutes, contact Josh McFeeters at 410-786-9732 or via 
email [email protected].
    All Other Issues Related to Hospital Outpatient and Ambulatory 
Surgical Center Payments Not Previously Identified, contact Lela Strong 
at 410-786-3213 or via email [email protected].

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

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
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
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
DME Durable medical equipment
DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and 
Supplies
DOS Date of service
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
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

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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
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
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
OPPS [Hospital] Outpatient Prospective Payment System
OPSF Outpatient Provider-Specific File
OQR [Hospital] Outpatient Quality Reporting
OT Occupational therapy
PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93
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
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
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 2017 OPPS/ASC 
Final Rule With Comment Period
II. Proposed Updates Affecting OPPS Payments
    A. Proposed Recalibration of APC Relative Payment Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    2. Proposed Data Development Process and Calculation of Costs 
Used for Ratesetting
    a. Proposed Calculation of Single Procedure APC Criteria-Based 
Costs
    (1) Blood and Blood Products
    (2) Brachytherapy Sources
    b. Proposed Comprehensive APCs (C-APCs) for CY 2018
    (1) Background
    (2) Proposed Additional C-APCs for CY 2018
    (3) Brachytherapy Insertion Procedures
    (4) C-APC 5627 (Level 7 Radiation Stereotactic Radiosurgery 
(SRS))
    (5) Proposed Complexity Adjustment for Blue Light Cystoscopy 
Procedures
    (6) Analysis of C-APC Packaging under the OPPS
    c. Proposed Calculation of Composite APC Criteria-Based Costs
    (1) Mental Health Services Composite APC
    (2) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    3. Proposed Changes to Packaged Items and Services
    a. Background and Rationale for Packaging in the OPPS
    b. CY 2018 Drug Administration Packaging Proposal
    (1) Background of Drug Administration Packaging Policy

[[Page 33561]]

    (2) Proposed Packaging of Level 1 and Level 2 Drug 
Administration Services
    (3) Comment Solicitation Regarding Unconditionally Packaging 
Drug Administration Add-On Codes
    c. Analysis of Packaging Services in the OPPS
    d. Comment Solicitation on Packaging of Items and Services Under 
the OPPS
    4. Proposed Calculation of OPPS Scaled Payment Weights
    B. Proposed Conversion Factor Update
    C. Proposed Wage Index Changes
    D. Proposed Statewide Average Default CCRs
    E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs) 
and Essential Access Community Hospitals (EACHs) Under Section 
1833(t)(13)(B) of the Act
    F. Proposed Payment Adjustment for Certain Cancer Hospitals for 
CY 2018
    1. Background
    2. Proposed Policy for CY 2018
    G. Proposed Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation for CY 2018
    H. Proposed Calculation of an Adjusted Medicare Payment From the 
National Unadjusted Medicare Payment
    I. Proposed Beneficiary Copayments
    1. Background
    2. Proposed OPPS Copayment Policy
    3. Proposed Calculation of an Adjusted Copayment Amount for an 
APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Proposed Treatment of New HCPCS Codes That Were Effective 
April 1, 2017 for Which We Are Soliciting Public Comments in This CY 
2018 OPPS/ASC Proposed Rule
    2. Proposed Treatment of New HCPCS Codes Effective July 1, 2017 
for Which We Are Soliciting Public Comments in This CY 2018 OPPS/ASC 
Proposed Rule
    3. Proposed Process for New Level II HCPCS Codes That Will Be 
Effective October 1, 2017 and January 1, 2018 for Which We Will Be 
Soliciting Public Comments in the CY 2018 OPPS/ASC Final Rule With 
Comment Period
    4. Proposed Treatment of New and Revised CY 2018 Category I and 
III CPT Codes That Will Be Effective January 1, 2018 for Which We 
Are Soliciting Public Comments in This CY 2018 OPPS/ASC Proposed 
Rule
    5. Proposed Care Management Coding Changes Effective January 1, 
2018 (APCs 5821 and 5822)
    B. Proposed OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Proposed APC Exceptions to the 2 Times Rule
    C. Proposed New Technology APCs
    1. Background
    2. Proposed Revised and Additional New Technology APC Groups
    3. Proposed Procedures Assigned to New Technology APC Groups for 
CY 2018
    a. Overall Proposal
    b. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS) 
(APCs 1537, 5114, and 5415)
    c. Retinal Prosthesis Implant Procedure
    d. Pathogen Test for Platelets
    D. Proposed OPPS APC-Specific Policies
    1. Blood-Driven Hematopoietic Cell Harvesting
    2. Radiology and Imaging Procedures and Services
    a. Imaging APCs
    b. Non-Ophthalmic Fluorescent Vascular Angiography (APC 5524)
    3. Comment Solicitation on Intraocular Procedure APCs
IV. Proposed OPPS Payment for Devices
    A. Proposed Pass-Through Payments for Devices
    1. Beginning Eligibility Date for Device Pass-Through Status and 
Quarterly Expiration of Device Pass-Through Payments
    a. Background
    b. Expiration of Transitional Pass-Through Payment for Certain 
Devices
    2. New Device Pass-Through Applications
    a. Background
    b. Applications Received for Device Pass-Through Payment for CY 
2018
    B. Proposed Device-Intensive Procedures
    1. Background
    2. HCPCS Code-Level Device-Intensive Determination
    3. Changes to the Device Edit Policy for CY 2017 and Subsequent 
Years
    4. Proposed Adjustment to OPPS Payment for No Cost/Full Credit 
and Partial Credit Devices
    a. Background
    b. Policy for CY 2017 and Subsequent Years
    5. Proposed Payment Policy for Low-Volume Device-Intensive 
Procedures
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. Proposed OPPS Transitional Pass-Through Payment for 
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. 3-Year Transitional Pass-Through Payment Period for All Pass-
Through Drugs, Biologicals, and Radiopharmaceuticals and Expiration 
of Pass-Through Status
    3. Proposed Drugs and Biologicals With Expiring Pass-Through 
Payment Status in CY 2017
    4. Proposed Drugs, Biologicals, and Radiopharmaceuticals With 
New or Continuing Pass-Through Status in CY 2018
    5. Proposed Provisions for Reducing Transitional Pass-Through 
Payments for Policy-Packaged Drugs, Biologicals, and 
Radiopharmaceuticals to Offset Costs Packaged Into APC Groups
    B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Payment Status
    1. Proposed Criteria for Packaging Payment for Drugs, 
Biologicals, and Radiopharmaceuticals
    a. Proposed Packaging Threshold
    b. Proposed 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. Proposed High Cost/Low Cost Threshold for Packaged Skin 
Substitutes
    e. Proposed Packaging Determination for HCPCS Codes That 
Describe the Same Drug or Biological But Different Dosages
    2. Proposed 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. Proposed CY 2018 Payment Policy
    c. Biosimilar Biological Products
    3. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    4. Proposed Payment Adjustment Policy for Radioisotopes Derived 
From Non-Highly Enriched Uranium Sources
    5. Proposed Payment for Blood Clotting Factors
    6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital 
Claims Data
    7. Alternative Payment Methodology for Drugs Purchased Under the 
340B Drug Discount Program
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Hospital Outpatient Visits and 
Critical Care Services
VIII. Proposed Payment for Partial Hospitalization Services
    A. Background
    B. Proposed PHP APC Update for CY 2018
    1. Proposed PHP APC Geometric Mean Per Diem Costs
    2. Development of the Proposed PHP APC Geometric Mean Per Diem 
Costs
    a. CMHC Data Preparation: Data Trims, Exclusions, and CCR 
Adjustments
    b. Hospital-Based PHP Data Preparation: Data Trims and 
Exclusions
    3. PHP Service Utilization Updates
    4. Minimum Service Requirement: 20 Hours Per Week
    C. Proposed Outlier Policy for CMHCs
IX. Proposed Procedures That Would Be Paid Only as Inpatient 
Procedures
    A. Background
    B. Proposed Changes to the Inpatient Only (IPO) List
    C. Solicitation of Public Comments on the Possible Removal of 
Partial Hip Arthroplasty (PHA) and Total Hip Arthroplasty (THA) 
Procedures From the IPO List
    1. Background
    2. Topics and Questions for Public Comments
X. Proposed Nonrecurring Policy Changes

[[Page 33562]]

    A. Payment for Certain Items and Services Furnished by Certain 
Off-Campus Departments of a Provider
    1. Background
    2. Summary of Public Comments and Our Responses Regarding 
Expansion of Services by Excepted Off-Campus Hospital Outpatient 
Departments
    3. Implementation of Section 16002 of the 21st Century Cures Act 
(Treatment of Cancer Hospitals in Off Campus Outpatient Department 
of a Provider Policy)
    B. Medicare Site-of-Service Price Transparency (Section 4011 of 
the 21st Century Cures Act)
    C. Appropriate Use Criteria for Advanced Diagnostic Imaging 
Services
    D. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in Critical Access Hospitals (CAHs) and Certain 
Small Rural Hospitals
    E. Payment Changes for Film X-Rays Services and Proposed Payment 
Changes for X-Rays Taken Using Computed Radiography Technology
    F. Potential Revisions to the Laboratory Date of Service Policy
    1. Background on the Medicare Part B Laboratory Date of Service 
Policy
    2. Current Medicare DOS Policy (``14-Day Rule'')
    3. Billing and Payment for Laboratory Services Under the OPPS
    4. ADLTs Under the New Private Payor Rate-Based CLFS
    5. Potential Revisions to the Laboratory DOS Policy
XI. Proposed CY 2018 OPPS Payment Status and Comment Indicators
    A. Proposed CY 2018 OPPS Payment Status Indicator Definitions
    B. Proposed CY 2018 Comment Indicator Definitions
XII. Proposed 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
    3. Definition of ASC Covered Surgical Procedures
    B. Proposed 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. Proposed Treatment of New and Revised Level II HCPCS Codes 
Implemented in April 2017 for Which We Are Soliciting Public 
Comments in This Proposed Rule
    3. Proposed Treatment of New and Revised Level II HCPCS Codes 
Implemented in July 2017 for Which We Are Soliciting Public Comments 
in This Proposed Rule
    4. Process for New and Revised Level II HCPCS Codes That Will Be 
Effective October 1, 2017 and January 1, 2018 for Which We Will 
Solicit Public Comments in the CY 2018 OPPS/ASC Final Rule With 
Comment Period
    5. Process for Recognizing New and Revised Category I and 
Category III CPT Codes That Will Be Effective January 1, 2018 for 
Which We Will Be Soliciting Public Comments in the CY 2018 OPPS/ASC 
Final Rule With Comment Period
    C. Proposed 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) Proposed Changes for CY 2018 to Covered Surgical Procedures 
Designated as Office-Based
    b. Proposed ASC Covered Surgical Procedures Designated as 
Device-Intensive
    (1) Background
    (2) Proposed Changes to List of ASC Covered Surgical Procedures 
Designated as Device-Intensive for CY 2018
    c. Proposed Adjustment to ASC Payments for No Cost/Full Credit 
and Partial Credit Devices
    d. Proposed Additions to the List of ASC Covered Surgical 
Procedures
    e. Comment Solicitation on Adding Additional Procedures to the 
ASC Covered Procedures List
    2. Covered Ancillary Services
    D. Proposed ASC Payment for Covered Surgical Procedures and 
Covered Ancillary Services
    1. Proposed ASC Payment for Covered Surgical Procedures
    a. Background
    b. Proposed Update to ASC Covered Surgical Procedure Payment 
Rates for CY 2018
    2. Proposed Payment for Covered Ancillary Services
    a. Background
    b. Proposed Payment for Covered Ancillary Services for CY 2018
    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Application Cycle
    2. Requests to Establish New NTIOL Classes for CY 2018
    3. Payment Adjustment
    F. Proposed ASC Payment and Comment Indicators
    1. Background
    2. Proposed ASC Payment and Comment Indicators
    G. Proposed Calculation of the ASC Conversion Factor and the 
Proposed ASC Payment Rates
    1. Background
    2. Proposed Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2018 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Comment Solicitation on ASC Payment System Reform
    4. Display of CY 2018 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. Accounting for Social Risk Factors in the Hospital OQR 
Program
    3. Retention of Hospital OQR Program Measures Adopted in 
Previous Payment Determinations
    4. 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
    c. Measures Proposed for Removal From the Hospital OQR Program
    5. Proposal To Make Reporting of OP-37a-e: Outpatient and 
Ambulatory Surgery Consumer Assessment of Healthcare Providers and 
Systems (OAS CAHPS) Survey-Based Measures Voluntary for CY 2018 
Reporting and Subsequent Years
    6. Previously Adopted Hospital OQR Program Measure Set for the 
CY 2020 Payment Determination and Subsequent Years
    7. Summary of the Hospital OQR Program Measure Set Proposed for 
the CY 2020 and CY 2021 Payment Determination and Subsequent Years
    8. Hospital OQR Program Measures and Topics for Future 
Consideration
    a. Future Measure Topics
    b. Possible Future Adoption of the Electronic Version of OP-2: 
Fibrinolytic Therapy Received Within 30 Minutes of Emergency 
Department Arrival
    9. Maintenance of Technical Specifications for Quality Measures
    10. Public Display of Quality Measures
    a. Background
    b. Public Reporting of OP-18c: Median Time From Emergency 
Department Arrival to Emergency Department Departure for Discharged 
Emergency Department Patients--Psychiatric/Mental Health Patients
    C. Administrative Requirements
    1. QualityNet Account and Security Administrator
    2. Requirements Regarding Participation Status
    a. Background
    b. Proposed Changes to the NOP Submission Deadline
    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 2021 Payment 
Determination and Subsequent Years
    3. Claims-Based Measure Data Requirements for the CY 2020 
Payment Determination and Subsequent Years
    4. Data Submission Requirements for 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

[[Page 33563]]

    5. Data Submission Requirements for Previously Finalized 
Measures for Data Submitted via a Web-based Tool for the CY 2020 
Payment Determination and Subsequent Years
    6. Population and Sampling Data Requirements for the CY 2020 
Payment Determination and Subsequent Years
    7. Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2020 
Payment Determination and Subsequent Years
    a. Clarification
    b. Proposed Codification
    c. Proposed Modifications to the Educational Review Process for 
Chart-Abstracted Measures Validation
    8. Extraordinary Circumstances Exception Process for the CY 2020 
Payment Determination and Subsequent Years
    a. ECE Policy Nomenclature
    b. Timeline for CMS Response to ECE Requests
    9. Hospital OQR Program Reconsideration and Appeals Procedures 
for the CY 2020 Payment Determination and Subsequent Years--
Clarification
    E. Payment Reduction for Hospitals That Fail To Meet the 
Hospital Outpatient Quality Reporting (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
    3. Regulatory History of the ASCQR Program
    B. ASCQR Program Quality Measures
    1. Considerations in the Selection of ASCQR Program Quality 
Measures
    2. Accounting for Social Risk Factors in the ASCQR Program
    3. Policies for Retention and Removal of Quality Measures From 
the ASCQR Program
    a. Retention of Previously Adopted ASCQR Program Measures
    b. Proposed Measure Removal
    4. Proposal To Delay ASC-15a-e: Outpatient and Ambulatory 
Surgery Consumer Assessment of Healthcare Providers and Systems (OAS 
CAHPS) Survey-Based Measures Beginning With the 2020 Payment 
Determination
    5. ASCQR Program Quality Measures Adopted in Previous Rulemaking
    6. Proposed ASCQR Program Quality Measures for the CY 2021 and 
CY 2022 Payment Determinations and Subsequent Years
    a. Proposed Adoption of ASC-16: Toxic Anterior Segment Syndrome 
Beginning With the CY 2021 Payment Determination
    b. Proposed Adoption of ASC-17: Hospital Visits After Orthopedic 
Ambulatory Surgical Center Procedures Beginning With the CY 2022 
Payment Determination
    c. Proposed Adoption of ASC-18: Hospital Visits After Urology 
Ambulatory Surgical Center Procedures Beginning With the CY 2022 
Payment Determination
    d. Summary of Previously Adopted Measurers and Newly Proposed 
ASCQR Program Measures for the CY 2022 Payment Determination and 
Subsequent Years
    7. ASCQR Program Measures and Topics for Future Consideration
    8. Maintenance of Technical Specifications for Quality Measures
    9. 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. Proposals Regarding Requirements for Data Submitted via a CMS 
Online Data Submission Tool
    4. Requirements for Claims-Based Measure Data
    5. Requirements for Data Submission for ASC-15a-e: Outpatient 
and Ambulatory Surgery Consumer Assessment of Healthcare Providers 
and Systems (OAS CAHPS) Survey-Based Measures
    6. Extraordinary Circumstances Extensions or Exemptions for the 
CY 2019 Payment Determination and Subsequent Years
    a. Background
    b. ECE Policy Nomenclature
    c. Timeline for CMS Response to ECE Requests
    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. Request for Information and Public Comments
    A. Request for Information on CMS Flexibilities and Efficiencies
    B. Eliminating Inappropriate Medicare Payment Differentials for 
Similar Services in the Inpatient and Outpatient Settings
    C. Request for Information Regarding Physician-Owned Hospitals
XVI. Files Available to the Public via the Internet
XVII. Collection of Information Requirements
    A. Statutory Requirement for Solicitation of Comments
    B. ICRs for the Hospital OQR Program
    C. ICRs for the ASCQR Program
XVIII. Response to Comments
XIX. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for the Proposed OPPS and ASC Payment 
Provisions
    4. Regulatory Review Costs
    5. Detailed Economic Analyses
    a. Estimated Effects of Proposed OPPS Changes in This Proposed 
Rule
    (1) Limitations of Our Analysis
    (2) Estimated Effects of Proposed OPPS Changes to Part B Drug 
Payment on 340B Eligible Hospitals Paid Under the OPPS
    (3) Estimated Effects of Proposed OPPS Changes on Hospitals
    (4) Estimated Effects of Proposed OPPS Changes on CMHCs
    (5) Estimated Effects of Proposed OPPS Changes on Beneficiaries
    (6) Estimated Effects of Proposed OPPS Changes on Other 
Providers
    (7) Estimated Effects of Proposed OPPS Changes on the Medicare 
and Medicaid Programs
    (8) Alternative OPPS Policies Considered
    b. Estimated Effects of Proposed CY 2018 ASC Payment System 
Policies
    (1) Limitations of Our Analysis
    (2) Estimated Effects of Proposed CY 2018 ASC Payment System 
Policies on ASCs
    (3) Estimated Effects of Proposed ASC Payment System Policies on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered
    c. Accounting Statements and Tables
    d. Effects of Proposed Requirements for the Hospital OQR Program
    e. Effects of Proposed Requirements for the ASCQR Program
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Reducing Regulation and Controlling Regulatory Costs
    E. Conclusion
XX. Federalism Analysis
Regulation Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this proposed rule, we are proposing to update 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, 2018. 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

[[Page 33564]]

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 proposed rule. 
In addition, this proposed rule would update and refine the 
requirements for the Hospital Outpatient Quality Reporting (OQR) 
Program and the ASC Quality Reporting (ASCQR) Program.
2. Summary of the Major Provisions
     OPPS Update: For CY 2018, we are proposing to increase the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 1.75 percent. This proposed increase factor 
is based on the proposed hospital inpatient market basket percentage 
increase of 2.9 percent for inpatient services paid under the hospital 
inpatient prospective payment system (IPPS), minus the proposed 
multifactor productivity (MFP) adjustment of 0.4 percentage point, and 
minus a 0.75 percentage point adjustment required by the Affordable 
Care Act. Based on this proposed update, we estimate that proposed 
total payments to OPPS providers (including beneficiary cost-sharing 
and estimated changes in enrollment, utilization, and case-mix), for CY 
2018 would be approximately $70 billion, an increase of approximately 
$5.7 billion compared to estimated CY 2017 OPPS payments.
    We are proposing to continue 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 
proposed reporting factor of 0.980 to the OPPS payments and copayments 
for all applicable services.
     Proposed High Cost/Low Cost Threshold for Packaged Skin 
Substitutes: As we did for CY 2017, we are proposing to assign skin 
substitutes with a geometric mean unit cost (MUC) or a per day cost 
(PDC) that exceeds either the MUC threshold or the PDC threshold to the 
high cost group. In addition, for CY 2018, we are proposing that a skin 
substitute product that does not exceed either the CY 2018 MUC or PDC 
threshold for CY 2018, but was assigned to the high cost group for CY 
2017, will be assigned to the high cost group for CY 2018. The goal of 
our proposal is to maintain similar levels of payment for skin 
substitute products for CY 2018 while we study our current skin 
substitute payment methodology to determine whether refinements to our 
existing methodologies may be warranted.
     Supervision of Hospital Outpatient Therapeutic Services: 
In the CY 2009 and CY 2010 OPPS/ASC proposed rule and final rule with 
comment period, we clarified that direct supervision is required for 
hospital outpatient therapeutic services covered and paid by Medicare 
that are furnished in hospitals, CAHs, and in provider-based 
departments (PBDs) of hospitals, as set forth in the CY 2000 OPPS final 
rule with comment period. For several years, there has been a 
moratorium on the enforcement of the direct supervision requirement for 
CAHs and small rural hospitals, with the latest moratorium on 
enforcement expiring on December 31, 2016. In this proposed rule, we 
are proposing to reinstate the nonenforcement of direct supervision 
enforcement instruction for outpatient therapeutic services for CAHs 
and small rural hospitals having 100 or fewer beds for CY 2018 and CY 
2019.
     340B Drug Pricing: We are proposing changes to our current 
Medicare Part B drug payment methodology for 340B hospitals that we 
believe would better, and more appropriately, reflect the resources and 
acquisition costs that these hospitals incur. Such changes would allow 
the Medicare program and Medicare beneficiaries to share in some of the 
savings realized by hospitals participating in the 340B program. For CY 
2018, we are proposing to exercise the Secretary's authority to adjust 
the applicable payment rate as necessary for separately payable drugs 
and biologicals (other than drugs on pass-through and vaccines) 
acquired under the 340B program from average sales price (ASP) plus 6 
percent to ASP minus 22.5 percent. In addition, in this proposed rule, 
we state our intent to establish a modifier to identify whether a drug 
billed under the OPPS was purchased under the 340B Drug Discount 
Program.
     Device Pass-Through Applications: For CY 2018, we evaluate 
five devices for eligibility to receive pass through payments and are 
seeking comments on whether each of these items meet the criteria for 
device pass-through status.
     Rural Adjustment: We are proposing to continue the 
adjustment of 7.1 percent to the OPPS payments to certain rural sole 
community hospitals (SCHs), including essential access community 
hospitals (EACHs). This proposed adjustment would apply to all services 
paid under the OPPS, excluding separately payable drugs and 
biologicals, devices paid under the pass-through payment policy, and 
items paid at charges reduced to cost.
     Cancer Hospital Payment Adjustment: For CY 2018, we are 
proposing to continue 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. However, beginning CY 2018, section 16002(b) of the 
21st Century Cures Act requires this weighted average PCR be reduced by 
1.0 percentage point. Based on the data and the required 1.0 percentage 
point reduction, a proposed target PCR of 0.89 would be used to 
determine the CY 2018 cancer hospital payment adjustment to be paid at 
cost report settlement. That is, the proposed payment adjustments would 
be the additional payments needed to result in a PCR equal to 0.89 for 
each cancer hospital.
     Changes to the Inpatient Only List: In CY 2017 OPPS/ASC 
rulemaking, we solicited comment from the public on whether total knee 
arthroplasty should be removed from the inpatient only list. Several 
commenters to the CY 2017 OPPS/ASC proposed rule were supportive of the 
removal. In addition, the Advisory Panel on Hospital Outpatient Payment 
recommended at its Summer 2016 meeting that this procedure be removed 
from the inpatient only list. After evaluating the procedure, for CY 
2018, we are proposing to remove total knee arthroplasty from the 
inpatient-only list. In addition, we are soliciting comment on whether 
partial and total hip should also be removed from the inpatient only 
list and added to the ASC Covered Surgical Procedures List.
     Comprehensive APCs: For CY 2018, we are not proposing to 
create any new C-APCs or any extensive changes to the already 
established methodology used for C-APCs. There will be a total number 
of 62 C-APCs as of January 1, 2018. We note that for CY 2018, for the 
C-APC for Stereotactic Radio Surgery (SRS), specifically, C-APC 5627 
(Level 7 Radiation Therapy), we are proposing to continue to make 
separate payments for the 10 planning and preparation services 
adjunctive to the delivery of the SRS treatment using either the 
Cobalt-60-based or LINAC-based technology when furnished to a 
beneficiary within 30 days of the SRS treatment. In addition, the data 
collection period for SRS claims with modifier ``CP'' is set to 
conclude on December 31, 2017.

[[Page 33565]]

Accordingly, for CY 2018, we are deleting this modifier and 
discontinuing its required use.
     Packaging Policies: In CY 2015, we implemented a policy to 
conditionally package ancillary services assigned to APCs with a 
geometric mean cost of $100 or less prior to packaging, with some 
exceptions, including drug administration services. For CY 2018, we are 
proposing to remove the exception for certain drug administration 
services and conditionally package payment for low-cost drug 
administration services. We are not proposing to package drug 
administration add-on codes for CY 2018, but are soliciting comments on 
this policy. In addition, we are broadly soliciting comments on 
existing packaging policies that exist under the OPPS, including those 
related to drugs that function as a supply in a diagnostic test or 
procedure or in a surgical procedure.
     Payment Changes for X-rays Taken Using Computed 
Radiography Technology: 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)(ii) of the Act provides for a phased-in reduction of 
payments for imaging services that are taken using computed radiography 
technology. That section provides that payments for such services 
furnished during CYs 2018 through 2022 shall be reduced by 7 percent, 
and if such services are furnished during CY 2023 or a subsequent year, 
payments for such services shall be reduced by 10 percent. We are 
establishing a new modifier that would be reported on claims to 
identify those HCPCS codes that describe X-rays taken using computed 
radiography technology. Specifically, this modifier, as allowed under 
the provisions of new section 1833(t)(16)(F)(ii) of the Act, would be 
reported with the applicable HCPCS code to describe imaging services 
that are taken using computed radiography technology/cassette-based 
imaging beginning January 1, 2018.
     ASC Payment Update: For CY 2018, we are proposing to 
increase payment rates under the ASC payment system by 1.9 percent for 
ASCs that meet the quality reporting requirements under the ASCQR 
Program. This proposed increase is based on a projected CPI-U update of 
2.3 percent minus a multifactor productivity adjustment required by the 
Affordable Care Act of 0.4 percentage point. Based on this proposed 
update, we estimate that proposed total payments to ASCs (including 
beneficiary cost sharing and estimated changes in enrollment, 
utilization, and case-mix), for CY 2018 would be approximately $4.68 
billion, an increase of approximately $155 million compared to 
estimated CY 2017 Medicare payments. In addition, we are soliciting 
comment on payment reform for ASCs, including the collection of cost 
data which may support a rate update other than CPI-U.
     Comment Solicitation on ASC Payment Reform: We are broadly 
interested in feedback from stakeholders and other interested parties 
on potential reforms to the current payment system, including, but not 
limited to (1) the rate update factor applied to ASC payments, (2) 
whether and how ASCs should submit data relating to costs, (3) whether 
ASCs should bill on the institutional claim form rather than the 
professional claim form, and (4) other ideas to improve payment 
accuracy for ASCs.
     Changes to the List of ASC Covered Surgical Procedures: 
For CY 2018, we are proposing to add three procedures to the ASC 
Covered Procedures List. In addition, we are soliciting comment on 
whether total knee arthroplasty, partial hip arthroplasty and total hip 
arthroplasty meet the criteria to be added to the ASC-CPL. We also are 
soliciting comments from stakeholders on whether there are codes that 
are outside the AMA-CPT surgical code range that nonetheless, should be 
considered to be a covered surgical procedure.
     Potential Revisions to the Laboratory Date of Service 
Policy: To better understand the potential impact of the current date 
of service (DOS) policy on billing for molecular pathology tests and 
advance diagnostic laboratory tests (ADLTs) under the new private payor 
rate-based Clinical Laboratory Fee Schedule (CLFS), we are soliciting 
public comments on billing for molecular pathology tests and ADLTs 
ordered less than 14 days of a hospital outpatient discharge.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are proposing to remove and delay certain 
measures for the CY 2020 payment determination and the CY 2021 payment 
determination and subsequent years. For the CY 2020 payment 
determination and subsequent years, we are proposing to remove OP-21: 
Median Time to Pain Management for Long Bone Fracture and OP-26: 
Hospital Outpatient Volume Data on Selected Outpatient Surgical 
Procedures. We are also proposing to delay the OAS CAHPS Survey 
measures (OP-37-a-e) beginning with the CY 2020 payment determination 
(CY 2018 reporting). In addition, for the CY 2020 payment determination 
and subsequent years we are: (1) Providing clarification on our 
procedures for validation of chart-abstracted measures to note that the 
50 poorest performing outlier hospitals will be targeted for 
validation; (2) proposing to formalize the validation educational 
review process, update it to allow corrections of incorrect validation 
results for chart-abstracted measures, and modify the CFR accordingly; 
(3) proposing to change the Notice of Participation (NOP) deadline and 
make corresponding changes to the CFR; (4) proposing to align the first 
quarter for which to submit data for hospitals that did not participate 
in the previous year's Hospital OQR Program and make corresponding 
changes to the CFR; (5) proposing to publicly report OP-18c: Median 
Time from Emergency Department Arrival to Emergency Department 
Departure for Discharged Emergency Department Patients--Psychiatric/
Mental Health Patients; and (6) proposing to align the naming of the 
Extraordinary Circumstances Exceptions (ECE) policy with that used in 
our other quality reporting and value-based payment programs and make 
corresponding changes to the CFR. For the CY 2021 payment determination 
and subsequent years, we are proposing to remove: (1) OP-1: Median Time 
to Fibrinolysis; (2) OP-4: Aspirin at Arrival; (3) OP-20: Door to 
Diagnostic Evaluation by a Qualified Medical Professional; and, (4) OP-
25: Safe Surgery Checklist Use.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are proposing to adopt measures and 
policies for the CY 2019 payment determination, 2021 payment 
determination, and CY 2022 payment determination and subsequent years. 
Specifically, we are proposing, beginning with the CY 2019 payment 
determination, to remove three measures from the ASCQR Program measure 
set: (1) ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing; (2) 
ASC-6: Safe Surgery Checklist Use; and, (3) ASC-7: Ambulatory Surgical 
Center Facility Volume Data on Selected Ambulatory Surgical Center 
Surgical Procedures. In addition, we are also proposing to delay the 
OAS CAHPS Survey measures (ASC-15a-e) beginning with the CY 2020 
payment determination (CY 2018 data collection). Furthermore, starting 
with CY 2018 and beyond, we are proposing to: (1) Expand the CMS online 
tool to also allow for batch submission of measure data and make 
corresponding changes to the CFR; and (2) align the naming of the

[[Page 33566]]

Extraordinary Circumstances Exceptions (ECE) policy with that used in 
our other quality reporting and value-based payment programs and make 
corresponding changes to the CFR. We are also proposing, beginning with 
the CY 2021 payment determination, to adopt one new measure, ASC-16: 
Toxic Anterior Segment Syndrome. In addition, we are proposing, 
beginning with the CY 2022 payment determination, to adopt two new 
measures collected via claims, ASC-17: Hospital Visits after Orthopedic 
Ambulatory Surgical Center Procedures and ASC-18: Hospital Visits after 
Urology Ambulatory Surgical Center Procedures.
3. Summary of Costs and Benefits
    In sections XIX. and XX. of this proposed rule, we set forth a 
detailed analysis of the regulatory and Federalism impacts that the 
proposed changes would have on affected entities and beneficiaries. Key 
estimated impacts are described below.
a. Impacts of the Proposed OPPS Update
(1) Impacts of All OPPS Proposed Changes
    Table 38 in section XIX. of this proposed rule displays the 
distributional impact of all the proposed OPPS changes on various 
groups of hospitals and CMHCs for CY 2018 compared to all estimated 
OPPS payments in CY 2017. We estimate that the proposed policies in 
this proposed rule would result in a 1.9 percent overall increase in 
OPPS payments to providers. We estimate that proposed total OPPS 
payments for CY 2018, including beneficiary cost-sharing, to the 
approximate 3,900 facilities paid under the OPPS (including general 
acute care hospitals, children's hospitals, cancer hospitals, and 
CMHCs) would increase by approximately $897 million compared to CY 2017 
payments, excluding our estimated changes in enrollment, utilization, 
and case-mix.
    We estimated the isolated impact of our proposed 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 2.1 percent increase in 
CY 2018 payments to CMHCs relative to their CY 2017 payments.
(2) Impacts of the Proposed Updated Wage Indexes
    We estimate that our proposed update of the wage indexes based on 
the FY 2018 IPPS proposed rule wage indexes results in no change for 
urban and 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 Proposed Rural Adjustment and the Cancer Hospital 
Payment Adjustment
    There are no significant impacts of our proposed CY 2018 payment 
policies for hospitals that are eligible for the rural adjustment or 
for the cancer hospital payment adjustment. We are not proposing to 
make any change in policies for determining the rural hospital payment 
adjustments. While we are implementing the required reduction to the 
cancer hospital payment adjustment in Section 16002 of the 21st Century 
Cures Act for CY 2018, the adjustment amounts do not significantly 
impact the budget neutrality adjustments for these policies.
(4) Impacts of the Proposed OPD Fee Schedule Increase Factor
    We estimate that, for most hospitals, the application of the 
proposed OPD fee schedule increase factor of 1.75 percent to the 
conversion factor for CY 2018 would 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 would experience increases of approximately 2.0 
percent for urban hospitals and 2.0 percent for rural hospitals. 
Classifying hospitals by teaching status or type of ownership suggests 
that these hospitals would receive similar increases.
b. Impacts of the Proposed 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 proposed percentage change in 
estimated total payments by specialty groups under the proposed CY 2018 
payment rates compared to estimated CY 2017 payment rates ranges 
between 5 percent for integumentary system procedures and 1 percent for 
genitourinary system procedures.
c. Impacts of the Hospital OQR Program
    We do not expect our proposed CY 2018 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 proposed CY 2018 policies to significantly 
affect the number of ASCs that do not receive a full annual payment 
update.

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

[[Page 33567]]

(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; the Consolidated Appropriations Act, 2016 
(Pub. L. 114-113), enacted on December 18, 2015, and the 21st Century 
Cures Act (Pub. L. 114-255), enacted on December 13, 2016.
    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 proposed rule. 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 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. We set 
forth the services that are excluded from payment under the OPPS in 
regulations at 42 CFR 419.22.
    Under Sec.  419.20(b) of the regulations, we specify the types of 
hospitals 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/Hospital-Outpatient-Regulations-and-Notices.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

[[Page 33568]]

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 may advise on the clinical integrity of Ambulatory Payment 
Classification (APC) groups and their associated weights; may advise on 
the appropriate supervision level for hospital outpatient services; 
continues to be technical in nature; is governed by the provisions of 
the FACA; 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 Panel's charter was also amended 
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 Panel's current charter 
was approved on November 21, 2016, for a 2-year period (81 FR 94378).
    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, 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 have transitioned to one meeting per year (81 
FR 31941). Further information on this summer's meeting can be found in 
the meeting notice titled ``Medicare Program: Announcement of the 
Advisory Panel on Hospital Outpatient Payment (the Panel) Meeting on 
August 21-22, 2017'' (82 FR 24128).
    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. 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 
August 22, 2016 Panel meeting, namely conditional packaging, allogeneic 
hematopoietic stem cell transplantation, and outpatient total knee 
arthroplasty, were discussed in the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79562), the CY 2017 OPPS/ASC correction notice 
(82 FR 24), or are included in the sections of this proposed rule that 
are specific to each recommendation. For discussions of past Panel 
meetings and recommendations, we refer readers to previously published 
OPPS/ASC proposed and final rules, the CMS Advisory Panel on Hospital 
Outpatient Payment Web site mentioned earlier in this section, and the 
FACA database at: http://facadatabase.gov/.

F. Public Comments Received on the CY 2017 OPPS/ASC Final Rule With 
Comment Period

    We received 39 timely pieces of correspondence on the CY 2017 OPPS/
ASC final rule with comment period that appeared in the Federal 
Register on November 14, 2016 (81 FR 79562), 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), the potential limitation on clinical service line 
expansion or volume of services increases by nonexcepted off campus 
provider-based departments, and 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. Summaries of the public comments are set forth in this 
proposed rule under the appropriate subject matter headings. Summaries 
of public comments on the MPFS payment rates for nonexcepted items and 
services will be set forth in the CY 2018 MPFS final rule with comment 
period.

II. Proposed Updates Affecting OPPS Payments

A. Proposed 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 this CY 2018 OPPS/ASC proposed rule, for CY 2018, we are 
proposing to recalibrate the APC relative payment weights for services 
furnished on or after January 1, 2018, and before January 1, 2019 (CY 
2018), using the same basic methodology that we described in the

[[Page 33569]]

CY 2017 OPPS/ASC final rule with comment period (81 FR 79574 through 
79595). That is, we are proposing 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 2018, we began with 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, 2016, and before January 1, 2017, before applying our 
exclusionary criteria and other methodological adjustments. After the 
application of those data processing changes, we used approximately 86 
million final action claims to develop the proposed CY 2018 OPPS 
payment weights. 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 
2018 OPPS/ASC proposed rule on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Addendum N to this proposed rule includes the proposed list of 
bypass codes for CY 2018. The proposed list of bypass codes contains 
codes that were reported on claims for services in CY 2016 and, 
therefore, includes codes that were in effect in CY 2016 and used for 
billing, but were deleted for CY 2017. We retained these deleted bypass 
codes on the proposed CY 2018 bypass list because these codes existed 
in CY 2016 and were covered OPD services in that period, and CY 2016 
claims data are used to calculate CY 2018 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 are identified by asterisks (*) in the third 
column of Addendum N to this proposed rule. HCPCS codes that we are 
proposing to add for CY 2018 are identified by asterisks (*) in the 
fourth column of Addendum N.
    Table 1 below contains the list of codes that we are proposing to 
remove from the CY 2018 bypass list.

Table 1--Proposed HCPCS Codes To Be Removed From the CY 2018 Bypass List
------------------------------------------------------------------------
               HCPCS code                     HCPCS short descriptor
------------------------------------------------------------------------
77305..................................  Teletx isodose plan simple.
77310..................................  Teletx isodose plan intermed.
77315..................................  Teletx isodose plan complex.
77327..................................  Brachytx isodose calc intern.
90801..................................  Psy dx interview.
90802..................................  Intac psy dx interview.
90804..................................  Psytx office 20-30 min.
90805..................................  Psytx off 20-30 min w/e&m.
90806..................................  Psytx off 45-50 min.
90807..................................  Psytx off 45-50 min w/e&m.
90808..................................  Psytx office 75-80 min.
90809..................................  Psytx off 75-80 w/e&m.
90810..................................  Intac psytx off 20-30 min.
90811..................................  Intac psytx 20-40 w/e&m.
90812..................................  Intac psytx off 45-50 min.
90857..................................  Intac group psytx.
90862..................................  Medication management.
99201..................................  Office/outpatient visit new.
99202..................................  Office/outpatient visit new.
99203..................................  Office/outpatient visit new.
99204..................................  Office/outpatient visit new.
99205..................................  Office/outpatient visit new.
99212..................................  Office/outpatient visit est.
99213..................................  Office/outpatient visit est.
99214..................................  Office/outpatient visit est.
C1300..................................  Hyperbaric oxygen.
G0340..................................  Robt lin-radsurg fractx 2-5.
G9141..................................  Influenza A H1N1, admin w cou.
M0064..................................  Visit for drug monitoring.
------------------------------------------------------------------------

b. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2018, in this CY 2018 OPPS/ASC proposed rule, we are 
proposing to continue to use the hospital-specific overall ancillary 
and departmental cost-to-charge ratios (CCRs) to convert charges to 
estimated costs through application of a revenue code-to-cost center 
crosswalk. To calculate the APC costs on which the proposed CY 2018 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 2016 claims data by comparing these claims 
data to the most recently available hospital cost reports, which, in 
most cases, are from CY 2015. For the proposed CY 2018 OPPS payment 
rates, we used the set of claims processed during CY 2016. 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 2016 
(the year of claims data we used to calculate the proposed CY 2018 OPPS 
payment rates) and found that the National Uniform Billing Committee 
(NUBC) did not add any new revenue codes to the NUBC 2016 Data 
Specifications Manual.
    In accordance with our longstanding policy, we calculate CCRs for 
the standard and nonstandard cost centers accepted by the electronic 
cost report database. In general, the most detailed level at which we 
calculate CCRs is 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.a.(1) of this proposed rule.
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74840 
through 74847), we finalized our policy of creating new cost centers 
and distinct CCRs for implantable devices, MRIs, CT scans, and cardiac 
catheterization. However, in response to the CY 2014 OPPS/ASC proposed 
rule, commenters reported that some hospitals currently use an 
imprecise ``square feet'' allocation methodology for the costs of large 
moveable equipment like CT scan and MRI machines. They indicated that 
while CMS recommended using two alternative allocation methods, 
``direct assignment'' or ``dollar value,'' as a more accurate 
methodology for directly assigning equipment costs, industry analysis 
suggested that approximately only half of the reported cost centers for 
CT scans and MRIs rely on these preferred methodologies. In response to 
concerns from commenters, we finalized a policy for the CY 2014 OPPS to 
remove claims from providers that use a cost allocation method of 
``square feet'' to calculate CCRs used to estimate costs associated 
with the CT and MRI APCs (78 FR 74847). Further, we finalized a 
transitional policy to estimate imaging APC relative payment weights 
using only CT and MRI cost data from providers that do not use ``square 
feet'' as the cost allocation statistic. We provided that this 
finalized policy would sunset in 4 years to

[[Page 33570]]

provide a sufficient time for hospitals to transition to a more 
accurate cost allocation method and for the related data to be 
available for ratesetting purposes (78 FR 74847). Therefore, beginning 
CY 2018, with the sunset of the transition policy, we would estimate 
the imaging APC relative payment weight using cost data from all 
providers, regardless of the cost allocation statistic employed.
    Some stakeholders have raised concerns regarding using claims from 
all providers to calculate CT and MRI CCRs, regardless of the cost 
allocations statistic employed (78 FR 74840 through 74847). 
Stakeholders noted that providers continue to use the ``square feet'' 
cost allocation method and that including claims from such providers 
would cause significant reductions in imaging APC payment rates.
    Table 2 below demonstrates the relative effect on imaging APC 
payments after removing cost data for providers that report CT and MRI 
standard cost centers using ``square feet'' as the cost allocation 
method by extracting HCRIS data on Worksheet B-1. Table 3 below 
provides statistical values based on the CT and MRI standard cost 
center CCRs using the different cost allocation methods.

  Table 2--Percentage Change in Estimate Cost for CT and MRI APCs When
    Excluding Claims From Provider Using ``Square Feet'' as the Cost
                            Allocation Method
------------------------------------------------------------------------
                                                            Percentage
              APC                     APC descriptor          change
------------------------------------------------------------------------
5521...........................  Level 1 Imaging without            -4.3
                                  Contrast.
5522...........................  Level 2 Imaging without             6.1
                                  Contrast.
5523...........................  Level 3 Imaging without             1.1
                                  Contrast.
5524...........................  Level 4 Imaging without             7.3
                                  Contrast.
5525...........................  Level 5 Imaging without             4.5
                                  Contrast.
5571...........................  Level 1 Imaging with               10.1
                                  Contrast.
5572...........................  Level 2 Imaging with                9.4
                                  Contrast.
5573...........................  Level 3 Imaging with                6.0
                                  Contrast.
8005...........................  CT and CTA without                 13.5
                                  Contrast Composite.
8006...........................  CT and CTA with                    10.5
                                  Contrast Composite.
8007...........................  MRI and MRA without                 6.8
                                  Contrast Composite.
8008...........................  MRI and MRA with                    7.2
                                  Contrast Composite.
------------------------------------------------------------------------


                Table 3--CCR Statistical Values Based on Use of Different Cost Allocation Methods
----------------------------------------------------------------------------------------------------------------
                                                                CT                              MRI
             Cost allocation method              ---------------------------------------------------------------
                                                    Median CCR       Mean CCR       Median CCR       Mean CCR
----------------------------------------------------------------------------------------------------------------
All Providers...................................          0.0397          0.0559          0.0828          0.1072
Square Feet Only................................          0.0332          0.0493          0.0726          0.0972
Direct Assign...................................          0.0591          0.0680          0.1039          0.1247
Dollar Value....................................          0.0485          0.0644          0.0941          0.1203
Direct Assign and Dollar Value..................          0.0485          0.0644          0.0949          0.1200
----------------------------------------------------------------------------------------------------------------

    Our analysis shows that since the CY 2014 OPPS in which we 
established the transition policy, the number of valid MRI CCRs has 
increased by 15.6 percent to 2,142 providers and the number of valid CT 
CCRs has increased by 13.4 percent to 2,219 providers. However, we note 
that, as shown in Table 2 above, nearly all imaging APCs would see an 
increase in payment rates for CY 2018 if claims from providers that 
report ``square feet'' cost allocation method were removed. This can be 
attributed to the generally lower CCR values from providers that use a 
cost allocation method of ``square feet'' as shown in Table 3 above. We 
believe that the imaging CCRs that we have are appropriate for 
ratesetting. However, in response to provider concerns and to provide 
added flexibility for hospitals to improve their cost allocation 
methods, we are proposing to extend the transition policy an additional 
year, for the CY 2018 OPPS.
    For the CY 2018 OPPS, we are proposing to continue to remove claims 
from providers that use a cost allocation method of ``square feet'' to 
calculate CCRs used to estimate costs with the CT and MRI APCs 
identified in Table 2 above. Beginning in CY 2019, we would estimate 
the imaging APC relative payment weights using cost data from all 
providers, regardless of the cost allocation statistic employed.
2. Proposed Data Development Process and Calculation of Costs Used for 
Ratesetting
    In this section of this proposed rule, we discuss the use of claims 
to calculate the proposed OPPS payment rates for CY 2018. The Hospital 
OPPS page on the CMS Web site on which this proposed rule 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 proposed 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 upon payment of 
an administrative fee 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 obtaining 
the ``OPPS Limited Data Set,'' which now includes the additional 
variables previously available only in the OPPS Identifiable Data Set, 
including ICD-10-CM diagnosis codes and revenue code payment amounts. 
This file is derived from the CY 2016 claims that were used to 
calculate the proposed payment rates for the CY 2018 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

[[Page 33571]]

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 2018, in this CY 2018 OPPS/ASC proposed rule, we are 
proposing to continue to use geometric mean costs to calculate the 
proposed relative weights on which the CY 2018 OPPS payment rates are 
based.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.c. of this proposed rule to calculate the costs we used to 
establish the proposed relative payment weights used in calculating the 
proposed OPPS payment rates for CY 2018 shown in Addenda A and B to 
this proposed rule (which are available via the Internet on the CMS Web 
site). We refer readers to section II.A.4. of this proposed rule for a 
discussion of the conversion of APC costs to scaled payment weights.
    For details of the claims process used in this proposed rule, we 
refer readers to the claims accounting narrative under supporting 
documentation for this CY 2018 OPPS/ASC proposed rule on the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
a. Proposed 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 2018, in this CY 2018 OPPS/ASC proposed rule, we are 
proposing 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 are proposing 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 are proposing 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 are proposing to 
calculate the costs upon which the proposed CY 2018 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 2018 
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 CYs 2014 
through 2017 OPPS/ASC final rules with comment period (78 FR 74861 
through 74910, 79 FR 66798 through 66810, 80 FR 70325 through 70339, 
and 81 FR 79580 through 79585, respectively), 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 are proposing 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 
would be reflected in the overall costs of the C-APCs (and, as a 
result, in the proposed payment rates of the C-APCs), we are proposing 
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 also refer readers to Addendum B to this proposed rule (which is 
available via the Internet on the CMS Web site) for the proposed CY 
2018 payment rates for blood and blood products (which are identified 
with status indicator ``R''). For a more detailed discussion of the 
blood-specific CCR methodology, we refer readers to the CY 2005 OPPS 
proposed rule (69 FR 50524 through 50525). For a full history of OPPS 
payment for blood and blood products, we refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66807 through 66810).
    We are inviting public comments on our proposals.
(b) Pathogen-Reduced Platelets and 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: https://www.fda.gov/BiologicsBloodVaccines/GuidanceComplianceRegulatoryInformation/Guidances/default.htm). This 
draft guidance recommended the use of rapid bacterial testing devices 
secondary to testing using a culture-based bacterial detection device 
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), we

[[Page 33572]]

established HCPCS code P9072 (Platelets, pheresis, pathogen reduced, 
each unit). The CMS HCPCS Workgroup later revised HCPCS code P9072 to 
include the use of pathogen-reduction technology or rapid bacterial 
testing. Specifically, the descriptor for this code was 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).
    After the release of the CY 2017 OPPS/ASC final rule with comment 
period, several blood and blood product stakeholders expressed concerns 
about the revised code descriptor for HCPCS code P9072. The 
stakeholders believed that the revision to HCPCS code P9072 to describe 
both pathogen reduction and rapid bacterial testing was an 
inappropriate code descriptor. They stated that separate coding is 
needed to describe each service because each service is distinct. The 
stakeholders also noted that the code descriptor for HCPCS code P9072 
results in hospitals receiving the same payment rate for platelets 
undergoing rapid bacterial testing that the hospitals receive for 
platelets treated with pathogen reduction technology, despite the fact 
that pathogen reduction is significantly more expensive than rapid 
bacterial testing.
    After review of the concerns expressed by the blood and blood 
product stakeholders, the CMS HCPCS Workgroup deactivated HCPCS code 
P9072 for Medicare reporting and replaced the code with two new HCPCS 
codes effective July 1, 2017. Specifically, effective July 1, 2017, 
HCPCS code Q9988 (Platelets, pheresis, pathogen reduced, each unit) 
shall be used to report the use of pathogen-reduction technology and 
HCPCS code Q9987 (Pathogen(s) test for platelets) shall be used to 
report rapid bacterial testing or other pathogen tests for platelets, 
instead of HCPCS code P9072. We note that HCPCS code Q9987 should be 
reported to describe the test used for the detection of bacterial 
contamination in platelets as well as any other test that may be used 
to detect pathogen contamination. HCPCS code Q9987 should not be used 
for reporting donation testing for infectious agents such as viruses. 
The coding changes associated with these codes were published on the 
CMS HCPCS Quarterly Update Web site, effective July 2017, at: https://www.cms.gov/Medicare/Coding/HCPCSReleaseCodeSets/HCPCS-Quarterly-Update.html. In addition, for OPPS, we announced the new HCPCS codes 
that were effective July 1, 2017 through the July 2017 OPPS quarterly 
update Change Request (Transmittal 3783, Change Request 10122, dated 
May 26, 2017). We note that, effective July 1, 2017, HCPCS code Q9988 
is assigned to APC 9536 (Pathogen Reduced Platelets), with a payment 
rate of $647.12, and HCPCS code Q9987 is assigned to New Technology APC 
1493, with a payment rate of $25.50.
    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70322 
through 70323), we reiterated that we calculate 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. Because HCPCS code P9072 was new for CY 2016, there 
were no claims data on the charges and costs for this blood product 
upon which to apply our blood-specific CCR methodology. Therefore, we 
established an interim payment rates for this HCPCS code based on a 
crosswalk to existing blood product HCPCS code P9037, which we believed 
provided the best proxy for the costs of the new blood product. In 
addition, we stated that once we had claims data for HCPCS code P9072, 
we would calculate its payment rate using the claims data that should 
be available for the code beginning in CY 2018, which is our practice 
for other blood product HCPCS codes for which claims data have been 
available for 2 years.
    Although our standard practice for new codes involves using claims 
data to set payment rates once claims data become available, we are 
concerned that there may have been confusion among the provider 
community about the services that HCPCS code P9072 described. That is, 
as early as 2016, there were discussions about changing the descriptor 
for HCPCS code P9072 to include the phrase ``or rapid bacterial 
tested'', which is a much less costly technology than pathogen 
reduction. In addition, as noted above, effective January 2017, the 
code descriptor for HCPCS code P9072 was, in fact, changed to also 
describe rapid bacterial testing of platelets and, effective July 1, 
2017, the descriptor for the temporary successor code for HCPCS code 
P9072 (that is, HCPCS code Q9988) was changed again back to the 
original descriptor for HCPCS code P9072 that was in place for 2016.
    Based on the ongoing discussions involving changes to the original 
HCPCS code P9072 established in CY 2016, we believe that claims for 
pathogen reduced platelets may potentially reflect certain claims for 
rapid bacterial testing of platelets. The geometric mean costs based on 
submitted claims for HCPCS code P9072 based on available claims data 
from CY 2016 is $491.53, which is a 24-percent reduction from the CY 
2017 payment rate of $647.12. Because we believe that there may have 
been confusion related to ongoing discussions about changes to the 
original code descriptor for HCPCS code P9072, we believe it is 
appropriate to continue to crosswalk the payment amount for at least 1 
additional year. Therefore, we are proposing for CY 2018 to determine 
the payment rate for HCPCS code Q9988 (the successor code to HCPCS code 
P9072) by continuing to use the payment rate that has been crosswalked 
from HCPCS code P9037 of $647.12.
    In this CY 2018 OPPS/ASC proposed rule, we are soliciting public 
comments on the proposed APC and status indicator assignments for HCPCS 
codes Q9987 and Q9988 for the CY 2018 OPPS update. The proposed payment 
rates for HCPCS codes Q9987 and Q9988 can be found in Addendum B to 
this proposed rule (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 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

[[Page 33573]]

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 this CY 2018 OPPS/ASC proposed rule, for CY 2018, we are 
proposing to use the costs derived from CY 2016 claims data to set the 
proposed CY 2018 payment rates for brachytherapy sources because CY 
2016 is the same year of data we are proposing to use to set the 
proposed payment rates for most other items and services that would be 
paid under the CY 2018 OPPS. We are proposing to base the payment rates 
for brachytherapy sources on the geometric mean unit costs for each 
source, consistent with the methodology that we are proposing for other 
items and services paid under the OPPS, as discussed in section II.A.2. 
of this proposed rule. We also are proposing 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 are proposing 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 2018 and subsequent years, we also are proposing 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 2018 payment rates for brachytherapy sources are 
included in Addendum B to this proposed rule (which is available via 
the Internet on the CMS Web site) and are identified with status 
indicator ``U''. For CY 2018, we are proposing to assign status 
indicator ``E2'' (Items and Services for Which Pricing Information and 
Claims Data Are Not Available) to HCPCS code C2645 (Brachytherapy 
planar, p-103) because this code was not reported on CY 2016 claims. 
Therefore, we are unable to calculate a proposed payment rate based on 
the general OPPS ratesetting methodology described earlier. Although 
HCPCS code C2645 became effective January 1, 2016, and although we 
would expect that if a hospital furnished a brachytherapy source 
described by this code in CY 2016, HCPCS code C2645 should appear on 
the CY 2016 claims, there are no CY 2016 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 C2645 for CY 2018. Therefore, we are proposing to assign status 
indicator ``E2'' to HCPCS code C2645.
    In addition, we assigned status indicator ``E2'' to HCPCS code 
C2644 (Brachytherapy cesium-131 chloride) because this code was not 
reported on any CY 2015 claims (that is, there were no Medicare claims 
submitted by any hospitals in 2015 that reported this HCPCS code). In 
our review of CY 2016 claims (which are used to set rates for CY 2018), 
we found that one hospital submitted one claim reporting HCPCS code 
C2644. Therefore, we are proposing to assign status indicator ``U'' to 
HCPCS code 2644, and our payment rates for HCPCS code C2644 will be 
based on this information.
    We are inviting public comments on our proposals.
    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.
b. Proposed Comprehensive APCs (C-APCs) for CY 2018
(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. In the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79584 through 79585), we 
finalized another 25 C-APCs.
    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 under the OPPS 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

[[Page 33574]]

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 proposed rule 
(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 to qualifying extended assessment and 
management encounters through the ``Comprehensive Observation 
Services'' C-APC (C-APC 8011). Services within this APC are assigned 
status indicator ``J2''. Specifically, we make a payment through C-APC 
8011 for a claim that:
     Does not contain a procedure described by a HCPCS code to 
which we have assigned 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;
     Contains 8 or more units of services described by HCPCS 
code G0378 (Observation services, per hour);
     Contains services provided on the same date of service or 
1 day before the date of service for HCPCS code G0378 that are 
described by one of the following codes: HCPCS code G0379 (Direct 
referral of patient for hospital observation care) on the same date of 
service as HCPCS code G0378; CPT code 99281 (Emergency department visit 
for the evaluation and management of a patient (Level 1)); CPT code 
99282 (Emergency department visit for the evaluation and management of 
a patient (Level 2)); CPT code 99283 (Emergency department visit for 
the evaluation and management of a patient (Level 3)); CPT code 99284 
(Emergency department visit for the evaluation and management of a 
patient (Level 4)); CPT code 99285 (Emergency department visit for the 
evaluation and management of a patient (Level 5)) or HCPCS code G0380 
(Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B 
emergency department visit (Level 2)); HCPCS code G0382 (Type B 
emergency department visit (Level 3)); HCPCS code G0383 (Type B 
emergency department visit (Level 4)); HCPCS code G0384 (Type B 
emergency department visit (Level 5)); CPT code 99291 (Critical care, 
evaluation and management of the critically ill or critically injured 
patient; first 30-74 minutes); or HCPCS code G0463 (Hospital outpatient 
clinic visit for assessment and management of a patient); and
     Does not contain services described by a HCPCS code to 
which we have assigned status indicator ``J1''.
    The assignment of status indicator ``J2'' to a specific combination 
of services performed in combination with each other 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).
    In addition, payment for hospital outpatient department services 
that are similar to therapy services and delivered either by therapists 
or nontherapists 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 hospital outpatient department services. 
Payment for these nontherapy 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 hospital 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

[[Page 33575]]

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, 
which exclude 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 paired ``J1'' service 
code combinations or paired 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 apply this type of complexity adjustment when the paired 
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).
    These criteria identify paired code combinations that occur 
commonly and exhibit materially greater resource requirements than the 
primary service. The CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79582) included a revision to the complexity adjustment 
eligibility criteria. Specifically, we finalized a policy to 
discontinue the requirement that a code combination (that qualifies for 
a complexity adjustment by satisfying the frequency and cost criteria 
thresholds described above) also not create a 2 times rule violation in 
the higher level or receiving APC.
    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 there are paired code combinations that 
meet the complexity adjustment criteria. For a new HCPCS code, we 
determine initial C-APC assignment and qualification for a complexity 
adjustment using the best available information, crosswalking the new 
HCPCS code to a predecessor code(s) 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 claim including 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 claim including a 
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 qualify for a complexity 
adjustment for CY 2018, in this CY 2018 OPPS/ASC proposed rule, we are 
proposing 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 for the primary J1 service. 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 (based on meeting the criteria outlined above), 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 
to the next higher cost C-APC within the same clinical family of C-
APCs. As previously stated, we package payment for add-on codes into 
the C-APC payment rate. If any add-on code reported in conjunction with 
the ``J1'' primary service code does not qualify for a complexity 
adjustment, payment for the add-on service continues to be packaged 
into the payment for the primary service and is not reassigned to the 
next higher cost C-APC. We list the complexity adjustments proposed for 
``J1'' and add-on code combinations for CY 2018, along with all of the 
other proposed complexity adjustments, in Addendum J to this proposed 
rule (which is available via the Internet on the CMS Web site).
    Addendum J to this proposed rule includes the cost statistics for 
each code combination that would qualify for a complexity adjustment 
(including primary code and add-on code

[[Page 33576]]

combinations). Addendum J to this proposed rule also contains summary 
cost statistics for each of the paired 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 paired 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 this proposed rule allows stakeholders the opportunity to 
better assess the impact associated with the proposed reassignment of 
claims with each of the paired code combinations eligible for a 
complexity adjustment.
(2) Proposed Additional C-APCs for CY 2018
    For CY 2018 and subsequent years, in this CY 2018 OPPS/ASC proposed 
rule, we are proposing to continue to apply the C-APC payment policy 
methodology made effective in CY 2015 and updated with the 
implementation of status indicator ``J2'' in CY 2016. A discussion of 
the C-APC payment policy methodology can be found at 81 FR 79583.
    As a result of our annual review of the services and APC 
assignments under the OPPS, we are not proposing any additional C-APCs 
to be paid under the existing C-APC payment policy beginning in CY 
2018. Table 4 below lists the proposed C-APCs for CY 2018, all of which 
were established in past rules. All C-APCs are 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 contains all of 
the data related to the C-APC payment policy methodology, including the 
list of proposed complexity adjustments and other information.

                    Table 4--Proposed CY 2018 C-APCs
------------------------------------------------------------------------
             C-APC                CY 2018 APC title     Clinical family
------------------------------------------------------------------------
5072..........................  Level 2 Excision/      EBIDX
                                 Biopsy/Incision and
                                 Drainage.
5073..........................  Level 3 Excision/      EBIDX
                                 Biopsy/Incision and
                                 Drainage.
5091..........................  Level 1 Breast/        BREAS
                                 Lymphatic Surgery
                                 and Related
                                 Procedures.
5092..........................  Level 2 Breast/        BREAS
                                 Lymphatic Surgery
                                 and Related
                                 Procedures.
5093..........................  Level 3 Breast/        BREAS
                                 Lymphatic Surgery &
                                 Related Procedures.
5094..........................  Level 4 Breast/        BREAS
                                 Lymphatic Surgery &
                                 Related Procedures.
5112..........................  Level 2                ORTHO
                                 Musculoskeletal
                                 Procedures.
5113..........................  Level 3                ORTHO
                                 Musculoskeletal
                                 Procedures.
5114..........................  Level 4                ORTHO
                                 Musculoskeletal
                                 Procedures.
5115..........................  Level 5                ORTHO
                                 Musculoskeletal
                                 Procedures.
5116..........................  Level 6                ORTHO
                                 Musculoskeletal
                                 Procedures.
5153..........................  Level 3 Airway         AENDO
                                 Endoscopy.
5154..........................  Level 4 Airway         AENDO
                                 Endoscopy.
5155..........................  Level 5 Airway         AENDO
                                 Endoscopy.
5164..........................  Level 4 ENT            ENTXX
                                 Procedures.
5165..........................  Level 5 ENT            ENTXX
                                 Procedures.
5166..........................  Cochlear Implant       COCHL
                                 Procedure.
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  WPMXX
                                 PA Pressure Monitor.
5211..........................  Level 1                EPHYS
                                 Electrophysiologic
                                 Procedures.
5212..........................  Level 2                EPHYS
                                 Electrophysiologic
                                 Procedures.
5213..........................  Level 3                EPHYS
                                 Electrophysiologic
                                 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        AICDP
                                 Similar Procedures.
5232..........................  Level 2 ICD and        AICDP
                                 Similar Procedures.
5244..........................  Level 4 Blood Product  SCTXX
                                 Exchange and Related
                                 Services.
5302..........................  Level 2 Upper GI       GIXXX
                                 Procedures.
5303..........................  Level 3 Upper GI       GIXXX
                                 Procedures.
5313..........................  Level 3 Lower GI       GIXXX
                                 Procedures.
5331..........................  Complex GI Procedures  GIXXX
5341..........................  Abdominal/Peritoneal/  GIXXX
                                 Biliary and Related
                                 Procedures.
5361..........................  Level 1 Laparoscopy &  LAPXX
                                 Related Services.
5362..........................  Level 2 Laparoscopy &  LAPXX
                                 Related Services.
5373..........................  Level 3 Urology &      UROXX
                                 Related Services.
5374..........................  Level 4 Urology &      UROXX
                                 Related Services.
5375..........................  Level 5 Urology &      UROXX
                                 Related Services.
5376..........................  Level 6 Urology &      UROXX
                                 Related Services.
5377..........................  Level 7 Urology &      UROXX
                                 Related Services.
5414..........................  Level 4 Gynecologic    GYNXX
                                 Procedures.
5415..........................  Level 5 Gynecologic    GYNXX
                                 Procedures.
5416..........................  Level 6 Gynecologic    GYNXX
                                 Procedures.
5431..........................  Level 1 Nerve          NERVE
                                 Procedures.

[[Page 33577]]

 
5432..........................  Level 2 Nerve          NERVE
                                 Procedures.
5462..........................  Level 2                NSTIM
                                 Neurostimulator &
                                 Related Procedures.
5463..........................  Level 3                NSTIM
                                 Neurostimulator &
                                 Related Procedures.
5464..........................  Level 4                NSTIM
                                 Neurostimulator &
                                 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,   EXEYE
                                 Repair, and Plastic
                                 Eye Procedures.
5504..........................  Level 4 Extraocular,   EXEYE
                                 Repair, and Plastic
                                 Eye Procedures.
5627..........................  Level 7 Radiation      RADTX
                                 Therapy.
5881..........................  Ancillary Outpatient   N/A
                                 Services When
                                 Patient Dies.
8011..........................  Comprehensive          N/A
                                 Observation Services.
------------------------------------------------------------------------
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.

(3) Brachytherapy Insertion Procedures
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79584), we finalized 25 new C-APCs. Some of the HCPCS codes assigned to 
the C-APCs established for CY 2017 described surgical procedures for 
inserting brachytherapy catheters/needles and other related 
brachytherapy procedures such as the insertion of tandem and/or ovoids 
and the insertion of Heyman capsules. In the CY 2017 OPPS/ASC final 
rule with comment period (81 FR 79583), we stated that we received 
public comments which noted that claims that included several insertion 
codes for brachytherapy devices (namely CPT codes 57155 (Insertion of 
uterine tandem and/or vaginal ovoids for clinical brachytherapy); 20555 
(Placement of needles or catheters into muscle and/or soft tissue for 
subsequent interstitial radioelement application (at the time of or 
subsequent to the procedure)); 31643 (Bronchoscopy, rigid or flexible, 
including fluoroscopic guidance, when performed; with placement of 
catheter(s) for intracavitary radioelement application); 41019 
(Placement of needles, catheters, or other device(s) into the head and/
or neck region (percutaneous, transoral, or transnasal) for subsequent 
interstitial radioelement application); 43241 
(Esophagogastroduodenoscopy, flexible, transoral; with insertion of 
intraluminal tube catheter); 55920 (Placement of needles or catheters 
into pelvic organs and/or genitalia (except prostate) for subsequent 
interstitial radioelement application); and 58346 (Insertion of Heyman 
capsules for clinical brachytherapy)) often did not also contain a 
brachytherapy treatment delivery code (CPT codes 77750 through 77799). 
The commenters concluded that brachytherapy delivery charges are being 
underrepresented in ratesetting under the C-APC methodology because a 
correctly coded claim should typically include an insertion and 
treatment delivery code combination. The commenters stated that the 
insertion procedure and brachytherapy treatment delivery generally 
occur on the same day or within the same week and therefore the 
services should appear on a claim together. We indicated that we would 
not exclude claims from the CY 2017 ratesetting calculation because we 
generally do not remove claims from the claims accounting when 
stakeholders believe that hospitals included incorrect information on 
some claims. However, we stated that we would examine the claims for 
the brachytherapy insertion codes in question and determine if any 
future adjustment to the methodology (or possibly code edits) would be 
appropriate.
    We analyzed the claims that include brachytherapy insertion codes 
assigned to status indicator ``J1'' and that received payment through a 
C-APC, and we determined that several of these codes are frequently 
billed without an associated brachytherapy treatment code. As mentioned 
above, stakeholders have expressed concerns that using claims for 
ratesetting for brachytherapy insertion procedures that do not also 
include a brachytherapy treatment code may not capture all of the costs 
associated with the insertion procedure. To address this issue and base 
payment on claims for the most common clinical scenario, for CY 2018 
and subsequent years, we are establishing a code edit that requires a 
brachytherapy treatment

[[Page 33578]]

code when a brachytherapy insertion code is billed.
    As noted in section II.A.2.c. of this proposed rule, we also are 
proposing to delete composite APC 8001 (LDR Prostate Brachytherapy 
Composite) and assign HCPCS code 55875 (Transperineal placement of 
needles or catheters into prostate for interstitial radioelement 
application, with or without cystoscopy) to status indicator ``J1'' and 
to provide payment for this procedure through the C-APC payment 
methodology similar to the payment methodology for other surgical 
insertion procedures related to brachytherapy. Specifically, when HCPCS 
code 55875 is the primary service reported on a hospital outpatient 
claim, we are proposing to package payments for all adjunctive services 
reported on the claim into the payment for HCPCS code 55875. We are 
proposing to assign HCPCS code 55875 to C-APC 5375 (Level 5 Urology and 
Related Services). The code edit for claims with brachytherapy services 
described above that will be effective January 1, 2018 will require the 
brachytherapy application HCPCS code 77778 (Interstitial radiation 
source application; complex) to be included on the claim with the 
brachytherapy insertion procedure (HCPCS code 55875). The brachytherapy 
insertion codes that will be required to be billed with a brachytherapy 
treatment code are listed in Table 5 listed below.

 Table 5--Proposed Brachytherapy Insertion Procedures Assigned to Status
                            Indicator ``J1''
------------------------------------------------------------------------
         HCPCS code                         Long descriptor
------------------------------------------------------------------------
19296.......................  Placement of radiotherapy afterloading
                               expandable catheter (single or
                               multichannel) into the breast for
                               interstitial radioelement application
                               following partial mastectomy, includes
                               imaging guidance; on date separate from
                               partial mastectomy.
19298.......................  Placement of radiotherapy after loading
                               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.
19499.......................  Unlisted procedure, breast.
20555.......................  Placement of needles or catheters into
                               muscle and/or soft tissue for subsequent
                               interstitial radioelement application (at
                               the time of or subsequent to the
                               procedure).
31643.......................  Bronchoscopy, rigid or flexible, including
                               fluoroscopic guidance, when performed;
                               with placement of catheter(s) for
                               intracavitary radioelement application.
41019.......................  Placement of needles, catheters, or other
                               device(s) into the head and/or neck
                               region (percutaneous, transoral, or
                               transnasal) for subsequent interstitial
                               radioelement application.
43241.......................  Esophagogastroduodenoscopy, flexible,
                               transoral; with insertion of intraluminal
                               tube catheter.
55875.......................  Transperineal placement of needles or
                               catheters into prostate for interstitial
                               radioelement application, with or without
                               cystoscopy.
55920.......................  Placement of needles or catheters into
                               pelvic organs and/or genitalia (except
                               prostate) for subsequent interstitial
                               radioelement application.
57155.......................  Insertion of uterine tandem and/or vaginal
                               ovoids for clinical brachytherapy.
58346.......................  Insertion of Heyman capsules for clinical
                               brachytherapy.
------------------------------------------------------------------------

(4) C-APC 5627 (Level 7 Radiation Therapy) Stereotactic Radiosurgery 
(SRS)
    Stereotactic radiosurgery (SRS) is a type of radiation therapy that 
targets multiple beams of radiation to precisely deliver radiation to a 
brain tumor while sparing the surrounding normal tissue. SRS treatment 
can be delivered by Cobalt-60-based (also referred to as gamma knife) 
technology or robotic linear accelerator-based (LINAC)-based 
technology. As stated in the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70336), section 634 of the American Taxpayer Relief Act 
(ATRA) of 2012 (Pub. L. 112-240) amended section 1833(t)(16) of the Act 
by adding a new subparagraph (D) to require that OPPS payments for 
Cobalt-60-based SRS be reduced to equal that of payments for LINAC-
based SRS for covered OPD services furnished on or after April 1, 2013. 
Because section 1833(t)(16)(D) of the Act requires equal payment for 
SRS treatment delivered by Cobalt-60-based or LINAC-based technology, 
the two types of services involving SRS delivery instruments (which are 
described by HCPCS code 77371 (Radiation treatment delivery, 
stereotactic radiosurgery [SRS], complete course of treatment cranial 
lesion(s) consisting of 1 session; multi-source Cobalt 60-based) and 
HCPCS code 77372 (Linear accelerator-based)) are assigned to the same 
C-APC (C-APC 5627 Level 7 Radiation Therapy).
    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 
70336), we stated that we had identified differences in the billing 
patterns for SRS procedures delivered using Cobalt-60-based and LINAC-
based technologies. In particular, our claims data analysis revealed 
that services involving SRS delivered by Cobalt-60-based technologies 
(as described by HCPCS code 77371) typically included SRS treatment 
planning services (for example, imaging studies, radiation treatment 
aids, and treatment planning) and the actual deliveries of SRS 
treatment on the same date of service and reported on the same claim. 
In contrast, claims data analysis results revealed that services 
involving SRS delivered by LINAC-based technologies (as described by 
HCPCS code 77372) frequently included services related to SRS treatment 
(for example, imaging studies, radiation treatment aids, and treatment 
planning) that were provided on different dates of service and reported 
on claims separate from the actual delivery of SRS treatment.
    We stated in the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70336) that the intent of the C-APC policy is to package payment 
for all services adjunctive to the primary ``J1'' procedure and that we 
believed that all essential planning and preparation services related 
to the SRS treatment are adjunctive to the SRS treatment delivery 
procedure. Therefore, payment for these adjunctive services should be 
packaged into the C-APC payment for the SRS treatment instead of 
reported on a different claim and paid separately. To identify services 
that are adjunctive to the primary SRS treatment described by HCPCS 
codes 77371 and 77372, but reported on a different claim, we 
established modifier ``CP'' which became effective in CY 2016 and 
required the use of the modifier for CY 2016 and CY 2017.
    To ensure appropriate ratesetting for the SRS C-APC, we believed it 
was necessary to unbundle payment for the adjunctive services for CY 
2016 and CY 2017. Therefore, we finalized a policy to change the 
payment for SRS treatment for the 10 SRS planning and preparation 
services identified in our claims data (HCPCS codes 70551, 70552, 
70553, 77011, 77014, 77280, 77285, 77290, 77295, and 77336) that were 
reported

[[Page 33579]]

differentially using HCPCS codes 77371 and 77372 both on the same claim 
as the SRS services and on claims 1 month prior to the delivery of SRS 
services. These codes were removed from the geometric mean cost 
calculations for C-APC 5627. In addition, for CY 2016 and CY 2017, we 
provided separate payment for the 10 planning and preparation services 
adjunctive to the delivery of the SRS treatment using either the 
Cobalt-60-based or LINAC-based technology, even when the planning 
service was included on the same claim as the primary ``J1'' SRS 
treatment service. The use of the modifier ``CP'' was not required to 
identify these 10 planning and preparation codes.
    The data collection period for SRS claims with modifier ``CP'' 
began on January 1, 2016 and concludes on December 31, 2017. Based on 
our analysis of preliminary data collected with modifier ``CP'', we 
have identified some additional services that are adjunctive to the 
primary SRS treatment and reported on a different claim outside of the 
10 SRS planning and preparation codes that were removed from the SRS C-
APC costs calculations and paid separately.
    However, the ``CP'' modifier has been used by a small number of 
providers since its establishment. In addition, our analysis showed 
that several of the HCPCS codes that were billed with modifier ``CP'' 
belonged to the group of 10 SRS planning and preparation codes that we 
pay separately and do not require the use of modifier ``CP''. Also, 
some providers erroneously included the modifier when reporting the 
HCPCS code for the delivery of the LINAC-based SRS treatment. As stated 
above, the data collection period for SRS claims with modifier ``CP'' 
was set to conclude on December 31, 2017. Accordingly, for CY 2018, we 
are deleting this modifier and discontinuing its required use.
    For CY 2018, we also are proposing to continue to make separate 
payments for the 10 planning and preparation services adjunctive to the 
delivery of the SRS treatment using either the Cobalt-60-based or 
LINAC-based technology when furnished to a beneficiary within 1 month 
of the SRS treatment. The continued separate payment of these services 
will allow us to complete our analysis of the claims data including 
modifier ``CP'' from both CY 2016 and CY 2017 claims. As stated in the 
CY 2017 OPPS/ASC final rule with comment period (81 FR 79583), 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.
    We are inviting public comments on these proposals.
(5) Proposed Complexity Adjustment for Blue Light Cystoscopy Procedures
    As discussed in prior OPPS/ASC final rules with comment period, and 
most recently in the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79668), we continue to believe that Cysview[supreg] 
(hexaminolevulinate HCl) (described by HCPCS code C9275) is a drug that 
functions as a supply in a diagnostic test or procedure and is 
therefore packaged with payment for the primary procedure. In addition, 
as discussed in section II.A.2.b.(1) of this proposed rule, drugs that 
are not eligible for pass-through payment are always packaged when 
billed with a comprehensive service. To maintain the integrity of a 
prospective payment system, we believe it is generally not appropriate 
to allow exceptions to our drug packaging policy or comprehensive APC 
policy that would result in separate payment for the drug based on the 
product's ASP+6 percent payment rate. While we are not proposing to pay 
separately for Cysview[supreg], we have heard concerns from 
stakeholders that the payment for blue light cystoscopy procedures 
involving Cysview[supreg] may be creating a barrier to access 
reasonable and necessary care for which there may not be a clinically 
comparable alternative. Therefore, we are revisiting our payment policy 
for blue light cystoscopy procedures. As described in more detail 
below, we believe certain code combinations for blue light cystoscopy 
procedures should be eligible to qualify for a complexity adjustment, 
given the unique properties of the procedure and resource costs.
    Traditionally, white light (or standard) cystoscopy, typically 
performed by urologists, has been the gold standard for diagnosing 
bladder cancer. Enhanced bladder cancer diagnostics, such as narrow 
band imaging or blue light cystoscopy, increase tumor detection in 
nonmuscle invasive bladder cancer over white light cystoscopy alone, 
thus enabling more precise tumor removal by the urologist. Blue light 
cystoscopy can only be performed after performance of white light 
cystoscopy. Because blue light cystoscopy requires specialized imaging 
equipment to view cellular uptake of the dye that is not otherwise used 
in white light cystoscopy procedures, some practitioners consider blue 
light cystoscopy to be a distinct and adjunctive procedure to white 
light cystoscopy. However, the current CPT coding structure for 
cystoscopy procedures does not identify blue light cystoscopy in the 
coding descriptions separate from white light cystoscopy. Therefore, 
the existing cystoscopy CPT codes do not distinguish cystoscopy 
procedures involving only white light cystoscopy from those involving 
both white and blue light procedures, which require additional 
resources compared to white light cystoscopy alone.
    After discussion with our clinical advisors (including a 
urologist), we believe that blue light cystoscopy represents an 
additional elective but distinguishable service as compared to white 
light cystoscopy that in some cases may allow greater detection of 
bladder tumors in beneficiaries relative to white light cystoscopy 
alone. Given the additional equipment, supplies, operating room time, 
and other resources required to perform blue light cystoscopy in 
addition to white light cystoscopy, for CY 2018, we are proposing to 
create a new HCPCS C-code to describe blue light cystoscopy (HCPCS code 
C97XX (Adjunctive blue light cystoscopy with fluorescent imaging agent 
(List separately in addition to code for primary procedure)) and to 
allow for a complexity adjustment to APC 5374 (Level 4 Urology and 
Related Services) for certain code combinations in APC 5373 (Level 3 
Urology and Related Services). Specifically, to determine which code 
pair combinations of proposed new HCPCS code C97XX and cystoscopy 
procedure would qualify for a complexity adjustment, we first 
crosswalked the costs of HCPCS code C9275 (Hexaminolevulinate hcl) to 
the proposed new HCPCS code C97XX assigned status indicator ``N''. 
Next, we identified the procedure codes used to describe white light 
cystoscopy of the bladder which include the following CPT codes and APC 
assignments:

 APC 5372 (Level 2 Urology and Related Services)
    [squ] CPT code 52000
 APC 5373 (Level 3 Urology and Related Services
    [squ] CPT code 52204
    [squ] CPT code 52214
    [squ] CPT code 52224
 APC 5374 (Level 4 Urology and Related Services)
    [squ] CPT code 52234
    [squ] CPT code 52235
 APC 5375 (Level 5 Urology and Related Services)
    [squ] CPT code 52240

    Because APC 5372 is not a C-APC, cystoscopy procedures assigned to 
Level 2 Urology are not eligible for a complexity adjustment, and 
therefore,

[[Page 33580]]

we did not analyze these codes to determine whether they were eligible 
for a complexity adjustment. We modeled the data to determine which 
code pair combinations exceed the claim frequency and cost threshold in 
APC 5373, APC 5374, and APC 5375, which are all C-APCs. Results of our 
analysis indicate that the code pair combination of proposed new HCPCS 
code C97XX and cystoscopy procedures assigned to APC 5373 would be 
eligible for a complexity adjustment based on current criteria and cost 
data because they meet the frequency and cost criteria thresholds. 
Likewise, our results indicate that the combination of proposed new 
HCPCS code C97XX and cystoscopy procedures assigned to APC 5374 and APC 
5375 would not qualify for a complexity adjustment because they do not 
meet the frequency and cost criteria thresholds.
    Under the C-APC policy, blue light cystoscopy would be packaged, 
but when performed with a cystoscopy procedure in APC 5373 and reported 
with proposed new HCPCS code C97XX in addition to the cystoscopy CPT 
code, there would be a complexity adjustment to the next higher level 
APC in the series, resulting in a higher payment than for the white 
light cystoscopy procedure alone. That is, if the code pair combination 
of proposed new HCPCS code C97XX with CPT code 52204, 52214, or 52224 
is reported on a claim, the claim will qualify for payment reassignment 
from APC 5373 to APC 5374. We plan to track the utilization and the 
costs associated with white light/blue light cystoscopy procedure 
combinations that will receive a complexity adjustment.
    We are inviting public comments on our CY 2018 proposal to allow 
for a complexity adjustment when a white light followed by blue light 
cystoscopy procedure is performed. In addition, we are seeking public 
comments on whether alternative procedures, such as narrow band 
imaging, may be disadvantaged by this proposed policy.
(6) Analysis of C-APC Packaging under the OPPS
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79584), we accepted a recommendation made at the August 22, 2016 HOP 
Panel meeting to analyze the effects of C-APCs. The HOP panel 
recommendation did not elucidate specific concerns with the C-APC 
policy or provide detailed recommendations on particular aspects of the 
policy to analyze. Therefore, we took a broad approach in studying 
HCPCS codes and APCs subject to the C-APC policy to determine whether 
aberrant trends in the data existed. Overall, we observed no such 
aberrancies and believe that the C-APC policy is working as intended.
    Specifically, using OPPS claims data from the CY 2016 final rule, 
the CY 2017 final rule, and the CY 2018 proposed rule, which reflect an 
observation period of CY 2014 to CY 2016, we examined the effects of C-
APCs and their impact on OPPS payments. We started with all hospital 
outpatient claims billed on the 13X claim-type and from that, 
separately identified HCPCS codes and APCs that were subject to the 
comprehensive methodology in CYs 2015 and 2016 (that is, HCPCS codes or 
APCs assigned status indicator ``J1'' or ``J2''). Next, we analyzed the 
claims to create a subset of claims that contain the HCPCS codes and 
APCs that were subject to the comprehensive methodology. Using the 
claims noted above, we analyzed claim frequency, line frequency, number 
of billing units, and the total OPPS payment between CYs 2014 and 2016 
for each HCPCS and APC that had been previously identified. In 
reviewing the cost statistics for HCPCS codes for procedures with 
status indicator ``S'', ``T'', or ``V'' in CY 2014 that were assigned 
to a C-APC in either CY 2015 or CY 2016, overall, we observed an 
increase in claim line frequency, units billed, and Medicare payment, 
which suggest that the C-APC payment policy did not adversely affect 
access or reduce payments to hospitals. Decreases in these cost 
statistics would suggest our comprehensive packaging logic is not 
working as intended and/or the C-APC payment rates were inadequate, 
resulting in lower volume due to migration of services to other 
settings or the cessation of providing these services. Likewise, 
because the cost statistics of major separately payable codes (that is, 
HCPCS codes with status indicator ``S'', ``T'', or ``V'') that were 
packaged into a C-APC prospectively were consistent with the cost 
statistics of the codes packaged on the claim in actuality, indicate 
that costs were appropriately redistributed, we believe the C-APC 
payment methodology is working as intended.
c. Proposed 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 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 this CY 2018 OPPS/ASC proposed rule, for CY 2018 and subsequent 
years, we are proposing to continue our composite APC payment policies 
for mental health services and multiple imaging services, as discussed 
below. As discussed in section II.A.2.b. of this proposed rule, we are 
proposing to assign CPT code 55875 (Transperineal placement of needs or 
catheters into prostate for interstitial radioelement application, with 
or without cystoscopy) a status indicator of ``J1'' and assign it to a 
C-APC. In conjunction with this proposal, we also are proposing to 
delete the low dose rate (LDR) prostate brachytherapy composite APC for 
CY 2018 and subsequent years.
(1) Mental Health Services Composite APC
    In this CY 2018 OPPS/ASC proposed rule, we are proposing 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.

[[Page 33581]]

    In the CY 2017 OPPS/ASC final rule (81 FR 79588 through 79589), we 
finalized a policy 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 new APC 5863 (Partial Hospitalization (3 or more 
services per day)). For CY 2018, and subsequent years, we are proposing 
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 would be paid through composite APC 
8010 (Mental Health Services Composite) for CY 2018. In addition, we 
are proposing to set the payment rate for composite APC 8010 for CY 
2018 at the same payment rate that we are proposing for 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. 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 5863 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.
(2) 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 this CY 2018 OPPS/ASC proposed rule, we are proposing, for CY 
2018 and subsequent years, to continue to pay for all multiple imaging 
procedures within an imaging family performed on the same date of 
service using the multiple imaging composite APC payment methodology. 
We continue to believe that this policy would reflect and promote the 
efficiencies hospitals can achieve when performing multiple imaging 
procedures during a single session.
    The proposed CY 2018 payment rates for the five multiple imaging 
composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) are based on 
proposed geometric mean costs calculated from a partial year of CY 2016 
claims available for this CY 2018 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), are identified by asterisks in 
Addendum N to this CY 2018 OPPS/ASC proposed rule (which is available 
via the Internet on the CMS Web site) and are discussed in more detail 
in section II.A.1.b. of this CY 2018 OPPS/ASC proposed rule.
    For this CY 2018 OPPS/ASC proposed rule, we were able to identify 
approximately 634,918 ``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 36 percent of 
all eligible claims, to calculate the proposed CY 2018 geometric mean 
costs for the multiple imaging composite APCs. Table 6 of this CY 2018 
OPPS/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 2018.

[[Page 33582]]



 Table 6--Proposed OPPS Imaging Families and Multiple Imaging Procedure
                             Composite APCs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
 Proposed CY 2018 APC 8004 (Ultrasound     Proposed CY 2018 Approximate
               Composite)                 APC Geometric Mean Cost = $303
------------------------------------------------------------------------
76700..................................  Us exam, abdom, complete.
76705..................................  Echo exam of abdomen.
76770..................................  Us exam abdo back wall, comp.
76776..................................  Us exam k transpl w/Doppler.
76831..................................  Echo exam, uterus.
76856..................................  Us exam, pelvic, complete.
76857..................................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA with and without Contrast
------------------------------------------------------------------------
 Proposed CY 2018 APC 8005 (CT and CTA     Proposed CY 2018 Approximate
      without Contrast Composite)*        APC Geometric Mean Cost = $280
------------------------------------------------------------------------
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.
------------------------------------------------------------------------
 Proposed CY 2018 APC 8006 (CT and CTA     Proposed CY 2018 Approximate
        with Contrast Composite)          APC Geometric Mean Cost = $503
------------------------------------------------------------------------
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.
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..
------------------------------------------------------------------------

[[Page 33583]]

 
             Family 3--MRI and MRA with and without Contrast
------------------------------------------------------------------------
 Proposed CY 2018 APC 8007 (MRI and MRA    Proposed CY 2018 Approximate
     without Contrast Composite) *        APC Geometric Mean Cost = $571
------------------------------------------------------------------------
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.
------------------------------------------------------------------------
 Proposed CY 2018 APC 8008 (MRI and MRA    Proposed CY 2018 Approximate
        with Contrast Composite)          APC Geometric Mean Cost = $888
------------------------------------------------------------------------
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.
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.

[[Page 33584]]

 
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. Proposed 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 occurs 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), the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70343), and the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79592). 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 2018, we examined the items and services currently provided 
under the OPPS, reviewing categories of integral, ancillary, 
supportive, dependent, or adjunctive items and services for which we 
believe payment would be appropriately packaged into payment of the 
primary service that they support. Specifically, we examined the HCPCS 
code definitions (including CPT code descriptors) and outpatient 
hospital billing patterns to determine whether there were categories of 
codes for which packaging would be appropriate according to existing 
OPPS packaging policies or a logical expansion of those existing OPPS 
packaging policies. In this proposed rule, for CY 2018, we are 
proposing to conditionally package the costs of selected newly 
identified ancillary services into payment with a primary service where 
we believe that the proposed packaged item or service is integral, 
ancillary, supportive, dependent, or adjunctive to the provision of 
care that was reported by the primary service HCPCS code. Below we 
discuss the items and services that we are proposing to package 
beginning in CY 2018.
b. CY 2018 Drug Administration Packaging Proposal
(1) Background of Drug Administration Packaging Policy
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74942 
through 74945), we finalized a policy to unconditionally package 
procedures described by add-on codes. Procedures described by add-on 
codes represent an extension or continuation of a primary procedure, 
which means that they are typically supportive, dependent, or 
adjunctive to a primary service. The primary code defines the purpose 
and typical scope of the patient encounter and the add-on code 
describes incremental work, when the extent of the procedure 
encompasses a range rather than a single defined endpoint applicable to 
all patients. Given the dependent nature and adjunctive characteristics 
of procedures described by add-on codes and in light of longstanding 
OPPS packaging principles, we finalized a policy to unconditionally 
package add-on codes with the primary procedure. However,

[[Page 33585]]

in response to stakeholder comments on the appropriateness of packaging 
drug administration add-on codes, we did not finalize our proposal to 
package drug administration add-on codes (78 FR 74945).
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66819 
through 66822), we conditionally packaged payment for ancillary 
services assigned to APCs with a geometric mean cost of less than or 
equal to $100 (prior to application of the conditional packaging status 
indicator). The ancillary services that we identified are primarily 
minor diagnostic tests and procedures that are often performed with a 
primary service, although there are instances where hospitals provide 
such services alone and without another primary service during the same 
encounter. Under this policy, we assigned the conditionally packaged 
services to status indicator ``Q1'', which indicates that the service 
is separately payable when not billed on the same claim as a HCPCS code 
assigned status indicator ``S'', ``T'', or ``V''. Exclusions to this 
ancillary service packaging policy include preventive services, certain 
psychiatric and counseling-related services, and certain low-cost drug 
administration services. In the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66819), we indicated that we did not propose to 
package certain low-cost drug administration services because we were 
examining various alternative payment policies for drug administration, 
including the associated drug administration add-on codes.
(2) Proposed Packaging of Level 1 and Level 2 Drug Administration 
Services
    As stated earlier, 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. To achieve this goal, it is important that we are consistent 
in our approach to packaging items and services under the established 
packaging categories. Although we excluded packaging of low-cost drug 
administration services from the ancillary services packaging policy in 
the CY 2015 rulemaking, separate payment for drug administration 
services is an example of inconsistent application of our packaging 
policy where we are continuing to pay separately for a service, 
regardless of cost and performance with another service. Given the 
frequency of drug administration in hospital outpatient care, we 
believe it is appropriate for us to reconsider whether payment for drug 
administration services with a geometric mean cost of less than or 
equal to $100 (prior to application of the conditional packaging status 
indicator) should continue to be excluded from the ancillary services 
packaging policy.
    As part of our review of CY 2016 claims data used for ratesetting 
in this CY 2018 OPPS/ASC proposed rule, we examined drug administration 
billing patterns and payment for drug administration services under the 
OPPS. Based on our analysis of CY 2016 claims data (used for the CY 
2018 OPPS/ASC proposed rule ratesetting), we found that the geometric 
mean cost for APC 5691 (Level 1 Drug Administration) is approximately 
$37 and the geometric mean cost for APC 5692 (Level 2 Drug 
Administration) is approximately $59. In addition, we observed that 
drug administration services in APC 5692 are frequently reported on the 
same claim with other separately payable services, such as an emergency 
department or clinic visit, while drug administration services in APC 
5691 are sometimes reported with other separately payable services. 
Accordingly, Medicare data show that these drug administration services 
are currently being provided as part of another separately payable 
service for which two separate payments are made, and support that 
packaging these services, when they are reported with another 
separately payable services, is appropriate. Further, packaging for 
Levels 1 and 2 Drug Administration services is consistent with the 
ancillary packaging policy that was adopted in CY 2015, as noted 
earlier in this section. Therefore, given the low geometric mean costs 
of drug administration services in APC 5691 and APC 5692 as well as 
their associated billing patterns, we believe that when these services 
are performed with another separately payable service, they should be 
packaged, but that they should be separately paid when performed alone. 
That is, we believe it is no longer necessary to exclude low-cost drug 
administration services from packaging under the ancillary services 
packaging policy adopted in CY 2015.
    In addition, as we examine payment differences between the hospital 
outpatient department and the physician office for similar services, 
under the OPPS, hospitals may receive separate payments for a clinic 
(office) visit and a drug administration service. In contrast, 
physicians are not eligible to receive payment for an office visit when 
a drug administration service is also provided. As a result, hospitals 
receive a higher payment than a physician office for furnishing the 
same drug administration service. We believe that conditional packaging 
of drug administration services would promote equitable payment between 
the physician office and the hospital outpatient hospital department. 
Accordingly, for CY 2018, we are proposing to conditionally package 
payment for HCPCS codes describing drug administration services in APC 
5691 and APC 5692, except for add-on codes and preventive services, 
when these services are performed with another service.
    Because preventive services are excluded from our packaging 
policies, we are proposing to continue to pay separately for Medicare 
Part B vaccine administration services. In addition, at this time, we 
are not proposing to package any drug administration services in APC 
5693 (Level 3 Drug Administration) or APC 5694 (Level 4 Drug 
Administration), but are interested in public comments pertaining to 
whether services in these APCs may be appropriate for packaging. The 
proposed status indicators for drug administration services in APC 5691 
and APC 5692 are listed in Table 7 below.

   Table 7--Proposed CY 2018 Status Indicators for Drug Administration
                     Services in Level 1 and Level 2
                        Drug Administration APCs
------------------------------------------------------------------------
                                                             Proposed CY
           HCPCS code                 Short descriptor       2018 status
                                                              indicator
------------------------------------------------------------------------
                  APC 5691--Level 1 Drug Administration
------------------------------------------------------------------------
95115...........................  Immunotherapy one                  Q1
                                   injection.
95117...........................  Immunotherapy injections           Q1
95144...........................  Antigen therapy services           Q1

[[Page 33586]]

 
95145...........................  Antigen therapy services           Q1
95146...........................  Antigen therapy services           Q1
95165...........................  Antigen therapy services           Q1
95170...........................  Antigen therapy services           Q1
96361...........................  Hydrate iv infusion add-            S
                                   on.
96366...........................  Ther/proph/diag iv inf              S
                                   add-on.
96370...........................  Sc ther infusion addl hr            S
96375...........................  Tx/pro/dx inj new drug              S
                                   add-on.
96377...........................  Application on-body                Q1
                                   injector.
96379...........................  Ther/prop/diag inj/inf             Q1
                                   proc.
96423...........................  Chemo ia infuse each                S
                                   addl hr.
96549...........................  Chemotherapy unspecified           Q1
G0008...........................  Admin influenza virus               S
                                   vac.
G0009...........................  Admin pneumococcal                  S
                                   vaccine.
G0010...........................  Admin hepatitis b                   S
                                   vaccine.
------------------------------------------------------------------------
                  APC 5692--Level 2 Drug Administration
------------------------------------------------------------------------
90471...........................  Immunization admin......           Q1
90473...........................  Immune admin oral/nasal.           Q1
95147...........................  Antigen therapy services           Q1
95148...........................  Antigen therapy services           Q1
95149...........................  Antigen therapy services           Q1
96367...........................  Tx/proph/dg addl seq iv             S
                                   inf.
96371...........................  Sc ther infusion reset             Q1
                                   pump.
96372...........................  Ther/proph/diag inj sc/            Q1
                                   im.
96401...........................  Chemo anti-neopl sq/im..           Q1
96402...........................  Chemo hormon antineopl             Q1
                                   sq/im.
96405...........................  Chemo intralesional up             Q1
                                   to 7.
96411...........................  Chemo iv push addl drug.            S
96415...........................  Chemo iv infusion addl              S
                                   hr.
96417...........................  Chemo iv infus each addl            S
                                   seq.
------------------------------------------------------------------------

(3) Comment Solicitation Regarding Unconditionally Packaging Drug 
Administration Add-on Codes
    With respect to drug administration add-on codes, as discussed in 
the CY 2014 OPPS/ASC proposed rule (78 FR 43573), we proposed to 
unconditionally package all drug administration services described by 
add-on codes. In response to the proposal, commenters objected to 
packaging drug administration add-on codes, which typically describe 
each additional hour of infusion or each additional intravenous push, 
among others, in addition to the initial drug administration service. 
The commenters believed that such a policy could disadvantage providers 
of longer drug administration services, which are often protocol-driven 
and are not necessarily dictated by the hospital, but by the 
characteristics of the specific drug or biological being administered 
to the patient. In response to these comments, we stated in the CY 2014 
OPPS/ASC final rule with comment period (78 FR 74945) that, given the 
frequency of drug administration services in the hospital outpatient 
department and their use in such a wide variety of different drug 
treatment protocols for various diseases in all types of hospitals, 
further study of the payment methodology for these services was 
warranted at that time. Therefore, we did not finalize our proposal to 
package the drug administration add-on codes in CY 2014. However, we 
stated we would continue to explore other payment options, including 
packaging and variations on packaging, in future years.
    We are not proposing to package drug administration add-on codes 
for CY 2018 in this proposed rule because we want stakeholder input on 
a payment methodology that supports the principles of a prospective 
payment system while ensuring patient access to prolonged infusion 
services. Instead, we are soliciting public comment on whether 
conditionally or unconditionally packaging such codes would create 
access to care issues or have other unintended consequences. 
Specifically, we are requesting public comments on the following: (1) 
Whether we should conditionally or unconditionally package drug 
administration services add-on codes; (2) how we should consider or 
incorporate the varied clinical drug protocols that result in different 
infusion times into a drug administration service add-on code payment 
proposal; and (3) other recommendations on an encounter-based payment 
approach for drug administration services that are described by add-on 
codes when furnished in the hospital outpatient setting.
c. Analysis of Packaging of Pathology Services in the OPPS
    At the August 22, 2016 HOP Panel meeting, a stakeholder expressed 
concern regarding conditional packaging of multiple pathology services. 
When multiple conditionally packaged services are billed on the same 
claim, the costs of the lowest paying services are bundled into the 
cost of the highest paying service and payment is made based on the 
highest single payable service. The stakeholder requested that CMS 
create a pathology

[[Page 33587]]

composite to more appropriately pay for claims with only multiple 
pathology services and no other separately payable service such as a 
surgical procedure or a clinic visit. The HOP panel recommended that 
CMS develop a composite APC for pathology services when multiple 
pathology services are provided on a claim with no other payable 
services. The HOP Panel also requested that CMS take into consideration 
the stakeholder presentation comments made at the August 22, 2016 panel 
meeting regarding hospital pathology laboratories as CMS evaluates 
conditional packaging to determine whether an accommodation can be 
made. Specifically, the stakeholder expressed concern with conditional 
packaging of pathology services, particularly when payment is limited 
to the single highest paying code, regardless of the number of services 
provided or specimens tested.
    In response to these HOP Panel requests and recommendation, we 
stated that we may consider the stakeholders' request for a pathology 
composite APC as well as additional composite APCs for future 
rulemaking (81 FR 79588). In light of these requests and 
recommendation, in development of this CY 2018 OPPS/ASC proposed rule, 
we evaluated and considered a pathology composite APC when multiple 
pathology services are performed and billed without a separately 
payable service on the same claim. To understand the frequency of 
billing multiple pathology services and no other separately payable 
codes on the same claim by hospital outpatient departments, we examined 
currently available claims data to identify the frequency distribution 
of pathology codes within the CPT code range 88300 to 88361. The claim 
frequency breakdown is displayed in Table 8 below.

           Table 8--Distribution of Pathology Only OPPS Claims
------------------------------------------------------------------------
                                             Number of      Percent of
              Claim subset                    claims          claims
------------------------------------------------------------------------
Claims having 1 pathology code..........         464,039           74.29
Claims having 2 pathology codes.........         101,954           16.32
Claims having 3 pathology codes.........          38,163            6.11
Claims having 4 or more pathology codes.          20,435            3.27
------------------------------------------------------------------------

    Based on our claims analysis, the majority of pathology-only OPPS 
claims are reported with one pathology code. Therefore, we believe that 
it is neither a frequent occurrence nor a common occurrence for a 
provider to submit a claim for payment under the OPPS with multiple 
pathology services and no other separately payable service.
    With regard to the HOP Panel's recommendation to develop a 
composite APC for pathology services when multiple pathology services 
are provided on a claim with no other payable services, we used CY 2016 
claims data available for the CY 2018 OPPS/ASC proposed rule to model 
four hypothetical pathology composite APCs. That is, following our 
standard packaging methodology, we modeled four hypothetical pathology 
composite APCs based on the following clinical scenarios that were 
specifically requested by a stakeholder at the August 2016 HOP Panel 
meeting:
     Hypothetical Composite APC A: Claims that contain 2-4 
pathology units (CPT codes 88302 through 88309) with or without special 
stains (CPT codes 88312-88314);
     Hypothetical Composite APC B: Claims that contain 5 or 
more pathology units (CPT codes 88302 through 88309) with or without 
special stains (CPT codes 88312-88314);
     Hypothetical Composite APC C: Claims that contain 2-4 
pathology units (CPT codes 88302 through 88309) with immunostains (CPT 
codes 88341, 88342, 88346, 88350, 88360, 88361); and
     Hypothetical Composite APC D: Claims that contain 5 or 
more pathology units (CPT codes 88302 through 88309) with immunostains 
(CPT codes 88341, 88342, 88346, 88350, 88360, 88361).
    In addition, we evaluated the volume of services and costs for each 
hypothetical composite. Results from modeling the four composite 
scenarios show low claim volume, which indicates that the suggested 
pathology code combinations are infrequently billed by hospital 
outpatient departments, which may mean that these are not likely 
clinical scenarios in hospital outpatient departments. A summary of the 
results from our composite analysis are presented in Table 9 below. We 
refer readers to Addendum B to the CY 2018 OPPS/ASC proposed rule 
(which is available via the Internet on the CMS Web site) for the CPT 
code descriptors.

                  Table 9--Cost and Utilization Statistics of Four Hypothetical Composite APCs
----------------------------------------------------------------------------------------------------------------
                                                                                                       Mean
                                     Number of    Geometric mean  Mean pathology   Mean special     immunostain
   Hypothetical composite APC         claims         unit cost       units per     stains units      units per
                                                                       claim         per claim         claim
----------------------------------------------------------------------------------------------------------------
A...............................         139,238          $95.82            2.42            0.19            0.02
B...............................          14,388          265.36            6.78            0.24            0.03
C...............................             877          544.71            2.46            0.14            3.98
D...............................             214        1,531.87            6.56            0.12            4.28
----------------------------------------------------------------------------------------------------------------

    As we move toward larger payment bundles under the OPPS, the 
necessity of composite APCs diminishes. For example, in this CY 2018 
OPPS/ASC proposed rule, we are proposing to delete composite APC 8001 
(LDR Prostate Brachytherapy Composite) and to provide payment for the 
component procedures through the C-APC payment methodology. Composite 
APCs were a precursor to C-APCs. In CY 2008, we implemented composite 
APCs to provide a single payment for groups of services that are 
typically performed together during a single clinical encounter and 
that result in the provision of a complete service (72 FR 66650 through 
66652). Because a C-APC would treat all individually reported codes as 
representing components of the comprehensive service, all of the

[[Page 33588]]

elements of the composite service are included in the C-APC payment. In 
addition, given the infrequent occurrence of multiple pathology 
services on the same claim without a separately payable service, we do 
not believe a composite APC is necessary or warranted.
    Therefore, for CY 2018, we are not proposing to create a pathology 
composite APC or additional composite APCs for stakeholder-requested 
services, such as X-ray services, respiratory services, cardiology 
services, or allergy testing services. However, we are soliciting 
public comments on our packaging policies below.
d. Comment Solicitation on Packaging of Items and Services Under the 
OPPS
    As previously noted, packaging is an inherent principle of a 
prospective payment system. The OPPS, like other prospective payment 
systems, relies on the concept of averaging, where the payment may be 
more or less than the estimated costs of providing a service or package 
of services for a particular patient, but with the exception of outlier 
cases, is adequate to ensure access to appropriate care. Packaging and 
bundling payment for multiple interrelated services into a single 
payment creates incentives for providers to furnish services in the 
most efficient way by enabling hospitals to manage their resources with 
maximum flexibility, thereby encouraging long-term cost containment. 
Decisions about packaging and bundling payment involve a balance 
between ensuring some separate payment for individual services or items 
while establishing incentives for efficiency through larger units of 
payment.
    As the OPPS continues to move towards a prospectively determined 
encounter-based payments and away from separate fee schedule-like 
payments, we continue to hear concerns from stakeholders that our 
packaging policies may be hampering patient access or resulting in 
other undesirable consequences. However, we have not observed 
significant fluctuations in our data that show a sharp decline of the 
volume of packaged services, nor have we heard from Medicare 
beneficiaries specifically about access issues or other concerns with 
packaged items and services. However, given that aggregate spending and 
utilization continue to increase for covered outpatient services, it is 
unclear what, if any, adverse effect packaging has on beneficiary 
access to care. Specifically, within the framework of existing 
packaging categories, such as drugs that function as supplies in a 
surgical procedure or diagnostic test or procedure, we are interested 
in stakeholder feedback on common clinical scenarios involving 
currently packaged HCPCS codes for which stakeholders believe packaged 
payment is not appropriate under the OPPS. Likewise, outside the 
framework of existing packaging categories, we are interested in 
stakeholder feedback on common clinical scenarios involving separately 
payable HCPCS codes for which payment would be most appropriately 
packaged under the OPPS. We are soliciting public comments from a broad 
cross-section of stakeholders, including beneficiaries, patient 
advocates, hospital providers, clinicians, manufacturers, and other 
interested parties.
4. Proposed 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 2017 OPPS/
ASC final rule with comment period (81 FR 79594 through 79595), we 
applied this policy and calculated the relative payment weights for 
each APC for CY 2017 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 2018, as we did 
for CY 2017, we are proposing to continue to apply the policy 
established in CY 2013 and calculate relative payment weights for each 
APC for CY 2018 using geometric mean-based APC costs.
    For CY 2012 and CY 2013, outpatient clinic visits were assigned to 
one of five 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 2018, as we did for CY 2017, we 
are proposing to continue to standardize all of the relative payment 
weights to APC 5012. 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 2018, as we did for CY 2017, we are proposing 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 2018 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 are proposing to compare the estimated 
aggregate weight using the CY 2017 scaled relative payment weights to 
the estimated aggregate weight using the proposed CY 2018 unscaled 
relative payment weights.
    For CY 2017, we multiplied the CY 2017 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2016 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 2018, we 
are proposing to apply the same process using the estimated CY 2018 
unscaled relative payment weights rather than scaled relative payment 
weights. We are proposing to calculate the weight scalar by dividing 
the CY 2017 estimated aggregate weight by the unscaled CY 2018 
estimated aggregate weight.
    For a detailed discussion of the weight scalar calculation, we 
refer readers to the OPPS claims accounting

[[Page 33589]]

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 2018 OPPS proposed rule link and open the claims 
accounting document link at the bottom of the page.
    We are proposing to compare the estimated unscaled relative payment 
weights in CY 2018 to the estimated total relative payment weights in 
CY 2017 using CY 2016 claims data, holding all other components of the 
payment system constant to isolate changes in total weight. Based on 
this comparison, we are proposing to adjust the calculated CY 2018 
unscaled relative payment weights for purposes of budget neutrality. We 
are proposing to adjust the estimated CY 2018 unscaled relative payment 
weights by multiplying them by a proposed weight scaler of 1.328 to 
ensure that the proposed CY 2018 relative payment weights are scaled to 
be budget neutral. The proposed CY 2018 relative payment weights listed 
in Addenda A and B to this proposed rule (which are available via the 
Internet on the CMS Web site) were scaled and incorporate the 
recalibration adjustments discussed in sections II.A.1. and II.A.2. of 
this 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 proposed rule) 
is included in the proposed budget neutrality calculations for the CY 
2018 OPPS.

B. Proposed 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 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19931), consistent with current law, based on IHS 
Global Insight, Inc.'s fourth quarter 2016 forecast of the FY 2018 
market basket increase, the proposed FY 2018 IPPS market basket update 
is 2.9 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 
2018.
    Specifically, section 1833(t)(3)(F)(i) of the Act requires that, 
for 2012 and subsequent years, the OPD fee schedule increase factor 
under subparagraph (C)(iv) be reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as 
equal to the 10-year moving average of changes in annual economy-wide, 
private nonfarm business multifactor productivity (MFP) (as projected 
by the Secretary for the 10-year period ending with the applicable 
fiscal year, year, cost reporting period, or other annual period) (the 
``MFP adjustment''). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51689 through 51692), we finalized our methodology for calculating and 
applying the MFP adjustment, and then revised this methodology as 
discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49509). In the 
FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19931 through 19932), we 
discussed the calculation of the proposed MFP adjustment for FY 2018, 
which is -0.4 percentage point.
    We are proposing that if more recent data become subsequently 
available after the publication of this 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 2018 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 the CY 2018 OPPS/ASC final rule with comment period.
    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 2018, 
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, we are proposing to 
apply a 0.75 percentage point reduction to the OPD fee schedule 
increase factor for CY 2018.
    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 proposing to apply an OPD fee schedule increase factor of 
1.75 percent for the CY 2018 OPPS (which is 2.9 percent, the proposed 
estimate of the hospital inpatient market basket percentage increase, 
less the proposed 0.4 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 proposed rule.
    In this CY 2018 OPPS/ASC proposed rule, we are proposing to amend 
42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (9) to reflect the 
requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2018, 
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 2018.
    To set the OPPS conversion factor for this CY 2018 proposed rule, 
we are proposing to increase the CY 2017 conversion factor of $75.001 
by 1.75 percent. In accordance with section 1833(t)(9)(B) of the Act, 
we are proposing further to adjust the conversion factor for CY 2018 to 
ensure that any revisions made to the wage index and rural adjustment 
are made on a budget neutral basis. We are proposing to calculate an 
overall proposed budget neutrality factor of 0.9999 for wage index 
changes by comparing proposed total estimated payments from our 
simulation model using the proposed FY 2018 IPPS wage indexes to those

[[Page 33590]]

payments using the FY 2017 IPPS wage indexes, as adopted on a calendar 
year basis for the OPPS.
    For CY 2018, we are proposing to maintain the current rural 
adjustment policy, as discussed in section II.E. of this proposed rule. 
Therefore, the proposed budget neutrality factor for the rural 
adjustment would be 1.0000.
    For CY 2018, we are proposing 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 proposed rule. We are proposing to calculate a CY 2018 
budget neutrality adjustment factor for the cancer hospital payment 
adjustment by comparing estimated total CY 2018 payments under section 
1833(t) of the Act, including the proposed CY 2018 cancer hospital 
payment adjustment, to estimated CY 2018 total payments using the CY 
2017 final cancer hospital payment adjustment as required under section 
1833(t)(18)(B) of the Act. The CY 2018 proposed estimated payments 
applying the proposed CY 2018 cancer hospital payment adjustment are 
less than estimated payments applying the CY 2017 final cancer hospital 
payment adjustment. Therefore, we are proposing to apply a budget 
neutrality adjustment factor of 1.0003 to the conversion factor for the 
cancer hospital payment adjustment. In accordance with section 16002(b) 
of the 21st Century Cures Act, we are applying a budget neutrality 
factor calculated as if the proposed cancer hospital adjustment target 
payment-to-cost ratio was 0.90, not the 0.89 target payment-to-cost 
ratio we are applying in section II.F. of this proposed rule.
    For this proposed rule, we estimate that proposed pass-through 
spending for drugs, biologicals, and devices for CY 2018 would equal 
approximately $26.2 million, which represents 0.04 percent of total 
projected CY 2018 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 2017 and the 0.04 percent 
estimate of proposed pass-through spending for CY 2018, resulting in a 
proposed adjustment for CY 2018 of 0.22 percent. Proposed estimated 
payments for outliers would remain at 1.0 percent of total OPPS 
payments for CY 2018. We estimate for this proposed rule that outlier 
payments would be 1.04 percent of total OPPS payments in CY 2017; the 
1.0 percent for proposed outlier payments in CY 2018 would constitute a 
0.04 percent decrease in payment in CY 2018 relative to CY 2017.
    For this proposed rule, we also are proposing 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 are proposing 
to make all other adjustments discussed above, but use a reduced OPD 
fee schedule update factor of -0.25 percent (that is, the proposed OPD 
fee schedule increase factor of 1.75 percent further reduced by 2.0 
percentage points). This would result in a proposed reduced conversion 
factor for CY 2018 of $74.953 for hospitals that fail to meet the 
Hospital OQR Program requirements (a difference of -1.530 in the 
conversion factor relative to hospitals that met the requirements).
    In summary, for CY 2018, we are proposing to amend Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (9) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2018 to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(v) of the Act. We are proposing to use a 
reduced conversion factor of $74.953 in the calculation of payments for 
hospitals that fail to meet the Hospital OQR Program requirements (a 
difference of -1.530 in the conversion factor relative to hospitals 
that met the requirements).
    For CY 2018, we are proposing to use a conversion factor of $76.483 
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 proposed OPD fee schedule increase 
factor of 1.75 percent for CY 2018, the required proposed wage index 
budget neutrality adjustment of approximately 0.9999, the proposed 
cancer hospital payment adjustment of 1.0003, and the proposed 
adjustment of 0.22 percentage point of projected OPPS spending for the 
difference in the pass-through spending and outlier payments that 
result in a proposed conversion factor for CY 2018 of $76.483.

C. Proposed 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 proposed rule.
    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). We are proposing to continue this policy 
for the CY 2018 OPPS. We refer readers to section II.H. of this 
proposed rule 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 the claims accounting narrative included with the 
supporting documentation for this proposed rule (which is available via 
the Internet on the CMS Web site), for estimating APC costs, we 
standardize 60 percent of estimated claims costs for geographic area 
wage variation using the same proposed FY 2018 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 and amended section 1833(t) of the Act

[[Page 33591]]

to add 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 2018 OPPS, we are proposing 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, the rural floor, and 
rural floor budget neutrality) is less than 1.00 (as discussed below, 
we are proposing not to extend the imputed floor under the OPPS for CY 
2018 and subsequent years). 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. We are inviting public comments on this proposal.
    In addition to the changes required by the Affordable Care Act, we 
note that the proposed FY 2018 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 provisions, an adjustment for 
occupational mix, and an adjustment to the wage index based on 
commuting patterns of employees (the out-migration adjustment). We note 
that in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19905), we 
proposed not to apply the imputed floor to the IPPS wage index 
computations for FY 2018 and subsequent fiscal years. We refer readers 
to the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19898 through 19915) 
for a detailed discussion of all proposed changes to the FY 2018 IPPS 
wage indexes (including our proposal not to extend the imputed floor 
for FY 2018 and subsequent fiscal years). 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: https://obamawhitehouse.archives.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 contained in OMB Bulletin No. 13-01, 
effective October 1, 2014. In the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56913), we adopted revisions to statistical areas contained in OMB 
Bulletin No. 15-01, issued on July 15, 2015, which provided updates to 
and superseded OMB Bulletin No. 13-01 that was issued on February 28, 
2013. 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 final rule with comment period (81 FR 79598), we adopted the 
revisions to the OMB statistical area delineations contained in OMB 
Bulletin No. 15-01, effective January 1, 2017, beginning with the CY 
2017 OPPS wage indexes.
    CBSAs are made up of one or more constituent counties. Each CBSA 
and constituent county has its own unique identifying codes. The FY 
2018 IPPS/LTCH PPS proposed rule (82 FR 19898 through 19899) discusses 
the two different lists of codes to identify counties: Social Security 
Administration (SSA) codes and Federal Information Processing Standard 
(FIPS) codes. Historically, CMS has listed and used SSA and FIPS county 
codes to identify and crosswalk counties to CBSA codes for purposes of 
the IPPS and OPPS wage indexes. However, the SSA county codes are no 
longer being maintained and updated, although the FIPS codes continue 
to be maintained by the U.S. Census Bureau. The Census Bureau's most 
current statistical area information is derived from ongoing census 
data received since 2010; the most recent data are from 2015. In the FY 
2018 IPPS/LTCH PPS proposed rule (81 FR 19898), for purposes of 
crosswalking counties to CBSAs for the IPPS wage index, we proposed to 
discontinue the use of the SSA county codes and begin using only the 
FIPS county codes. Similarly, for the purposes of crosswalking counties 
to CBSAs for the OPPS wage index, we are proposing to discontinue the 
use of SSA county codes and begin using only the FIPS county codes. We 
are inviting public comments on this proposal.
    The Census Bureau maintains a complete list of changes to counties 
or county equivalent entities on the Web site at: https://www.census.gov/geo/reference/county-changes.html. In our proposed 
transition to using only FIPS codes for counties for the IPPS wage 
index, we proposed to update the FIPS codes used for crosswalking 
counties to CBSAs for the IPPS wage index to incorporate changes to the 
counties or county equivalent entities included in the Census Bureau's 
most recent list. Based on information included in the Census Bureau's 
Web site, since 2010, the Census Bureau has made the following updates 
to the FIPS codes for counties or county equivalent entities:
     Petersburg Borough, AK (FIPS State County Code 02-195), 
CBSA 02, was created from part of former Petersburg Census Area (02-
195) and part of Hoonah-Angoon Census Area (02-105). The CBSA code 
remains 02.
     The name of La Salle Parish, LA (FIPS State County Code 
22-059), CBSA 14, is now LaSalle Parish, LA (FIPS State County Code 22-
059). The CBSA code remains as 14.
     The name of Shannon County, SD (FIPS State County Code 46-
113), CBSA 43, is now Oglala Lakota County, SD (FIPS State County Code 
46-102). The CBSA code remains as 43.
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19898 through 
19899), for the IPPS, we proposed to implement these FIPS code updates, 
effective October 1, 2017, beginning with the FY 2018 wage indexes. We 
proposed to include these updates to calculate area wage indexes in a 
manner that is generally consistent with the CBSA-based methodologies 
finalized in the FY 2005 IPPS final rule and the FY

[[Page 33592]]

2015 IPPS/LTCH PPS final rule. We noted that while the county update 
changes listed earlier changed the county names, the CBSAs to which 
these counties map did not change from the prior counties. Therefore, 
there would be no impact or change to hospitals in these counties; they 
would continue to be considered rural for the IPPS wage index under 
these changes. Consistent with the FY 2018 IPPS/LTCH PPS proposed rule, 
for purposes of the OPPS, we are proposing to implement these revisions 
effective January 1, 2018, beginning with the CY 2018 OPPS wage 
indexes. We believe it is important to use the latest counties or 
county equivalent entities in order to properly crosswalk hospitals 
from a county to a CBSA for purposes of the OPPS wage index. In 
addition, we believe that using the latest FIPS codes will allow us to 
maintain a more accurate and up-to-date payment system that reflects 
the reality of population shifts and labor market conditions. Tables 2 
and 3 for the FY 2018 IPPS/LTCH PPS proposed 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 these county 
changes. We are inviting public comments on our proposals.
    For this CY 2018 OPPS/ASC proposed rule, we are proposing to use 
the FY 2018 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 2018. Therefore, any adjustments for the FY 
2018 IPPS post-reclassified wage index would be reflected in the final 
CY 2018 OPPS wage index. (We refer readers to the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19898 through 19915) and the proposed FY 2018 
hospital wage index files posted on the CMS Web site). We are inviting 
public comments on this proposal.
    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 are proposing to continue this 
policy for CY 2018. The following is a brief summary of the major 
proposed FY 2018 IPPS wage index policies and adjustments that we are 
proposing to apply to these hospitals under the OPPS for CY 2018. We 
are inviting public comments on these proposals. We further refer 
readers to the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19898 through 
19915) for a detailed discussion of the proposed changes to the FY 2018 
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 2018, we are proposing 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). Because this 3-
year transition will end in CY 2017, it will no longer be applied in CY 
2018.
    In addition, under the IPPS, the imputed floor policy is set to 
expire effective October 1, 2017, and in the IPPS/LTCH PPS proposed 
rule, we proposed not to extend the imputed floor policy for FY 2018 
and subsequent fiscal years (82 FR 19904 through 19905). For purposes 
of the CY 2018 OPPS, the imputed floor policy is set to expire 
effective December 31, 2017, and consistent with the IPPS, we are 
proposing not to extend the imputed floor policy beyond this date.
    For CMHCs, for CY 2018, we are proposing 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). Because this 3-year transition will end in CY 2017, it will not 
be applied in CY 2018. Consistent with our current policy, the wage 
index that applies to CMHCs would include the rural floor adjustment, 
but would not include the imputed floor adjustment because as discussed 
above, we are proposing to not extend the imputed floor policy beyond 
December 31, 2107. The wage index that applies to CMHCs also would not 
include the out-migration adjustment because that adjustment only 
applies to hospitals.
    Table 2 associated with the FY 2018 IPPS/LTCH PPS proposed 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 would receive the adjustment for FY 2018. We are 
including the out-migration adjustment information from Table 2 
associated with the FY 2018 IPPS/LTCH PPS proposed rule as Addendum L 
to this proposed rule with the addition of non-IPPS hospitals that 
would receive the section 505 out-migration adjustment under the CY 
2018 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 proposed FY 2018 IPPS wage index tables and Addendum L.

D. Proposed Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses overall hospital-specific CCRs calculated 
from the hospital's most recent cost report to determine outlier 
payments, payments for pass-through devices, and monthly interim 
transitional corridor payments

[[Page 33593]]

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 earlier 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 this proposed rule, we are proposing to update the default 
ratios for CY 2018 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 refer readers to the CY 2018 OPPS 
proposed rule Claims Accounting Narrative that is posted on the CMS Web 
site. Table 10 below lists the proposed statewide average default CCRs 
for OPPS services furnished on or after January 1, 2018, based on 
proposed rule data.

                                Table 10--Proposed CY 2018 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
                                                                                                     Previous
                                                                                    Proposed CY     default CCR
                     State                                 Urban/rural             2018 default    (CY 2017 OPPS
                                                                                        CCR         Final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA........................................  RURAL...........................           0.582           0.449
ALASKA........................................  URBAN...........................           0.238           0.237
ALABAMA.......................................  RURAL...........................           0.191           0.196
ALABAMA.......................................  URBAN...........................           0.158           0.158
ARKANSAS......................................  RURAL...........................           0.192           0.196
ARKANSAS......................................  URBAN...........................           0.201           0.205
ARIZONA.......................................  RURAL...........................           0.237           0.238
ARIZONA.......................................  URBAN...........................           0.171           0.176
CALIFORNIA....................................  RURAL...........................           0.176           0.179
CALIFORNIA....................................  URBAN...........................           0.190           0.188
COLORADO......................................  RURAL...........................           0.351           0.354
COLORADO......................................  URBAN...........................           0.204           0.208
CONNECTICUT...................................  RURAL...........................           0.402           0.402
CONNECTICUT...................................  URBAN...........................           0.253           0.253
DISTRICT OF COLUMBIA..........................  URBAN...........................           0.279           0.286
DELAWARE......................................  URBAN...........................           0.296           0.288
FLORIDA.......................................  RURAL...........................           0.170           0.169
FLORIDA.......................................  URBAN...........................           0.141           0.143
GEORGIA.......................................  RURAL...........................           0.226           0.230
GEORGIA.......................................  URBAN...........................           0.187           0.196
HAWAII........................................  RURAL...........................           0.333           0.338
HAWAII........................................  URBAN...........................           0.314           0.319
IOWA..........................................  RURAL...........................           0.297           0.291
IOWA..........................................  URBAN...........................           0.247           0.252
IDAHO.........................................  RURAL...........................           0.341           0.341
IDAHO.........................................  URBAN...........................           0.404           0.401
ILLINOIS......................................  RURAL...........................           0.232           0.241
ILLINOIS......................................  URBAN...........................           0.216           0.209
INDIANA.......................................  RURAL...........................           0.305           0.272
INDIANA.......................................  URBAN...........................           0.217           0.218
KANSAS........................................  RURAL...........................           0.272           0.269
KANSAS........................................  URBAN...........................           0.202           0.194
KENTUCKY......................................  RURAL...........................           0.192           0.194
KENTUCKY......................................  URBAN...........................           0.188           0.189
LOUISIANA.....................................  RURAL...........................           0.273           0.217
LOUISIANA.....................................  URBAN...........................           0.200           0.201
MASSACHUSETTS.................................  RURAL...........................           0.315           0.316
MASSACHUSETTS.................................  URBAN...........................           0.349           0.345
MAINE.........................................  RURAL...........................           0.419           0.425
MAINE.........................................  URBAN...........................           0.412           0.413
MARYLAND......................................  RURAL...........................           0.263           0.264
MARYLAND......................................  URBAN...........................           0.228           0.229
MICHIGAN......................................  RURAL...........................           0.308           0.295
MICHIGAN......................................  URBAN...........................           0.323           0.324
MINNESOTA.....................................  RURAL...........................           0.374           0.398
MINNESOTA.....................................  URBAN...........................           0.304           0.319
MISSOURI......................................  RURAL...........................           0.226           0.222
MISSOURI......................................  URBAN...........................           0.243           0.261
MISSISSIPPI...................................  RURAL...........................           0.227           0.224
MISSISSIPPI...................................  URBAN...........................           0.165           0.167

[[Page 33594]]

 
MONTANA.......................................  RURAL...........................           0.475           0.450
MONTANA.......................................  URBAN...........................           0.376           0.368
NORTH CAROLINA................................  RURAL...........................           0.207           0.216
NORTH CAROLINA................................  URBAN...........................           0.215           0.223
NORTH DAKOTA..................................  RURAL...........................           0.366           0.411
NORTH DAKOTA..................................  URBAN...........................           0.372           0.334
NEBRASKA......................................  RURAL...........................           0.298           0.294
NEBRASKA......................................  URBAN...........................           0.231           0.238
NEW HAMPSHIRE.................................  RURAL...........................           0.311           0.320
NEW HAMPSHIRE.................................  URBAN...........................           0.262           0.279
NEW JERSEY....................................  URBAN...........................           0.201           0.195
NEW MEXICO....................................  RURAL...........................           0.220           0.225
NEW MEXICO....................................  URBAN...........................           0.284           0.280
NEVADA........................................  RURAL...........................           0.194           0.196
NEVADA........................................  URBAN...........................           0.114           0.123
NEW YORK......................................  RURAL...........................           0.309           0.309
NEW YORK......................................  URBAN...........................           0.286           0.292
OHIO..........................................  RURAL...........................           0.289           0.292
OHIO..........................................  URBAN...........................           0.208           0.207
OKLAHOMA......................................  RURAL...........................           0.220           0.231
OKLAHOMA......................................  URBAN...........................           0.173           0.180
OREGON........................................  RURAL...........................           0.280           0.280
OREGON........................................  URBAN...........................           0.336           0.344
PENNSYLVANIA..................................  RURAL...........................           0.263           0.274
PENNSYLVANIA..................................  URBAN...........................           0.176           0.179
PUERTO RICO...................................  URBAN...........................           0.549           0.527
RHODE ISLAND..................................  URBAN...........................           0.292           0.291
SOUTH CAROLINA................................  RURAL...........................           0.187           0.185
SOUTH CAROLINA................................  URBAN...........................           0.186           0.190
SOUTH DAKOTA..................................  RURAL...........................           0.391           0.383
SOUTH DAKOTA..................................  URBAN...........................           0.238           0.229
TENNESSEE.....................................  RURAL...........................           0.170           0.181
TENNESSEE.....................................  URBAN...........................           0.177           0.180
TEXAS.........................................  RURAL...........................           0.209           0.214
TEXAS.........................................  URBAN...........................           0.171           0.177
UTAH..........................................  RURAL...........................           0.351           0.349
UTAH..........................................  URBAN...........................           0.303           0.315
VIRGINIA......................................  RURAL...........................           0.193           0.191
VIRGINIA......................................  URBAN...........................           0.222           0.226
VERMONT.......................................  RURAL...........................           0.424           0.426
VERMONT.......................................  URBAN...........................           0.340           0.340
WASHINGTON....................................  RURAL...........................           0.269           0.271
WASHINGTON....................................  URBAN...........................           0.295           0.294
WISCONSIN.....................................  RURAL...........................           0.349           0.354
WISCONSIN.....................................  URBAN...........................           0.311           0.290
WEST VIRGINIA.................................  RURAL...........................           0.259           0.266
WEST VIRGINIA.................................  URBAN...........................           0.292           0.285
WYOMING.......................................  RURAL...........................           0.406           0.429
WYOMING.......................................  URBAN...........................           0.326           0.311
----------------------------------------------------------------------------------------------------------------

E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs) and 
Essential Access Community Hospitals (EACHs) Under Section 
1833(t)(13)(B) of the Act for CY 2018

    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural sole community hospitals 
(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) 
(Public Law 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 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

[[Page 33595]]

essential access community hospitals (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 2017. 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 this CY 2018 OPPS/ASC proposed rule, for the CY 2018 OPPS, we 
are proposing 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. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2018

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 are higher than those of other 
hospitals, 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). For CY 2017, the target PCR was 0.91, as discussed in 
the CY 2017 OPPS/ASC final rule with comment period (81 FR 79603 
through 7960).
2. Proposed Policy for CY 2018
    Section 16002(b) of the 21st Century Cures Act (Pub. L. 114-255) 
amended section 1833(t)(18) of the Act by adding subparagraph (C), 
which requires that in applying 42 CFR 419.43(i), that is, the payment 
adjustment for certain cancer hospitals, for services furnished on or 
after January 1, 2018, the target PCR adjustment be reduced by 1.0 
percentage point less than what would otherwise apply. Section 16002(b) 
also provides that, in addition to the percentage reduction, the 
Secretary may consider making an additional percentage point reduction 
to the target PCR that takes into account payment rates for applicable 
items and services described under section 1833(t)(21)(C) of the Act 
for hospitals that are not cancer hospitals described under section 
1886(d)(1)(B)(v) of the Act. Further, in making any budget

[[Page 33596]]

neutrality adjustment under section 1833(t) of the Act, the Secretary 
shall not take into account the reduced expenditures that result from 
application of section 1833(t)(18)(C) of the Act. In this CY 2018 OPPS/
ASC proposed rule, for CY 2018, we are proposing 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 this proposed rule, reduced by 1.0 percentage point to 
comply with section 16002(b) of the 21st Century Cures Act. We are not 
proposing an additional reduction beyond the 1.0 percentage point 
reduction required by section 16002(b) for CY 2018. To calculate the 
proposed CY 2018 target PCR, we use the same extract of cost report 
data from HCRIS, as discussed in section II.A. of this proposed rule, 
used to estimate costs for the CY 2018 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 2016 claims 
data that we used to model the impact of the proposed CY 2018 APC 
relative payment weights (3,701 hospitals) because it is appropriate to 
use the same set of hospitals that we are using to calibrate the 
modeled CY 2018 OPPS. The cost report data for the hospitals in this 
dataset were from cost report periods with fiscal year ends ranging 
from 2013 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 16 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 3,636 
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 90 percent of reasonable cost 
(weighted average PCR of 0.90). Therefore, after applying the 1.0 
percentage point reduction as required by section 16002(b) of the 21st 
Century Cures Act, we are proposing 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 0.89 for each cancer hospital.
    Table 11 below indicates the proposed estimated percentage increase 
in OPPS payments to each cancer hospital for CY 2018 due to the 
proposed cancer hospital payment adjustment policy. The actual amount 
of the CY 2018 cancer hospital payment adjustment for each cancer 
hospital will be determined at cost report settlement and will depend 
on each hospital's CY 2018 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 11--Proposed Estimated CY 2018 Hospital-Specific Payment
Adjustment for Cancer Hospitals To Be Provided at Cost Report Settlement
------------------------------------------------------------------------
                                                             Proposed
                                                             estimated
                                                            percentage
                                                            increase in
                                                          OPPS  payments
          Provider No.                Hospital name         for CY 2018
                                                              due to
                                                              payment
                                                            adjustment
                                                                (%)
------------------------------------------------------------------------
050146.........................  City of Hope                       32.9
                                  Comprehensive Cancer
                                  Center.
050660.........................  USC Norris Cancer                  11.5
                                  Hospital.
100079.........................  Sylvester Comprehensive            24.3
                                  Cancer Center.
100271.........................  H. Lee Moffitt Cancer              23.1
                                  Center & Research
                                  Institute.
220162.........................  Dana-Farber Cancer                 45.8
                                  Institute.
330154.........................  Memorial Sloan-                    47.1
                                  Kettering Cancer
                                  Center.
330354.........................  Roswell Park Cancer                21.4
                                  Institute.
360242.........................  James Cancer Hospital &            28.9
                                  Solove Research
                                  Institute.
390196.........................  Fox Chase Cancer Center             8.8
450076.........................  M.D. Anderson Cancer               76.9
                                  Center.
500138.........................  Seattle Cancer Care                53.9
                                  Alliance.
------------------------------------------------------------------------

G. Proposed 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 2017, the outlier 
threshold was met when the hospital's

[[Page 33597]]

cost of furnishing a service exceeded 1.75 times (the multiplier 
threshold) the APC payment amount and exceeded the APC payment amount 
plus $3,825 (the fixed-dollar amount threshold) (81 FR 79604 through 
79606). 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. Our estimate of total outlier payments as a percent of 
total CY 2016 OPPS payment, using CY 2016 claims available for this 
proposed rule, is approximately 1.0 percent of the total aggregated 
OPPS payments. Therefore, for CY 2016, we estimate that we paid the 
outlier target of 1.0 percent of total aggregated OPPS payments.
    For this proposed rule, using CY 2016 claims data and CY 2017 
payment rates, we estimate that the aggregate outlier payments for CY 
2017 would be approximately 1.0 percent of the total CY 2017 OPPS 
payments. We are providing estimated CY 2018 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. Proposed Outlier Calculation for CY 2018
    In this CY 2018 OPPS/ASC proposed rule, for CY 2018, we are 
proposing to continue our policy of estimating outlier payments to be 
1.0 percent of the estimated aggregate total payments under the OPPS. 
We are proposing 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 this proposed 
rule, we are proposing to continue our longstanding policy that if a 
CMHC's cost for partial hospitalization services, paid under APC 5853 
(Partial Hospitalization for CMHCs), 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 proposed 
APC 5853 payment rate. For further discussion of CMHC outlier payments, 
we refer readers to section VIII.D. of this proposed rule.
    To ensure that the estimated CY 2018 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we are proposing 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 $4,325.
    We calculated this proposed fixed-dollar threshold of $4,325 using 
the standard methodology most recently used for CY 2017 (81 FR 79604 
through 79605). For purposes of estimating outlier payments for this 
proposed rule, we used the hospital-specific overall ancillary CCRs 
available in the April 2017 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 2018 hospital outlier payments for this 
proposed rule, we inflated the charges on the CY 2016 claims using the 
same inflation factor of 1.104055 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2018 IPPS/LTCH PPS proposed 
rule (82 FR 20173). We used an inflation factor of 1.05074 to estimate 
CY 2017 charges from the CY 2016 charges reported on CY 2016 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.
    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 are proposing to apply the same CCR 
inflation adjustment factor that we proposed to apply for the FY 2018 
IPPS outlier calculation to the CCRs used to simulate the proposed CY 
2018 OPPS outlier payments to determine the fixed-dollar threshold. 
Specifically, for CY 2018, we proposed to apply an adjustment factor of 
0.979187 to the CCRs that were in the April 2017 OPSF to trend them 
forward from CY 2017 to CY 2018. The methodology for calculating this 
proposed adjustment was discussed in the FY 2018 IPPS/LTCH PPS proposed 
rule (82 FR 20173).
    To model hospital outlier payments for the proposed rule, we 
applied the overall CCRs from the April 2017 OPSF after adjustment 
(using the proposed CCR inflation adjustment factor of 0.979187 to 
approximate CY 2018 CCRs) to charges on CY 2016 claims that were 
adjusted (using the proposed charge inflation factor of 1.104055 to 
approximate CY 2018 charges). We simulated aggregated CY 2018 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 2018 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $4,325, 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

[[Page 33598]]

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 are proposing 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 
proposed rule.

H. Proposed 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 2018 OPPS/ASC proposed 
rule, the proposed payment rate for most services and procedures for 
which payment is made under the OPPS is the product of the proposed 
conversion factor calculated in accordance with section II.B. of this 
proposed rule and the proposed relative payment weight determined under 
section II.A. of this proposed rule. Therefore, the proposed national 
unadjusted payment rate for most APCs contained in Addendum A to this 
proposed rule (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 proposed rule (which is available 
via the Internet on the CMS Web site) was calculated by multiplying the 
proposed CY 2018 scaled weight for the APC by the proposed CY 2018 
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 proposed rule.
    We demonstrate below 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 this 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 note that, although 
blood and blood products with status indicator ``R'' and brachytherapy 
sources with status indicator ``U'' are not subject to wage adjustment, 
they are subject to reduced payments when a hospital fails to meet the 
Hospital OQR Program requirements.
    Individual providers interested in calculating the payment amount 
that they would receive for a specific service from the national 
unadjusted payment rates presented in Addenda A and B to this proposed 
rule (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 proposed 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 proposed 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 
proposed 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 proposed full CY 2018 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 proposed CY 2018 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 proposed rule. The proposed wage index values 
assigned to each area reflect the geographic statistical areas (which 
are based upon OMB standards) to which hospitals are proposed to be 
assigned for FY 2018 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 proposed changes to 
the FY 2018 IPPS wage indexes, as applied to the CY 2018 OPPS, we refer 
readers to section II.C. of this proposed rule. We are proposing to 
continue 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 proposed rule (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 2018 IPPS, which

[[Page 33599]]

are listed in Table 2 in the FY 2018 IPPS/LTCH PPS proposed rule 
available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 
This step is to be followed only if the hospital is not reclassified or 
redesignated under section 1886(d)(8) or section 1886(d)(10) of the 
Act.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the labor-related portion of the national unadjusted payment 
rate for the specific service by the wage index.

Xa is the labor-related portion of the national unadjusted 
payment rate (wage adjusted).
Xa = .60 * (national unadjusted payment rate) * applicable 
wage index.

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

Y is the nonlabor-related portion of the national unadjusted payment 
rate.
Y = .40 * (national unadjusted payment rate).
Adjusted Medicare Payment = Y + Xa.

    Step 6. If a provider is an SCH, 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 proposed CY 2018 full 
national unadjusted payment rate for APC 5071 is approximately $552.34. 
The proposed reduced national unadjusted payment rate for APC 5071 for 
a hospital that fails to meet the Hospital OQR Program requirements is 
approximately $541.29. This proposed reduced rate is calculated by 
multiplying the proposed reporting ratio of 0.980 by the proposed full 
unadjusted payment rate for APC 5071.
    The proposed FY 2018 wage index for a provider located in CBSA 
35614 in New York is 1.2892. The labor-related portion of the proposed 
full national unadjusted payment is approximately $427.25 (.60 * 
$552.34 * 1.2892). The labor-related portion of the proposed reduced 
national unadjusted payment is approximately $418.70 (.60 * $541.29 * 
1.2892). The nonlabor-related portion of the proposed full national 
unadjusted payment is approximately $220.94 (.40 * $552.34). The 
nonlabor-related portion of the proposed reduced national unadjusted 
payment is approximately $216.52 (.40 * $541.29). The sum of the labor-
related and nonlabor-related portions of the proposed full national 
adjusted payment is approximately $648.19 ($427.25 + $220.94). The sum 
of the portions of the proposed reduced national adjusted payment is 
approximately $635.22 ($418.70 + $216.52).

I. Proposed 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. Proposed OPPS Copayment Policy
    For CY 2018, we are proposing 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 are 
proposing to use the same standard rounding principles that we have 
historically used in instances where the application of our standard 
copayment methodology would result in a copayment amount that is less 
than 20 percent and cannot be rounded, under standard rounding 
principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66687) in which we discuss our 
rationale for applying these rounding principles.) The proposed 
national unadjusted copayment amounts for services payable under the 
OPPS that would be effective January 1, 2018 are included in Addenda A 
and B to this proposed rule (which are available via the Internet on 
the CMS Web site).
    As discussed in section XIII.E. of this proposed, for CY 2018, the 
proposed Medicare beneficiary's minimum unadjusted copayment and 
national unadjusted copayment for a service to which a reduced national 
unadjusted payment rate applies will equal the product of the reporting 
ratio and the national unadjusted copayment, or the product of the 
reporting ratio and the minimum unadjusted copayment, respectively, for 
the service.

[[Page 33600]]

    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.
     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 achieves 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).
3. Proposed 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, $110.47 is approximately 20 percent of the 
proposed full national unadjusted payment rate of $552.34. For APCs 
with only a minimum unadjusted copayment in Addenda A and B to this 
proposed rule (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 proposed rule. Calculate the rural 
adjustment for eligible providers as indicated in Step 6 under section 
II.H. of this proposed rule.
    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 proposed rule, 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 proposed unadjusted copayments for services payable under the 
OPPS that would be effective January 1, 2018, are shown in Addenda A 
and B to this proposed rule (which are available via the Internet on 
the CMS Web site). We note that the proposed national unadjusted 
payment rates and copayment rates shown in Addenda A and B to this 
proposed rule reflect the proposed CY 2018 OPD fee schedule increase 
factor discussed in section II.B. of this proposed rule.
    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. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies

A. Proposed 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

[[Page 33601]]

     Level II HCPCS codes, which are used primarily to identify 
products, supplies, temporary procedures, and services not described by 
CPT codes.
    CPT codes are established by the American Medical Association (AMA) 
and the Level II HCPCS codes are established by the CMS HCPCS 
Workgroup. These codes are updated and changed throughout the year. CPT 
and HCPCS code changes that affect the OPPS are published both through 
the annual rulemaking cycle and through the OPPS quarterly update 
Change Requests (CRs). CMS releases new Level II HCPCS codes to the 
public or recognizes the release of new CPT codes by the AMA and makes 
these codes effective (that is, the codes can be reported on Medicare 
claims) outside of the formal rulemaking process via OPPS quarterly 
update CRs. Based on our review, we assign the new CPT and Level II 
HCPCS codes to interim status indicators (SIs) and APCs. 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. Those items, 
procedures, or services not paid separately under the hospital OPPS are 
assigned to appropriate status indicators. Certain payment status 
indicators provide separate payment, while other payment status 
indicators do not. Section XI. of this proposed rule discusses the 
various status indicators used under the OPPS.
    In Table 12 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 12--Comment Timeframe for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
    OPPS quarterly update CR         Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April l, 2017...................  Level II HCPCS      April 1, 2017.....  CY 2018 OPPS/ASC    CY 2018 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
July 1, 2017....................  Level II HCPCS      July 1, 2017......  CY 2018 OPPS/ASC    CY 2018 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
                                  Category I          July 1, 2017......  CY 2018 OPPS/ASC    CY 2018 OPPS/ASC
                                   (certain vaccine                        proposed rule.      final rule with
                                   codes) and III                                              comment period.
                                   CPT codes.
October 1, 2017.................  Level II HCPCS      October 1, 2017...  CY 2018 OPPS/ASC    CY 2019 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
January 1, 2018.................  Level II HCPCS      January 1, 2018...  CY 2018 OPPS/ASC    CY 2019 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
                                  Category I and III  January 1, 2018...  CY 2018 OPPS/ASC    CY 2018 OPPS/ASC
                                   CPT Codes.                              proposed rule.      final rule with
                                                                                               comment period.
----------------------------------------------------------------------------------------------------------------

1. Proposed Treatment of New HCPCS Codes That Were Effective April 1, 
2017 for Which We Are Soliciting Public Comments in This CY 2018 OPPS/
ASC Proposed Rule
    Through the April 2017 OPPS quarterly update CR (Transmittal 3728, 
Change Request 10005, dated March 3, 2017), we made effective six new 
Level II HCPCS codes for separate payment under the OPPS. In this CY 
2018 OPPS/ASC proposed rule, we are soliciting public comments on the 
proposed APC and status indicator assignments for these Level II HCPCS 
codes, which are listed in Table 13 of this proposed rule. The proposed 
payment rates for these codes, where applicable, can be found in 
Addendum B to this proposed rule (which is available via the Internet 
on the CMS Web site).

                           Table 13--New Level II HCPCS Codes Effective April 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                   Proposed CY      Proposed CY
          CY 2017 HCPCS code                    CY 2017 long descriptor              2018 SI         2018 APC
----------------------------------------------------------------------------------------------------------------
C9484.................................  Injection, eteplirsen, 10 mg...........               G             9484
C9485.................................  Injection, olaratumab, 10 mg...........               G             9485
C9486.................................  Injection, granisetron extended                       G             9486
                                         release, 0.1 mg.
C9487 \*\.............................  Ustekinumab, for intravenous injection,               G             9487
                                         1 mg.
C9488.................................  Injection, conivaptan hydrochloride, 1                G             9488
                                         mg.
----------------------------------------------------------------------------------------------------------------
* HCPCS code C9487, which was effective April 1, 2017, was deleted June 30, 2017 and replaced with HCPCS code
  Q9989 (Ustekinumab, for intravenous injection, 1 mg) effective July 1, 2017.


[[Page 33602]]

2. Proposed Treatment of New HCPCS Codes That Were Effective July 1, 
2017 for Which We Are Soliciting Public Comments in This CY 2018 OPPS/
ASC Proposed Rule
    Through the July 2017 OPPS quarterly update CR (Transmittal 3783, 
Change Request 10122, dated May 26, 2017), we made 10 new Category III 
CPT codes and 13 Level II HCPCS codes effective July 1, 2017 and 
assigned them to appropriate interim OPPS status indicators and APCs.
    Three HCPCS codes are no longer payable under the OPPS because they 
have been replaced with more specific or different codes effective July 
1, 2017. In particular, the coverage indicator for HCPCS codes J1725 
(Injection, hydroxyprogesterone caproate, 1 mg) and P9072 (Platelets, 
pheresis, pathogen reduced or rapid bacterial tested, each unit) was 
revised to ``Not Payable by Medicare'' because these codes were 
replaced with more specific HCPCS codes. HCPCS code J1725 was replaced 
with HCPCS codes Q9986, and HCPCS code P9072 was replaced with HCPCS 
code Q9988 (Platelets, pheresis, pathogen reduced, each unit). Further, 
HCPCS code C9487 (Ustekinumab, for intravenous injection, 1 mg) was 
deleted June 30, 2017 and replaced with HCPCS code Q9989 effective July 
1, 2017. Because HCPCS code Q9989 describes the same drug as HCPCS code 
C9487, we are proposing to continue the drug's pass-through payment 
status and to assign HCPCS code Q9989 to the same APC and status 
indicators as its predecessor HCPCS code C9487, as shown in Table 14.
    In this CY 2018 OPPS/ASC proposed rule, we are soliciting public 
comments on the proposed APC and status indicator assignments for CY 
2018 for the CPT and Level II HCPCS codes implemented on July 1, 2017, 
all of which are listed in Table 14 below. The proposed payment rates 
and status indicators for these codes, where applicable, can be found 
in Addendum B to this proposed rule (which is available via the 
Internet on the CMS Web site).

                 Table 14--New Category III CPT and Level II HCPCS Codes Effective July 1, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                                    Proposed CY
        CY 2017 HCPCS code                CY 2017 long descriptor          Proposed CY 2018 SI       2018 APC
----------------------------------------------------------------------------------------------------------------
C9489.............................  Injection, nusinersen, 0.1 mg......  G                                  9489
C9490.............................  Injection, bezlotoxumab, 10 mg.....  G                                  9490
C9745.............................  Nasal endoscopy, surgical; balloon   J1                                 5165
                                     dilation of eustachian tube.
C9746.............................  Transperineal implantation of        J1                                 5377
                                     permanent adjustable balloon
                                     continence device, with
                                     cystourethroscopy, when performed
                                     and/or fluoroscopy, when performed.
C9747.............................  Ablation of prostate, transrectal,   J1                                 5376
                                     high intensity focused ultrasound
                                     (HIFU), including imaging guidance.
K0553.............................  Supply allowance for therapeutic     Y                                   N/A
                                     continuous glucose monitor (CGM),
                                     includes all supplies and
                                     accessories, 1 month supply = 1
                                     Unit Of Service.
K0554.............................  Receiver (monitor), dedicated, for   Y                                   N/A
                                     use with therapeutic glucose
                                     continuous monitor system.
Q9984.............................  Levonorgestrel-releasing             E1                                  N/A
                                     intrauterine contraceptive system
                                     (Kyleena), 19.5 mg.
Q9985.............................  Injection, hydroxyprogesterone       N                                   N/A
                                     caproate, not otherwise specified,
                                     10 mg.
Q9986 *...........................  Injection, hydroxyprogesterone       K                                  9074
                                     caproate (Makena), 10 mg.
Q9987.............................  Pathogen(s) test for platelets.....  S                                  1493
Q9988.............................  Platelets, pheresis, pathogen        R                                  9536
                                     reduced, each unit.
Q9989#............................  Ustekinumab, for intravenous         G                                  9487
                                     injection, 1 mg.
0469T.............................  Retinal polarization scan, ocular    E1                                  N/A
                                     screening with on-site automated
                                     results, bilateral.
0470T.............................  Optical coherence tomography (OCT)   M                                   N/A
                                     for microstructural and
                                     morphological imaging of skin,
                                     image acquisition, interpretation,
                                     and report; first lesion.
0471T.............................  Optical coherence tomography (OCT)   N                                   N/A
                                     for microstructural and
                                     morphological imaging of skin,
                                     image acquisition, interpretation,
                                     and report; each additional lesion
                                     (List separately in addition to
                                     code for primary procedure).
0472T.............................  Device evaluation, interrogation,    Q1                                 5743
                                     and initial programming of intra-
                                     ocular retinal electrode array
                                     (eg, retinal prosthesis), in
                                     person, with iterative adjustment
                                     of the implantable device to test
                                     functionality, select optimal
                                     permanent programmed values with
                                     analysis, including visual
                                     training, with review and report
                                     by a qualified health care
                                     professional.
0473T.............................  Device evaluation and interrogation  Q1                                 5742
                                     of intra-ocular retinal electrode
                                     array (eg, retinal prosthesis), in
                                     person, including reprogramming
                                     and visual training, when
                                     performed, with review and report
                                     by a qualified health care
                                     professional.
0474T.............................  Insertion of anterior segment        J1                                 5492
                                     aqueous drainage device, with
                                     creation of intraocular reservoir,
                                     internal approach, into the
                                     supraciliary space.
0475T.............................  Recording of fetal magnetic cardiac  M                                   N/A
                                     signal using at least 3 channels;
                                     patient recording and storage,
                                     data scanning with signal
                                     extraction, technical analysis and
                                     result, as well as supervision,
                                     review, and interpretation of
                                     report by a physician or other
                                     qualified health care professional.
0476T.............................  Recording of fetal magnetic cardiac  Q1                                 5734
                                     signal using at least 3 channels;
                                     patient recording, data scanning,
                                     with raw electronic signal
                                     transfer of data and storage.
0477T.............................  Recording of fetal magnetic cardiac  Q1                                 5734
                                     signal using at least 3 channels;
                                     signal extraction, technical
                                     analysis, and result.
0478T.............................  Recording of fetal magnetic cardiac  M                                   N/A
                                     signal using at least 3 channels;
                                     review, interpretation, report by
                                     physician or other qualified
                                     health care professional.
----------------------------------------------------------------------------------------------------------------
* HCPCS code J1725 (Injection, hydroxyprogesterone caproate, 1 mg) was replaced with HCPCS code Q9986 effective
  July 1, 2017.
# HCPCS code C9487, which was effective April 1, 2017, was replaced with HCPCS code Q9989 (Ustekinumab, for
  intravenous injection, 1 mg) effective July 1, 2017.


[[Page 33603]]

3. Proposed Process for New Level II HCPCS Codes That Will Be Effective 
October 1, 2017 and January 1, 2018 for Which We Will Be Soliciting 
Public Comments in the CY 2018 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we will solicit comments on 
those new Level II HCPCS codes that are effective October 1, 2017 and 
January 1, 2018 in the CY 2018 OPPS/ASC final rule with comment period, 
thereby allowing us to finalize the status indicators, APCs, and 
payment rates for the codes in the CY 2019 OPPS/ASC final rule with 
comment period. These codes will be 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 2018, we are proposing to continue our established policy of 
assigning comment indicator ``NI'' in Addendum B to the OPPS/ASC final 
rule with comment period to those new Level II HCPCS codes that are 
effective October 1, 2017 and January 1, 2018 to indicate that we are 
assigning them an interim payment status, which is subject to public 
comment. We will be inviting public comments in the CY 2018 OPPS/ASC 
final rule with comment period on the status indicator, APC 
assignments, and payment rates for these codes, if applicable, which 
would then be finalized in the CY 2019 OPPS/ASC final rule with comment 
period.
4. Proposed Treatment of New and Revised CY 2018 Category I and III CPT 
Codes That Will Be Effective January 1, 2018 for Which We Are 
Soliciting Public Comments in This CY 2018 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 note 
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 the resort to HCPCS G-codes and the resulting delay in 
utilization of the most current CPT codes. Also, 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 2018 OPPS update, we received the CY 2018 CPT codes from 
AMA in time for inclusion in this CY 2018 OPPS/ASC proposed rule. The 
new, revised, and deleted CY 2018 Category I and III CPT codes can be 
found in Addendum B to this proposed rule (which is available via the 
Internet on the CMS Web site). We note that the new and revised codes 
are assigned to new comment indicator ``NP'' to indicate that the code 
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, 
and that comments will be accepted on the proposed APC assignment and 
status indicator.
    Further, we remind readers that the CPT code descriptors that 
appear in Addendum B are short descriptors and do not accurately 
describe the complete procedure, service, or item described by the CPT 
code. Therefore, we are including the 5-digit placeholder codes and 
their long descriptors for the new and revised CY 2018 CPT codes in 
Addendum O to this proposed rule (which is available via the Internet 
on the CMS Web site) so that the public can adequately comment on our 
proposed APCs and status indicator assignments. The 5-digit placeholder 
codes can be found in Addendum O, specifically under the column labeled 
``CY 2018 OPPS/ASC Proposed Rule 5-Digit AMA Placeholder Code,'' to 
this proposed rule. The final CPT code numbers will be included in the 
CY 2018 OPPS/ASC final rule with comment period. We note that not every 
code listed in Addendum O is subject to comment. For the new and 
revised Category I and III CPT codes, we are requesting comments on 
only those codes that are assigned to comment indicator ``NP''.
    In summary, we are soliciting public comments on the proposed CY 
2018 status indicators and APC assignments for the new and revised 
Category I and III CPT codes that will be effective January 1, 2018. 
The CPT codes are listed in Addendum B to this proposed rule with short 
descriptors only. We list them again in Addendum O to this proposed 
rule with long descriptors. We also are proposing to finalize the 
status indicator and APC assignments for these codes (with their final 
CPT code numbers) in the CY 2018 OPPS/ASC final rule with comment 
period. The proposed status indicator and APC assignment for these 
codes can be found in Addendum B to this proposed rule (which is 
available via the Internet on the CMS Web site).
5. Proposed Care Management Coding Changes Effective January 1, 2018 
(APCs 5821 and 5822)
    As noted in the CY 2018 MPFS proposed rule, we continue to be 
interested in the ongoing work of the medical community to refine the 
set of codes used to describe care management services, including 
chronic care management. We are proposing to adopt CPT replacement 
codes for CY 2018 for several of the care management services finalized 
last year and are seeking public comment on ways we might further 
reduce burden on reporting providers, including through stronger 
alignment between CMS requirements and CPT guidance for existing and 
potential new codes. Table 15 below details the proposed care 
management coding changes. We refer readers to Addendum B to the 
proposed rule (which is available via the Internet on the CMS Web site) 
for the proposed CY 2018 payment rates for the replacement codes.

[[Page 33604]]



                                       Table 15--Proposed Care Management Coding Changes Effective January 1, 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Proposed CY
                                 CY2017 HCPCS short                    CY 2017 OPPS        2018        Proposed CY 2018    Proposed CY      Proposed CY
       CY 2017 HCPCS code            descriptor      CY 2017 OPPS SI        ASC         replacement   replacement HCPCS    2018 OPPS SI    2018 OPPS APC
                                                                                        CPT code *     short descriptor
--------------------------------------------------------------------------------------------------------------------------------------------------------
G0502..........................  Init psych care                  S             5822           994X1  1st psyc collab                 S             5822
                                  Manag, 70min.                                                        care mgmt.
G0503..........................  Subseq psych care                S             5822           994X2  Sbsg psyc collab                S             5822
                                  man, 60mi.                                                           care mgmt.
G0504..........................  Init/sub psych                   N              N/A           994X3  1st/sbsq psyc                   N              N/A
                                  Care add 30 m.                                                       collab care.
G0505..........................  Cog/func                         S             5822           99XX3  Assmt & care pln                S             5822
                                  assessment outpt.                                                    pt cog imp.
G0507..........................  Care manage serv                 S             5821           99XX5  Care mgmt. svc                  S             5821
                                  minimum 20.                                                          bhvl hlth cond.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* These are the 5-digit placeholder CPT codes. The final CPT code numbers will be included in the CY 2018 OPPS/ASC final rule with comment period. The
  long descriptors for the codes can be found in Addendum O (New Category I and Category III CPT Codes Effective January 1, 2018) to this proposed rule,
  which is available via the Internet on the CMS Web site.

B. Proposed 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 regulations at 42 CFR[thinsp]419.31. 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.  [thinsp]419.2(b) of the regulations. A further 
discussion of packaged services is included in section II.A.3. of this 
proposed rule.
    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. For CY 2018, we are proposing 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
    In accordance with section 1833(t)(2) of the Act and Sec.  419.31 
of the regulations, we annually review the items and services within an 
APC group to determine, with respect to comparability of the use of 
resources, if the highest cost for an item or service in the APC group 
is more than 2 times greater than the lowest cost for an item or 
service within the same APC 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). 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 both have more than 
99 single major claims and contribute at least 2 percent of the single 
major claims used to establish the APC cost to be significant (75 FR 
71832). This longstanding definition of when a procedure code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 or fewer 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 that comprises less 
than 2 percent of the single major claims within an APC will have a 
negligible impact on the APC cost (75 FR 71832). In this section of 
this proposed rule, for CY 2018, we are proposing to make exceptions to 
this limit on the variation of costs within each APC group in unusual 
cases, such as for certain low volume items and services.
    For the CY 2018 OPPS, we have identified the APCs with violations 
of the 2 times rule. Therefore, we are proposing changes to the 
procedure codes assigned to these APCs in Addendum B to this proposed 
rule. We note that Addendum B does not appear in the printed version of 
the Federal Register as part of this CY 2018 OPPS/ASC proposed rule. 
Rather, it is published and made available via the Internet on the CMS 
Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. To eliminate a violation of 
the 2 times rule

[[Page 33605]]

and improve clinical and resource homogeneity, we are proposing 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 2018 included 
in this proposed rule are related to changes in costs of services that 
were observed in the CY 2016 claims data newly available for CY 2018 
ratesetting. Addendum B to this CY 2018 OPPS/ASC proposed rule 
identifies with a comment indicator ``CH'' those procedure codes for 
which we are proposing a change to the APC assignment or status 
indicator, or both, that were initially assigned in the July 1, 2017 
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).
3. Proposed APC Exceptions to the 2 Times Rule
    Taking into account the APC changes that we are proposing for CY 
2018, 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.
    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).
    Based on the CY 2016 claims data available for this CY 2018 
proposed rule, we found 12 APCs with violations of the 2 times rule. We 
applied the criteria as described above to identify the APCs for which 
we are proposing to make exceptions under the 2 times rule for CY 2018, 
and found that all of the 12 APCs we identified meet the criteria for 
an exception to the 2 times rule based on the CY 2016 claims data 
available for this proposed rule. We did not include in that 
determination those APCs where a 2 times rule violation was not a 
relevant concept, such as APC 5401 (Dialysis), which only has two HCPCS 
codes assigned to it that have a similar geometric mean costs and do 
not create a 2 time rule violation. Therefore, we have only identified 
those APCs, including those with criteria-based costs, such as device-
dependent CPT/HCPCS codes, with 2 times rule violations.
    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 may 
accept the HOP 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 16 of this proposed rule lists the 12 APCs that we are 
proposing to except from the 2 times rule for CY 2018 based on the 
criteria cited above and claims data submitted between January 1, 2016 
and December 31, 2016, and processed on or before December 31, 2016. 
For the final rule with comment period, we intend to use claims data 
for dates of service between January 1, 2016 and December 31, 2016 that 
were processed on or before June 30, 2017, and updated CCRs, if 
available. The geometric mean costs for covered hospital outpatient 
services for these and all other APCs that were used in the development 
of this proposed rule can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

   Table 16--Proposed APC Exceptions to the Two Times Rule for CY 2018
------------------------------------------------------------------------
       Proposed CY 2018 APC              Proposed CY 2018 APC title
------------------------------------------------------------------------
5112..............................  Level 2 Musculoskeletal Procedures.
5161..............................  Level 1 ENT Procedures.
5311..............................  Level 1 Lower GI Procedures.
5461..............................  Level 1 Neurostimulator and Related
                                     Procedures.
5521..............................  Level 1 Imaging without Contrast.
5573..............................  Level 3 Imaging with Contrast.
5611..............................  Level 1 Therapeutic Radiation
                                     Treatment Preparation.
5691..............................  Level 1 Drug Administration.
5731..............................  Level 1 Minor Procedures.
5735..............................  Level 5 Minor Procedures.
5771..............................  Cardiac Rehabilitation.
5823..............................  Level 3 Health and Behavior
                                     Services.
------------------------------------------------------------------------

C. Proposed New Technology APCs

1. Background
    In the November 30, 2001 final rule (66 FR 59903), we finalized 
changes to the time period in which a service can be 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 2017, there are 51 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 1906 (New 
Technology--Level 51 ($140,001-$160,000)). 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 and 1901 through 1906, vary with 
increments ranging from $10 to $19,999. 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

[[Page 33606]]

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. Proposed Revised and Additional New Technology APC Groups
    As stated above, for CY 2017 there are currently 51 levels of New 
Technology APCs. To improve our ability to have payments for services 
over $100,000 more closely match the cost of the service, for CY 2018 
we are proposing to narrow the increments for New Technology APCs 1901-
1906 from $19,999 cost bands to $14,999 cost bands. We also are 
proposing to add New Technology APCs 1907 and 1908 (New Technology 
Level 52 ($145,001-$160,000), which would allow for an appropriate 
payment of retinal prosthesis implantation procedures, which is 
discussed in later in this section. Table 17 below includes the 
complete list of the proposed modified and additional New Technology 
APC groups for CY 2018.

                         Table 17--Proposed CY 2018 Additional New Technology APC Groups
----------------------------------------------------------------------------------------------------------------
        Proposed CY 2018 APC         Proposed CY 2018 APC Title     Proposed CY 2018 SI      Updated or new APC
----------------------------------------------------------------------------------------------------------------
1901...............................  New Technology--Level 49    S                         Updated.
                                      ($100,001-$115,000).
1902...............................  New Technology--Level 49    T                         Updated.
                                      ($100,001-$115,000).
1903...............................  New Technology--Level 50    S                         Updated.
                                      ($115,001-$130,000).
1904...............................  New Technology--Level 50    T                         Updated.
                                      ($115,001-$130,000).
1905...............................  New Technology--Level 51    S                         Updated.
                                      ($130,001-$145,000).
1906...............................  New Technology--Level 51    T                         Updated.
                                      ($130,001-$145,000).
1907...............................  New Technology--Level 52    S                         New.
                                      ($145,001-$160,000).
1908...............................  New Technology--Level 52    T                         New.
                                      ($145,001-$160,000).
----------------------------------------------------------------------------------------------------------------

    The proposed payment rates for New Technology APCs 1901 through 
1908 can be found in Addendum A to this proposed rule (which is 
available via the Internet on the CMS Web site).
3. Proposed Procedures Assigned to New Technology APC Groups for CY 
2018
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.
    In addition, 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), where 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 2018, in this CY 2018 
OPPS/ASC proposed rule, we are proposing 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).

[[Page 33607]]

b. 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, three of which we are proposing to continue to assign to 
standard APCs and one of which we are proposing to continue to assign 
to a New Technology APC. 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 18 below, and as listed in Addendum B of this CY 
2018 OPPS/ASC proposed rule, we are proposing to continue to assign CPT 
codes 0071T and 0072T to APC 5414 (Level 4 Gynecologic Procedures), 
with a proposed payment rate of approximately $2,189 for CY 2018. We 
also are proposing to continue to assign the APC to status indicator 
``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 are proposing to continue to assign HCPCS 
code C9734 to APC 5114 (Level 4 Musculoskeletal Procedures), with a 
proposed payment rate of approximately $5,385 for CY 2018. We also are 
proposing to continue to assign HCPCS code C9734 to status indicator as 
``J1''.
    Further, we are proposing to continue to assign CPT code 0398T to 
APC 1537 (New Technology--Level 37 ($9501-$10000)), with a proposed 
payment rate of approximately $9,751 for CY 2018. We have only received 
one claim for CPT code 0398T, and, based on this limited information, 
are not proposing to assign this MRgFUS procedure to a standard APC. We 
refer readers to Addendum B of this proposed rule for the proposed 
payment rates for all codes reportable under the OPPS. Addendum B is 
available via the Internet on the CMS Web site.

   Table 18--Proposed CY 2018 Status Indicator (SI), APC Assignments, and Payment Rates for the Magnetic Resonance Image Guided High Intensity Focused
                                                             Ultrasound (MRgFUS) Procedures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                            Proposed CY
          CPT/HCPCS Code                Long descriptor       CY 2017 OPPS   CY 2017 OPPS    CY 2017 OPPS    Proposed CY    Proposed CY      2018 OPPS
                                                                   SI             APC        payment rate   2018 OPPS SI   2018 OPPS APC   payment rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
0071T............................  Focused ultrasound                  J1             5414       $2,084.59           J1             5414       $2,188.97
                                    ablation of uterine
                                    leiomyomata, including
                                    mr guidance; total
                                    leiomyomata volume less
                                    than 200 cc of tissue.
0072T............................  Focused ultrasound                  J1             5414        2,084.59           J1             5414        2,188.97
                                    ablation of uterine
                                    leiomyomata, including
                                    mr guidance; total
                                    leiomyomata volume
                                    greater or equal to 200
                                    cc of tissue.
0398T............................  Magnetic resonance image             S             1537        9,750.50            S             1537        9,750.50
                                    guided high intensity
                                    focused ultrasound
                                    (mrgfus), stereotactic
                                    ablation lesion,
                                    intracranial for
                                    movement disorder
                                    including stereotactic
                                    navigation and frame
                                    placement when performed.
C9734............................  Focused ultrasound                  J1             5114        5,219.36           J1             5114        5,385.23
                                    ablation/therapeutic
                                    intervention, other than
                                    uterine leiomyomata,
                                    with magnetic resonance
                                    (mr) guidance.
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Retinal Prosthesis Implant Procedure
    CPT code 0100T (Placement of a subconjunctival retinal prosthesis 
receiver and pulse generator, and implantation of intra-ocular retinal 
electrode array, with vitrectomy) describes the implantation of a 
retinal prosthesis, specifically, a procedure involving the 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 this status 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 was assigned to new technology APC 
1599 with a payment rate of $95,000, which was the highest paying New 
Technology APC for that year. 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) believed that the CY 2016 payment rate for 
the procedure involving the Argus[supreg] II System was 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.

[[Page 33608]]

    For CY 2017, analysis of the CY 2015 OPPS claims data used for the 
CY 2017 final rule with comment showed 9 single claims (out of 13 total 
claims) for CPT code 0100T, with a geometric mean cost of approximately 
$142,003 based on claims submitted between January 1, 2015, through 
December 31, 2015, and processed through June 30, 2016. Based on the CY 
2015 OPPS claims data available for the final rule and our 
understanding of the Argus[supreg] II procedure, we reassigned CPT code 
0100T from new technology APC 1599 to new technology APC 1906 with a 
final payment rate of $150,000.50 for CY 2017. 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).
    For the CY 2018 update, analysis of the CY 2016 OPPS claims data 
used for the CY 2018 proposed rule showed 3 single claims (out of 3 
total claims) for CPT code 0100T, with a geometric mean cost of 
approximately $116,239 based on the claims submitted between January 1, 
2016 through December 31, 2016, and processed through December 31, 
2016. For the CY 2018 OPPS/ASC final rule with comment period, the 
final payment rate will be based on claims submitted between January 1, 
2016 and December 31, 2016, and processed through June 30, 2017.
    Based on the CY 2016 OPPS claims data available, which show a 
geometric mean cost of approximately $116,239, we are proposing to 
assign the Argus[supreg] II procedure to a New Technology APC with a 
payment band that covers the geometric mean of the procedure. 
Therefore, we are proposing to assign CPT code 0100T to APC 1904 (New 
Technology--Level 50 $115,001-$130,000)), with a proposed payment of 
$122,000.50 for CY 2018. We are inviting public comments on this 
proposal.
d. Pathogen Test for Platelets
    The CMS HCPCS Workgroup has established HCPCS code Q9987 
(Pathogen(s) test for platelets) effective July 1, 2017. HCPCS code 
Q9987 will be used to report any test used to identify bacterial or 
other pathogen contamination in blood platelets. Currently, there is 
one test approved by the FDA that is described by HCPCS code Q9987. The 
test is a rapid bacterial test and the manufacturer estimates the cost 
of the test to be between $26 and $35. HCPCS code Q9987 was established 
after concerns from blood and blood product stakeholders that the 
previous CPT code used to describe pathogen tests for platelets, CPT 
code P9072 (Platelets, pheresis, pathogen reduced or rapid bacterial 
tested, each unit), inappropriately described rapid bacterial testing 
by combining the test with the pathogen reduction of platelets. CPT 
code P9072 is inactive effective July 1, 2017.
    We are seeking more information on the actual costs of pathogen 
tests for platelets before assigning HCPCS code Q9987 to a clinical 
APC. Effective July 1, 2017, HCPCS code Q9987 is assigned to New 
Technology APC 1493 (New Technology--Level 1C ($21-$30)), with a 
payment rate of $25.50. We are proposing to continue to assign HCPCS 
code Q9987 to New Technology APC 1493, with a proposed payment rate of 
$25.50, until such time as claims data are available to support 
assignment to a clinical APC. We are inviting public comments on this 
proposal.

D. Proposed OPPS APC-Specific Policies

1. Blood-Derived Hematopoietic Cell Harvesting
    HCPCS code 38205 describes blood-derived hematopoietic progenitor 
cell harvesting for transplantation, per collection; allogeneic. This 
code represents a donor acquisition cost for an allogeneic 
hematopoietic stem cell transplant (HSCT). In the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60575), we assigned this code to 
status indicator ``B'', which indicates that this code is not 
recognized by the OPPS when submitted on an outpatient hospital Part B 
bill (type 12x and 13x).
    In CY 2017, we finalized a comprehensive APC (C-APC) for HSCT (81 
FR 79586 through 79587). Payment for donor acquisition services for 
HSCT is included in the C-APC payment for the allogeneic stem cell 
transplant when the transplant occurs in the hospital outpatient 
setting. All donor acquisition costs, including the costs for HCPCS 
code 38205, should be reported on the same date of service as the 
transplant procedure (HCPCS code 38240 (Hematopoietic progenitor (HPC); 
allogeneic transplantation per donor)) in order to be appropriately 
packaged for payment purposes. Hospitals are instructed to identify 
services required to acquire stem cells from a donor for allogeneic 
HSCT separately in Field 42 on Form CMS-1450 (or UB-04), with revenue 
code 0815 when an allogeneic stem cell transplant occurs. (We refer 
readers to the Medicare Claims Processing Manual (Pub. L. 100-04), 
Chapter 4, Section 231.11 and Chapter 3, Section 90.3.1.)
    There other donor acquisition costs, namely those costs for the 
procedure described by HCPCS code 38230 (Bone marrow harvesting for 
transplantation; allogeneic), which are assigned to status indicator 
``S''. For consistency and to ensure that the donor acquisition costs 
are captured accurately, for CY 2018, we are proposing to change the 
status indicator assignment for the procedure described by HCPCS code 
38205 from ``B'' to ``S'', which indicates that the procedure is paid 
under the OPPS and receives separate payment.
    Our latest claims data used for this proposed rule, which include 
claims submitted between January 1, 2016, and December 31, 2016, and 
processed on or before December 31, 2016, show a geometric mean cost of 
approximately $580 for HCPCS code 38205 based on 2 single claims (out 
of 8 total claims). The procedure described by HCPCS code 38205 has 
resource and clinical similarities to procedures assigned to APC 5242 
(Level 2 Blood Product Exchange and Related Services). Therefore, we 
are proposing to assign HCPCS code 38205 to APC 5242. We are inviting 
public comments on these proposals.
2. Radiology and Imaging Procedures and Services
a. Imaging APCs
    Section 1833(t)(9)(A) of the Act requires the Secretary to review 
not less often than annually, and revise the APC group assignments, 
relative payment weights, and the wage and other adjustments to take 
into account changes in medical practice, changes in technology, the 
addition of new services, new cost data, and other relevant information 
and factors. In addition, section 1833(t)(2)(G) of the Act requires the 
Secretary to create additional groups of covered OPD services that 
classify separately those procedures that utilize contrast agents from 
those procedures that do not.
    In CY 2016, as a part of our 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 was to more appropriately reflect the resource costs and 
clinical characteristics of the services classified within the imaging 
APCs. The restructuring of the imaging APCs resulted in broader 
groupings that removed the excessive granularity of grouping imaging 
services according to organ or physiologic system, which did not 
necessarily reflect either significant differences in resources or how 
these services are delivered in the hospital outpatient setting. In CY 
2017, in

[[Page 33609]]

response to public comments on the CY 2017 OPPS/ASC proposed rule, we 
further consolidated the imaging APCs from 17 APCs in CY 2016 to 7 APCs 
in CY 2017 (81 FR 79633). These included four imaging APCs without 
contrast and three imaging APCs with contrast.
    For this CY 2018 proposed rule, we reviewed the services assigned 
to the imaging without contrast APCs and imaging with contrast APCs. 
Specifically, we evaluated the resource costs and clinical coherence of 
the procedures associated with the four levels of imaging without 
contrast APCs and the three levels of imaging with contrast APCs as 
well as identified and corrected any 2 times rule violations as 
discussed in section III.B.2. of this CY 2018 OPPS/ASC proposed rule. 
In addition, we reviewed and considered stakeholder recommendations to 
make additional refinements to the structure of the APC groupings of 
the imaging procedures classified within the imaging APCs that would 
maintain clinical homogeneity while more appropriately addressing 
resource cost fluctuation and volatility. As a result of our analysis 
and review of the claims data used for CY 2018 ratesetting, we believe 
a Level 5 Imaging without Contrast APC is needed to more appropriately 
group certain imaging services with higher resource costs. 
Specifically, we believe the data support splitting the current Level 4 
Imaging without Contrast APC into two APCs such that the Level 4 
Imaging without Contrast APC would include high frequency low cost 
services and the proposed Level 5 Imaging without Contrast APC would 
include low frequency high cost services. Therefore, for CY 2018, we 
are proposing to add a fifth level within the Imaging without Contrast 
APCs. Below in Table 19, we list the CY 2017 imaging APCs, and in Table 
20, we list the proposed CY 2018 imaging APCs with the addition of a 
fifth level within the Imaging without Contrast APCs. The specific APC 
assignments for each service grouping are listed in Addendum B to the 
proposed rule, which is available via the Internet on the CMS Web site. 
This proposal would increase the imaging APCs from 7 APCs in CY 2017 to 
8 in CY 2018. The specific APC assignments for each imaging service 
HCPCS code are listed in Addendum B to this proposed rule, which is 
available via the Internet on the CMS Web site. We note that some of 
the imaging procedures are assigned to APCs that are not listed in the 
tables below (for example, the vascular procedures APCs). Also, the 
nuclear medicine services APCs are not included in this proposal. These 
imaging services are not included in this proposal because we are not 
proposing changes to their APC structure.
    We are inviting public comments on our proposal to add a Level 5 
Imaging without Contrast APC in CY 2018.

                     Table 19--CY 2017 Imaging APCs
------------------------------------------------------------------------
           CY 2017 APC                    CY 2017 APC Group 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.
------------------------------------------------------------------------


                 Table 20--Proposed CY 2018 Imaging APCs
------------------------------------------------------------------------
       Proposed CY 2017 APC           Proposed CY 2017 APC Group 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.
5525..............................  Level 5 Imaging without Contrast.
5571..............................  Level 1 Imaging with Contrast.
5572..............................  Level 2 Imaging with Contrast.
5573..............................  Level 3 Imaging with Contrast.
------------------------------------------------------------------------

b. Non-Ophthalmic Fluorescent Vascular Angiography (APC 5524)
    For the CY 2018 OPPS update, we are proposing to reassign HCPCS 
code C9733 (Non-ophthalmic fluorescent vascular angiography) from APC 
5523 (Level 3 Imaging without Contrast) to APC 5524 (Level 4 Imaging 
without Contrast) based on the latest claims data available for this 
proposed rule. We are proposing to maintain the status indicator 
assignment of ``Q2'' (T-packaged) to indicate that the service is 
conditionally packaged when performed in conjunction with other 
procedures on the same day but paid separately when performed as a 
stand-alone service.
    Our latest claims data used for this proposed rule, which include 
claims submitted between January 1, 2016, and December 31, 2016, and 
processed on or before December 31, 2016, show a geometric mean cost of 
approximately $236 for HCPCS code C9733 based on 216 single claims (out 
of 953 total claims), which is closely aligned with the geometric mean 
cost of approximately $275 for APC 5524. Because HCPCS code C9733 is an 
imaging service which is similar to the codes assigned to APC 5524, we 
are proposing to reassign HCPCS code C9733 from APC 5523 to APC 5524. 
We believe this proposed reassignment would improve the clinical 
homogeneity of APC 5524 and appropriately align the resource costs of 
HCPCS code C9733 to the resource costs of those procedures assigned to 
APC 5524.
    As we have stated in previous OPPS/ASC final rules, specifically, 
in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68345 
through 68346), CY 2014 OPPS/ASC final rule with comment period (78 FR 
74976 through 74977), and the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79632), the service described by HCPCS code C9733 is 
primarily an intraoperative imaging service that is performed in 
combination with a number of primary procedures, including facial 
reconstruction and reanimation, muscle flaps, trauma reconstruction, 
digital and limb reattachment, and breast reconstruction. Therefore, 
HCPCS code C9733 is conditionally packaged under Sec.  419.2(b)(14), 
which contains the policies governing packaging of intraoperative items 
and services. Consequently, we are proposing to maintain the status 
indicator assignment of ``Q2'' to indicate that the payment for the 
service will be packaged in the APC payment if billed on the same date 
of service as a HCPCS code assigned to status indicator ``T'', but in 
all other circumstances, a separate APC payment for the service will be 
made. We believe that the OPPS payments, separate or packaged, for 
surgical procedures with which this service is performed are more than 
adequate to cover the cost of the service described by HCPCS code C9733 
for Medicare beneficiaries in need of this service.
    In summary, for the CY 2018 OPPS update, we are proposing to 
reassign HCPCS code C9733 to APC 5524 based on the latest claims data 
used for this proposed rule. In addition, we are proposing to maintain 
its status indicator assignment of ``Q2'' to indicate that the service 
is conditionally packaged. The proposed CY 2018 OPPS payment rate for 
HCPCS C9733 can be found in OPPS Addendum B to this proposed rule, 
which is available via the Internet on the CMS Web site.
3. Comment Solicitation on Intraocular Procedure APCs
    As part of our CY 2018 comprehensive review of the structure of the 
APCs and procedure code assignments, we evaluated the intraocular 
procedure APCs with a particular focus on C-APC 5491 (Level 1 
Intraocular Procedures) that contains

[[Page 33610]]

cataract surgery procedures. We strive to maintain APCs that contain 
procedures that are relatively homogenous in resource costs and 
clinical characteristics. While it is impracticable and contrary to the 
principles of a prospective payment system to assign each procedure to 
its own APC, thus resulting in a cost-based, fee schedule payment 
system, we seek to ensure our clinical groupings appropriately group 
like items and services while maintaining the integrity of a 
prospective payment system under which bundled, encounter-based 
payments are essential.
    For CY 2018, we considered proposing a new intraocular procedure 
APC that would further distinguish the resource costs and clinical 
characteristics between cataract surgery and complex cataract surgery. 
As listed in Addendum B of this CY 2018 OPPS/ASC proposed rule, we are 
proposing to continue to assign CPT code 66984 (Cataract surgery with 
IOL 1 stage procedure) and CPT code 66982 (Cataract surgery complex) to 
C-APC 5491. However, because the 2017 AMA CPT Code manual describes a 
complex cataract surgery case as ``requiring devices or techniques not 
generally used in routine cataract surgery (e.g., iris expansion 
device, suture support for intraocular lens, or primary posterior 
capsulorrhexis),'' we believe it may be more appropriate to assign CPT 
code 66982 to a C-APC that is separate from the C-APC assignment for 
CPT code 66984. However, because this potential APC grouping would 
assign CPT code 66982 to a higher paying C-APC than CPT code 66984, we 
would monitor claims data for changes in the distribution of coding 
complex cataract surgery and routine cataract surgery if we were to 
adopt this change. We are seeking public comments from stakeholders, 
including ophthalmologists, organizations representing 
ophthalmologists, beneficiaries, hospitals, and all other interested 
parties on whether we should create a new C-APC that includes complex 
cataract surgeries identified by CPT code 66982 (along with other 
intraocular procedures that are similar in resources) in a newly 
created C-APC that is separate from those identified by CPT code 66984. 
That is, we are considering whether to establish a new Level 2 
Intraocular Procedures C-APC in between existing C-APCs 5491 and 5492.

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

1. Beginning Eligibility Date for Device Pass-Through Status and 
Quarterly Expiration of Device Pass-Through Payments
a. Background
    Under section 1833(t)(6)(B)(iii) of the Act, the period for which a 
device category eligible for transitional pass-through payments under 
the OPPS can be in effect is at least 2 years but not more than 3 
years. Prior to CY 2017, our regulation at 42 CFR 419.66(g) provided 
that this pass-through payment eligibility period began on the date CMS 
established a particular transitional pass-through category of devices, 
and we based the pass-through status expiration date for a device 
category on the date on which pass-through payment was effective for 
the category. In the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79654), in accordance with section 1833(t)(6)(B)(iii)(II) of the 
Act, we amended Sec.  419.66(g) to provide that the pass-through 
eligibility period for a device category begins on the first date on 
which pass-through payment is made under the OPPS for any medical 
device described by such category.
    In addition, prior to CY 2017, our policy was to propose and 
finalize the dates for expiration of pass-through status for device 
categories as part of the OPPS annual update. This means that device 
pass-through status would expire at the end of a calendar year when at 
least 2 years of pass-through payments has been made, regardless of the 
quarter in which the device was approved. In the CY 2017 OPPS/ASC final 
rule with comment period (81 FR 79655), we changed our policy to allow 
for quarterly expiration of pass-through payment status for devices, 
beginning with pass-through devices approved 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. We refer readers to the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79648 through 79661) for a full discussion of the 
changes to the device pass-through payment policy. 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. Expiration of Transitional Pass-Through Payments for Certain 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 three device categories eligible for 
pass-through payment: (1) HCPCS code C2623 (Catheter, transluminal 
angioplasty, drug-coated, non-laser), which was established effective 
April 1, 2015; (2) HCPCS code C2613 (Lung biopsy plug with delivery 
system), which was established effective July 1, 2015; and (3) 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 categories for HCPCS codes C2623, C2613, and C1822 will end on 
December 31, 2017. We note that our new policy adopted in the CY 2017 
OPPS/ASC final rule with comment period to allow for quarterly 
expiration of pass-through payment status for devices applies to 
devices approved in CY 2017 and subsequent years. As all the devices in 
these three device categories were approved prior to CY 2017, we are 
applying our policy to expire them at the end of the calendar year when 
at least 2 years of pass-through payments have been made. Therefore, we 
are proposing, beginning in CY 2018, to package the costs of each of 
the devices described by HCPCS codes C2623, C2613, and C1822 into the 
costs related to the procedure with which each device is reported in 
the hospital claims data.
2. New Device Pass-through Applications
a. Background
    Section 1833(t)(6) of the Act provides for 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 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 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

[[Page 33611]]

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 Sec.  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 payment 
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 specified 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 CMS 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 2018
    We received five applications by the March 1, 2017 quarterly 
deadline, which was the last quarterly deadline for applications to be 
received in time to be included for this CY 2018 OPPS/ASC proposed 
rule. All applications were received in the second quarter of 2016. 
None of the five applications were approved for device pass-through 
payment during the quarterly review process.
    Applications received for the later deadlines for the remaining 
2017 quarters (June 1, September 1, and December 1), if any, will be 
presented in the CY 2019 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 five applications received by the March 1, 2017 
deadline is presented below.
(1) Architect[supreg] Px
    Harbor MedTech, Inc. submitted an application for a new device 
category for transitional pass-through payment status for 
Architect[supreg] Px. Architect[supreg] Px is a collagen biomatrix 
comprised of a stabilized extracellular matrix derived from equine 
pericardium. The equine pericardium is stabilized to become a catalyst 
and scaffold for use by autologous tissue regeneration factors. 
Architect[supreg] Px is packaged as an individual unit in sizes ranging 
from 2cm x 2cm up to 10cm x 15cm and is approximately 0.75mm thick. 
Architect[supreg] Px typically requires only one application. The 
applicant asserted

[[Page 33612]]

that it is clinically superior to other skin substitutes that work by 
flooding the wound with nonautologous collagen and growth factors 
because Architect[supreg] Px attracts and concentrates the patient's 
own autologous collagen and growth factors to support healing.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant received FDA clearance for Architect[supreg] Px on September 
12, 2014, and its June 1, 2016 application was submitted within 3 years 
of FDA clearance. However, Unite BioMatrix, cleared by the FDA on June 
20, 2007, is claimed as a predicate of Architect[supreg] Px. The 
Architect[supreg] Px application states that ``. . .while packaged 
differently, Architect[supreg] Px and Unite BioMatrix are identical . . 
. they are both stabilized equine pericardium manufactured using the 
same processes . . .'' If the date for FDA clearance for Unite 
BioMatrix is used to evaluate the newness criterion, Architect[supreg] 
Px may not meet the newness criterion. We are inviting public comments 
on this issue.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant Architect[supreg] Px is a skin substitute 
product that is integral to the service provided, is used for one 
patient only, comes in contact with human skin, and is surgically 
inserted into the patient. The applicant also claims Architect[supreg] 
Px meets the device eligibility requirements of Sec.  419.66(b)(4) 
because Architect[supreg] Px is not an instrument, apparatus, 
implement, or item for which depreciation and financing expenses are 
recovered, and it is not a supply or material.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. We have not 
identified an existing pass-through category that describes 
Architect[supreg] Px. Harbor MedTech, Inc. proposes a new device 
category descriptor of ``Stabilized Skin Substitute for Autologous 
Tissue Regeneration'' for Architect[supreg] Px. We are inviting public 
comments on this issue.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines that a device to be included 
in the category has demonstrated that it will 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. With regard to the substantial clinical 
improvement criterion, the applicant only identifies two references, 
neither of which we believe provide evidence of substantial clinical 
improvement. One reference is a 2012 summary report \1\ of skin 
substitute products that can be used to treat chronic wounds that only 
describes characteristics of the predecessor product to 
Architect[supreg] Px with no efficacy or performance information. The 
second reference \2\ is a small observational study of 34 subjects with 
no comparison group. We are inviting public comments on whether 
Architect[supreg] Px meets the substantial clinical improvement 
criterion.
---------------------------------------------------------------------------

    \1\ Snyder, D.L. et al. Skin Substitutes for Treating Chronic 
Wounds. Technology Assessment Report. Project ID: HCPR0610. AHRQ. 
December 18, 2012.
    \2\ Alexander JH, Yeager DA, et al. Equine Pericardium as a 
Biological Covering for the Treatment of Diabetic Foot Wounds; a 
Prospective Study. J Am Podiatric Assoc., 2012 Sep-Oct.:102 (5): 
352-358.
---------------------------------------------------------------------------

    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. Architect[supreg] Px would be reported with 
CPT codes 15271 through 15278, which cover the application of skin 
substitute grafts to different areas of the body for high-cost skin 
substitutes. To meet the cost criterion for device pass-through 
payment, a device must pass all three tests of the cost criterion for 
at least one APC. CPT codes 15271 through 15278 are assigned to either 
APC 5054 (Level 4 Skin Procedures), with a CY 2016 payment rate of 
$1,411.21 and a device offset of $4.52, or APC 5055 (Level 5 Skin 
Procedures), with a CY 2016 payment rate of $2,137.49 and a device 
offset of $25.44. According to the applicant, the cost of the 
substitute graft procedures when performed with Architect[supreg] Px is 
$5,495.
    Section 419.66(d)(1), the first cost significance requirement, 
provides that the estimated average reasonable cost of devices in the 
category must exceed 25 percent of the applicable APC payment amount 
for the service related to the category of devices. The estimated 
average reasonable cost of $5,495 for Architect[supreg] Px exceeds the 
applicable APC amount for the service related to the category of 
devices of $1,411.21 by 389 percent ($5,495/$1,411.21 x 100 percent = 
389 percent). Therefore, it appears that Architect[supreg] Px meets the 
first cost significance test.
    The second cost significance test, at Sec.  419.66(d)(2), provides 
that the estimated average reasonable cost of the devices in the 
category must exceed the cost of the device-related portion of the APC 
payment amount for the related service by at least 25 percent, which 
means 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). The estimated average reasonable cost of $5,495 for 
Architect[supreg] Px exceeds the device-related portion of the APC 
payment amount for the related service of $4.52 by 121,571 percent 
($5,495/$4.52 x 100 percent = 121,571 percent). Therefore, it appears 
that Architect[supreg] Px meets the second cost significance test.
    Section 419.66(d)(3), the third cost significance test, requires 
that 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 must exceed 10 percent of the APC payment amount for the 
related service. The difference between the estimated average 
reasonable cost of $5,495 for Architect[supreg] Px and the portion of 
the APC payment amount for the device of $4.52 exceeds 10 percent at 
389 percent (($5,495 - $4.52)/$1,411.21) x 100 percent = 389 percent). 
Therefore, it appears that Architect[supreg] Px meets the third cost 
significance test. Based on the costs submitted by the applicant and 
the calculations noted earlier, we believe that Architect[supreg] Px 
meets the cost criterion at Sec.  419.66(c)(3) for new device 
categories.
    We are inviting public comments on whether Architect[supreg] Px 
meets the device pass-through payment criteria discussed in this 
section.
(2) Dermavest and Plurivest Human Placental Connective Tissue Matrix 
(HPCTM)
    Aedicell, Inc. submitted an application for a new device category 
for transitional pass-through payment status for Dermavest and 
Plurivest human placental connective tissue matrix (HPCTM). Dermavest 
and Plurivest HPCTM use tissue sourced from the placental disk, amnion/
chorion, and umbilical cord to replace or supplement damaged tissue. 
The applicant stated that Dermavest and Plurivest replace or supplement 
damaged or inadequate integumental tissue by providing a scaffold to 
entrap migrating cells for repopulation. The applicant stated that the 
products may be clinically indicated for the following conditions: 
Partial and full thickness

[[Page 33613]]

wounds; pressure ulcers; venous ulcers; chronic vascular ulcers; 
diabetic ulcers; trauma wounds (abrasions, lacerations, second degree 
burns, and skin tears); drainage wounds; and surgical wounds (donor 
sites/grafts post mohs surgery, post laser surgery, and podiatric). 
Dermavest and Plurivest HPCTM are applied to the area of inadequate or 
damaged tissue, moistened if necessary and covered with a nonadherent 
secondary dressing. While the application does not distinguish between 
the Dermavest and Plurivest products, the AediCell Inc. Web site states 
that the two products differ by dosage. According to information on the 
Web site at www.aedicell.com, each product contains different tissue 
cell attachment proteins (CAP) and cytokine/growth factors (GF) 
profiles. There is a lower cytokine/GF concentration profile in 
Plurivest and a higher concentration of CAP and cytokine/GF in 
Dermavest.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant indicated that the product conforms to the FDA regulatory 
path under section 361 of the Public Health Service (PHS) Act and 21 
CFR part 1271 for Human Cells, Tissues, and Cellular and Tissue-Based 
Products (HCT/Ps). Under this regulatory path, FDA requires the 
manufacturer to register and list its HCT/Ps with the Center for 
Biologics Evaluation and Research (CBER) within 5 days after beginning 
operations and to update their registrations annually. AediCell Inc. 
has an FDA field establishment identifier (FEI) under the HHS-FDA-
Establishment Registration and Listing for Human Cells, Tissues, and 
Cellular and Tissue-Based Products (HCT/Ps) and submitted with its 
application the annual registration/listing for Dermavest and Plurivest 
dated November 9, 2015. The applicant noted that the initial 
registration for the manufacture of Dermavest was submitted to the CBER 
on October 28, 2013, and the registration of Plurivest was submitted 
the following year on November 14, 2014. The registration forms 
including these dates were not included in the application. Therefore, 
it is unclear if the newness criterion is met.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, Dermavest and Plurivest are skin substitute 
products that are integral to the service provided, are used for one 
patient only, come in contact with human skin, and are applied in or on 
a wound or other skin lesion. The applicant also claimed Dermavest and 
Plurivest meet the device eligibility requirements of Sec.  
419.66(b)(4) because they are not instruments, apparatuses, implements, 
or items for which depreciation and financing expenses are recovered, 
and they are not supplies or materials furnished incident to a service.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. We have not 
identified an existing pass-through payment category that describes 
Dermavest and Plurivest HPCTM. The applicant proposed a category 
descriptor for Dermavest and Pluravest of ``Human placental connective 
tissue matrix (HPCTM), comprised of tissue sourced from the placental 
disk, amnion/chorion, and umbilical cord for the intention of replacing 
or supplementing damaged or inadequate integumental issue.'' We are 
inviting public comments on this issue.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines that a device to be included 
in the category has demonstrated that it will 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. With respect to this criterion, the applicant 
provided several background studies showing general evidence that 
placental tissue, umbilical cord, and amnion membrane products are 
effective in the treatment of various wounds and ulcers. However, these 
studies were not specific to Dermavest and Plurivest HPCTM. The 
applicant submitted two poster presentations describing case studies 
that evaluated the wound healing time and wound characteristics of 
patients with diabetic and venous ulcers treated with Dermavest and 
Plurivest HPCTM. Both studies were described as case series and, as 
such, lacked blinding, randomization, and control groups. The first 
poster,\3\ presented in 2015, described a prospective, multi-center 
case series with a small number of participants (n = 15). The study 
evaluated wound healing time and wound characteristics of patients with 
various etiologies. The patients were treated with up to two six cm\2\ 
pieces of Dermavest per application on wounds up to 44 cm\2\. Results 
were presented for diabetic and venous ulcer cases and showed a week 4 
percent area reduction (PAR) of 71 percent for diabetic ulcers and 50 
percent for venous ulcers. Eighty percent of the diabetic ulcer cases 
and 50 percent of the venous ulcer cases had a week 4 PAR of greater 
than 40 percent.
---------------------------------------------------------------------------

    \3\ Connell et al., Human placental connective tissue matrix in 
the treatment of chronic wounds: A prospective multi-center case 
series. 2015 at Society of Advanced Wound Healing (SAWC) Spring 
meeting.
---------------------------------------------------------------------------

    The second poster,\4\ presented in 2016, also described a case 
series that evaluated wound healing time and wound characteristics of 
patients with various etiologies (n = 8). The poster stated that the 
patients were treated with pieces of HPCTM according to manufacturer 
guidelines on wounds ranging in size up to 3.8 cm\2\. The methods 
presented in the poster do not specify whether the patients were 
treated with Dermavest or Plurivest, or both. The results presented in 
the poster compile Dermavest data from two case series presented at the 
Society for Advanced Wound Care (SAWC) annual meeting. It was unclear 
whether there was overlap between the patients used in the 2015 and 
2016 case series included in the application. The compiled Dermavest 
data were compared to the 4-week PAR results for diabetic and venous 
ulcers from two other noncontemporaneous studies evaluating different 
skin replacement products. The results showed, at week 4, approximately 
80 percent of the Dermavest-treated diabetic ulcer cases had a PAR of 
greater than 50 percent in comparison to approximately 60 percent of 
cases and approximately 30 percent of cases, respectively, in the 
comparison studies using other skin replacement products. The results 
also showed that, at week 4, approximately 60 percent of the Dermavest-
treated venous ulcer cases had a PAR of greater than 40 percent in 
comparison to approximately 50 percent of cases and approximately 30 
percent of cases in the comparison studies treated with other skin 
replacement products. There were multiple differences between the 
Dermavest studies included in the poster presentations and these two 
additional studies presented as comparators, including the number of 
patients included in the studies, the number of wounds treated, and the 
purpose of the study. Based on the results presented in the poster, the 
applicant concluded that HPCTM

[[Page 33614]]

provides an effective alternative to other skin replacement products.
---------------------------------------------------------------------------

    \4\ McGuire and Sebag, The use of a new placental acellular 
tissue product in the management of chronic wounds: A case series. 
2016 at the Society of Advanced Wound Healing (SAWC) Spring meeting.
---------------------------------------------------------------------------

    We are concerned that the research provided did not clinically 
demonstrate the active ingredients of the product(s) that might 
distinguish the product from others, the correct dosing of the 
product(s), the amount of durable wound closure with the product(s) 
compared to standard of care in studies with rigorous trial design/
implementation, and the amount of durable wound closure with the 
product(s) compared to other products in studies with rigorous trial 
design/implementation. Based on the evidence submitted with the 
application, we are not yet convinced that the Dermavest and Plurivest 
HPCTM provide a substantial clinical improvement over other treatments 
for wound care. We are inviting public comments on whether the 
Dermavest and Plurivest HPCTM meet this criterion.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. The applicant stated that Dermavest and 
Plurivest HPCTM would be reported with CPT codes 15271, 15272, 15273, 
15274, 15275, 15276, 15277, and 15278. CPT codes 15272, 15274, 15276, 
and 15278 are add-on codes assigned status indicator ``N'', which means 
payment is packaged under the OPPS. CPT codes 15271 and 15275 are 
assigned to APC 5054 (Level 4 Skin Procedures), and CPT codes 15273 and 
15277 are assigned to APC 5055 (Level 5 Skin Procedures). To meet the 
cost criterion for device pass-through payment, a device must pass all 
three tests of the cost criterion for at least one APC. For our 
calculations, we used APC 5054 (Level 4 Skin Procedures), which had a 
CY 2016 payment rate of $1,411 and a device offset amount of $4.52 at 
the time the application was received. According to the applicant, the 
cost of a sheet of 2x3 cm Dermavest is $550, and the cost of a sheet of 
2x3 cm Plurivest is $500.
    Section 419.66(d)(1), the first cost significance requirement, 
provides that the estimated average reasonable cost of devices in the 
category must exceed 25 percent of the applicable APC payment amount 
for the service related to the category of devices. The estimated 
average reasonable cost of $550 for Dermavest and Plurivest exceeds 39 
percent of the applicable APC payment amount for the service related to 
the category of devices of $1,411 ($550/$1,411 x 100 = 39 percent). 
Therefore, we believe Dermavest and Plurivest meet the first cost 
significance test.
    The second cost significance test, at Sec.  419.66(d)(2), provides 
that the estimated average reasonable cost of the devices in the 
category must exceed the cost of the device-related portion of the APC 
payment amount for the related service by at least 25 percent, which 
means 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). The estimated average reasonable cost of $550 for 
Dermavest and Plurivest exceeds the cost of the device-related portion 
of the APC payment amount for the related service of $4.52 by 12,168 
percent ($550/$4.52) x 100 = 12,168 percent). Therefore, we believe 
that Dermavest and Plurivest meet the second cost significance test.
    The third cost significance test, at Sec.  419.66(d)(3), requires 
that 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 must exceed 10 percent of the APC payment amount for the 
related service. The difference between the estimated average 
reasonable cost of $550 for Dermavest and Plurivest and the portion of 
the APC payment amount for the device of $4.52 exceeds the APC payment 
amount for the related service of $1,411 by 38.6 percent (($550 - 
$4.52)/$1,411 x 100 = 38.6 percent). Therefore, we believe that 
Dermavest and Plurivest meet the third cost significance test.
    We are inviting public comments on whether Dermavest and Plurivest 
meet the device pass-through payment criteria discussed in this 
section.
(3) Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg]
    Applied Biologics, LLC submitted an application for a new device 
category for transitional pass-through payment status for 
Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg]. 
Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg] is an 
injectable, human placental amniotic fluid. It is an allograft derived 
from human birth tissue recovered from a live, healthy C-section birth. 
The allograft is used to augment tissue to bone and tissue to tissue 
repairs. The allograft is implanted at the surgical site at the end of 
the procedure using a needle and syringe under direct visualization. 
The applicant claimed that the product helps drive healing towards 
native tissue regeneration and away from scar formation. 
Fl[omacr]Graft[supreg] has a standardized potency of 2 million cells. 
Fl[omacr]Graft Neogenesis[supreg] has a standardized potency of 1.5 
million cells. The applicant indicated that the product may be used 
with several surgical procedures, including joint replacement 
procedures, traumatic bone and soft tissue injury, meniscal repairs, 
meniscal transplantation, articular cartilage restoration, foot and 
ankle repairs, and chronic wounds.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant indicated that Fl[omacr]Graft[supreg] and Fl[omacr]graft 
Neogenesis[supreg] conform to the FDA regulatory path under section 361 
of the PHS Act and 21 CFR part 1271 for Human Cells, Tissues, and 
Cellular and Tissue-Based Products (HCT/Ps). Under this regulatory 
path, FDA requires the manufacturer to register and list their HCT/Ps 
with the Center for Biologics Evaluation and Research (CBER) within 5 
days after beginning operations and update their registrations 
annually. Applied Biologics, LLC has two FDA field establishment 
identifiers (FEI) under the HHS-FDA-Establishment Registration and 
Listing for Human Cells, Tissues, and Cellular and Tissue-Based 
Products (HCT/Ps). Both registration forms list the product as 
``Fl[omacr]Graft[supreg]''. The applicant submitted an initial 
registration/listing for one FEI dated June 8, 2015, as well as an 
annual registration/listing for a different FEI dated December 1, 2014. 
The first date of U.S. sale for Fl[omacr]Graft[supreg] was May 23, 
2013. It is not clear when the initial CBER filing occurred for the 
Fl[omacr]Graft[supreg] product. Therefore, it is unclear if the newness 
criterion for the Fl[omacr]Graft[supreg] product is met.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, Fl[omacr]Graft[supreg] and Fl[omacr]graft 
Neogenesis[supreg] are integral to the service provided, are used for 
one patient only, come in contact with human skin, and are applied in 
or on a wound or other skin lesion. The applicant also claimed 
Fl[omacr]Graft[supreg] and Fl[omacr]graft Neogenesis meet the device 
eligibility requirements of Sec.  419.66(b)(4) because they are not 
instruments, apparatuses, implements, or items for which depreciation 
and financing expenses are recovered, and they are not supplies or 
materials furnished incident to a service.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. We have not 
identified an existing

[[Page 33615]]

pass-through payment device category that describes 
Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg]. The 
application proposed a payment device category for 
Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg] with a 
category descriptor of ``Injectable Amniotic Fluid Allograft''. We are 
inviting public comments on this issue.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines that a device to be included 
in the category has demonstrated that it will 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. With respect to the substantial clinical 
improvement criterion, the applicant submitted several peer-reviewed 
publications that provided general evidence that amniotic fluid and 
amniotic membrane-based products significantly reduce recovery time. 
However, these studies did not include the use of the 
Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg] product. The 
applicant did list several studies in the application that involved the 
use of the Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg] 
product. Of these studies, five unpublished studies were available for 
review. The five studies submitted with the application were described 
as case studies, case series, or retrospective cohort studies. The 
studies lacked random allocation, blinding, and a comparison group. The 
first study \5\ described a retrospective cohort study of 30 patients. 
The studies showed that 93 percent of the patients (n=14) who received 
a Fl[omacr]Graft[supreg] injection, coupled with conservative, 
nonsurgical treatment plan to treat their Morton's Nerve entrapment 
condition, had their issue resolved compared to 20 percent of patients 
(n=3) who did not receive Fl[omacr]Graft[supreg] injection, coupled 
with conservative, nonsurgical treatment plan to treat their Morton's 
Nerve entrapment condition. A greater percentage of patients who did 
not receive a Fl[omacr]Graft[supreg] injection with their conservative 
treatment required surgery (80 percent versus 7 percent). Patients who 
required surgery had a 95-percent success rate when surgery was coupled 
with a Fl[omacr]Graft[supreg] injection.
---------------------------------------------------------------------------

    \5\ Bregman, Peter. (2014). Addressing Morton's Nerve Entrapment 
Surgically and Non-surgically with FloGraft.
---------------------------------------------------------------------------

    The next study \6\ was a retrospective analysis that involved 27 
patients who were treated for stalled wounds. The patients had a broad 
spectrum of etiologies. Over a 12-month period, the applicant indicated 
that 96 percent of wounds that had stalled demonstrated rapid 
acceleration towards closure within a 21-day period when treated with 
Fl[omacr]Graft[supreg]. The article recommended a randomized controlled 
trial (RCT) to confirm the results. The applicant also submitted two 
case studies,7 8 each involving one patient, which described 
the use of Fl[omacr]Graft[supreg] to treat distal fibula fracture and 
tarsal tunnel compression neuropathy. Lastly, the application included 
a study \9\ which presented the results from a case study of one 
patient as well as a retrospective cohort of 34 patients who received a 
Brostr[ouml]m-Evans procedure with the Fl[omacr]Graft[supreg] product. 
In general, the studies submitted lacked a clear description of the 
outcome variable and study population, and did not include statistical 
analysis.
---------------------------------------------------------------------------

    \6\ Gottleib, et al. FloGraft Rapidly Moves Stalled Wounds Into 
the Proliferative Phase.
    \7\ Jacoby, Richard. Case Study 221: Non-surgical Resolution of 
Distal Fibula Fracture with Flograft Implant; 82 YO Male.
    \8\ Jacoby, Richard. Tarsal Tunnel Compression Neuropathy Case 
Study Using Flograft.
    \9\ Maling, Scott. A Case Series: A retrospective analysis of 34 
patients receiving modified Bronstom-Evans procedure with Flograft 
reduce time to full mobility by 52%
---------------------------------------------------------------------------

    Based on the evidence submitted, we believe there is insufficient 
data to determine whether Fl[omacr]Graft[supreg]/Fl[omacr]graft 
Neogenesis[supreg] offers a substantial clinical improvement over other 
treatments for wound care. We are inviting public comments on whether 
the Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg] meets the 
substantial clinical improvement criterion.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. The applicant stated several CPT codes would 
be used to report Fl[omacr]Graft[supreg]/Fl[omacr]graft 
Neogenesis[supreg], including CPT codes 29826, 29827, 29828, 23473, 
23420, 23412, 27605, 27650, 29891, 29888, 29889, 28008, 22551, 22856, 
27179, 29861, and 29862. To meet the cost criterion for device pass-
through payment, a device must pass all three tests of the cost 
criterion for at least one APC. These CPT codes are assigned to APCs 
5121 through 5125 (Level 1 through Level 5 Musculoskeletal Procedures). 
For our calculations, we used APC 5121 (Level 1 Musculoskeletal 
Procedures), which had a CY 2016 payment rate of $1,455 and a device 
offset of $15.86 at the time the application was received. According to 
the applicant, the Fl[omacr]Graft[supreg]/Fl[omacr]graft 
Neogenesis[supreg] product is available in a variety of vial sizes, the 
largest size being 18 cc with a cost of $19,925.
    Section 419.66(d)(1), the first cost significance requirement, 
provides that the estimated average reasonable cost of devices in the 
category must exceed 25 percent of the applicable APC payment amount 
for the service related to the category of devices. We used the highest 
priced product for this determination. The estimated average reasonable 
cost of $19,925 for Fl[omacr]Graft[supreg]/Fl[omacr]graft 
Neogenesis[supreg] exceeds the applicable APC payment amount for the 
service related to the category of devices of $1,455 by 1,369 percent 
($19,925/$1,455 x 100 = 1,369 percent). Therefore, we believe 
Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg] meets the 
first cost significance test.
    The second cost significance test, at Sec.  419.66(d)(2), provides 
that the estimated average reasonable cost of the devices in the 
category must exceed the cost of the device-related portion of the APC 
payment amount for the related service by at least 25 percent, which 
means 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). The average reasonable cost of $19,925 for 
Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg] exceeds the 
device-related portion of the APC payment amount of $15,86 by 125,360 
percent ($19,925/$15.86) x 100 = 125,630 percent). Therefore, we 
believe that Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg] 
meets the second cost significance test.
    The third cost significance test, at Sec.  419.66(d)(3), requires 
that 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 must exceed 10 percent of the APC payment amount for the 
related service. The difference between the average reasonable cost of 
$19,925 for Fl[omacr]Graft[supreg]/Fl[omacr]graft Neogenesis[supreg] 
and the portion of the APC payment amount for the device of $15.86 
exceeds the APC payment amount for the related service of $1,455 by 
1,368 percent (($19,925 -$15.86)/$1,455 x 100 = 1,368 percent). 
Therefore, we believe Fl[omacr]Graft[supreg]/Fl[omacr]graft 
Neogenesis[supreg] meets the third cost significance test.
    We are inviting public comments on whether Fl[omacr]Graft[supreg]/
Fl[omacr]graft Neogenesis[supreg] meets the device pass-through payment 
criteria discussed in this section.

[[Page 33616]]

(4) KerecisTM Omega3 Wound (Skin Substitute)
    Kerecis, LLC submitted an application for a new device category for 
transitional pass-through payment status for KerecisTM 
Omega3 Wound. KerecisTM Omega3 Wound is made from acellular 
fish skin from wild Atlantic cod (Gadus morhua) caught in the North 
Atlantic Ocean that is used to regenerate damaged human tissue in 
chronic wounds. The applicant claimed that there is no disease 
transmission risk and noted that the fish skin is not required to 
undergo the viral inactivation process that the FDA dictates for 
tissues from farm animals. The applicant noted that the Omega3 fatty 
acids offer multiple health benefits, including anti-inflammation. 
KerecisTM Omega3 Wound is supplied as a sterile, single-use 
sheet in peel-open pouches. KerecisTM Omega3 Wound does not 
elicit an immune response because the major antigenic components 
present within cell membranes are removed in a gentle manner during 
processing. Unlike mammalian and human sourced products, the fish skin 
possesses extremely low risk of disease transmission and offers no 
known cultural or religious constraints for usage. The fish skin 
product is both halal and kosher compatible and avoids potential 
conflicts with Sikhism and Hinduism (Vaishnavism).
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant received FDA clearance for KerecisTM Omega3 Wound 
through the premarket notification section 510(k) process on October 
23, 2013 and its June 1, 2016 application was within 3 years of FDA 
clearance.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, KerecisTM Omega3 Wound is a skin 
substitute product that is integral to the service provided, is used 
for one patient only, comes in contact with human skin, and is 
surgically inserted into the patient. The applicant also claimed 
KerecisTM Omega3 Wound meets the device eligibility 
requirements of Sec.  419.66(b)(4) because it is not an instrument, 
apparatus, implement, or item for which depreciation and financing 
expenses are recovered, and it is not a supply or material.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. We have not 
identified an existing pass-through payment category that describes 
KerecisTM Omega3 Wound. The applicant proposed a pass-
through payment device category for KerecisTM Omega3 Wound 
with category descriptor of ``Piscine skin substitute.'' We are 
inviting public comments on this issue.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines that a device to be included 
in the category has demonstrated that it will 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. With regard to the substantial clinical 
improvement criterion, the applicant stated that individuals who would 
normally refuse to use skin substitute products from animal sources, 
including pigs, cows, horses, and sheep, would use KerecisTM 
Omega3 Wound because it is a fish-based skin substitute. The applicant 
also asserted that KerecisTM Omega3 Wound provides several 
beneficial outcomes, including faster resolution of the disease process 
compared to similar products, decreased antibiotic use, decreased pain, 
and reduced amounts of device-related complications.
    The applicant cited three studies in support of the application. 
The first study \10\ was a parallel-group, double-blinded, randomized 
controlled trial undertaken to determine if healing time of whole 
thickness biopsy wounds treated with Kerecis Omega3 Wound is 
noninferior to that of wounds treated with porcine SIS ECM (Oasis). The 
study was an intention-to-treat study. Participants had two 4-mm full 
thickness punch wounds made on the proximal anterolateral aspect of 
their nondominant arm. The study population was comprised of volunteers 
aged between 18 and 67 years with most volunteers between the ages of 
18 and 30. There were 80 volunteers who received Kerecis Omega3 Wound 
and 82 volunteers who received porcine SIS ECM (Oasis).
---------------------------------------------------------------------------

    \10\ Tumi Baldursson, T, MD, Ph.D. et al. Healing Rate and 
Autoimmune Safety of Full-Thickness Wounds Treated With Fish Skin 
Acellular Dermal Matrix Versus Porcine Small-Intestine Submucosa: A 
Noninferiority Study; The International Journal of Lower Extremity 
Wounds 2015, Vol. 14(1) 37-43.
---------------------------------------------------------------------------

    The results showed that, at 21 days, 58 (72.5 percent) of the fish 
skin ADM group were healed, compared with 46 (56 percent) of the 
porcine SIS ECM group. At 25 days, 62 (77.5 percent) of the fish skin 
ADM and 53 (65 percent) of the porcine SIS ECM group had healed. At the 
completion of the trial (28 days), 76 of the 80 wounds treated with 
fish skin ADM (95 percent) and 79 of the 82 wounds treated with porcine 
SIS ECM (96.3 percent) were healed. The odds ratio of a fish skin ADM-
treated wound being healed as compared with that treated with porcine 
SIS ECM at any given time point was estimated to be 4.75. The 
difference between the treatments was significant (P = .041). The 
immunological part of the study was designed to detect autoimmune 
reactions in those individuals treated with Kerecis Omega3 Wound. There 
was no evidence of antibodies forming in the presence of Kerecis Omega3 
Wound.
    There were issues with this study that may limit its usefulness to 
determine substantial clinical improvement including the use of 
nonpatient volunteers; studying the healing of biopsy sites rather than 
actual wounds requiring treatment; and the use of an unrealistic 1-
month endpoint of care instead of a 6-month endpoint of care.
    The second study \11\ was a case series study of 18 patients to 
assess the percentage of wound closure area from baseline after 5 
weekly fish-skin graft applications with at least one ``hard-to-heal'' 
criterion. Patients underwent application of the fish skin for 5 
sequential weeks, followed by 3 weeks of standard care. Wound area, 
skin assessments, and pain were analyzed weekly.
---------------------------------------------------------------------------

    \11\ Yang, C.K. et al. A Prospective, Postmarket, Compassionate 
Clinical Evaluation of a Novel Acellular Fish-skin Graft Which 
Contains Omega-3 Fatty Acids for the Closure of Hard-to-heal Lower 
Extremity Chronic Ulcers. Wounds 2016;28(4): 112-118.
---------------------------------------------------------------------------

    The study results showed a 40-percent decrease in wound surface 
area (P < 0.05) and a 48-percent decrease in wound depth was seen with 
5 weekly applications of the fish-skin graft and secondary dressing (P 
< 0.05). Complete closure was seen in 3 of 18 patients by the end of 
the study phase. This study did not use a comparator group to measure 
whether there is substantial clinical improvement with Kerecis Omega3 
Wound compared to other skin substitute products.
    The third study \12\ was a case series study of five patients with 
diabetes mellitis and complicated wounds in the lower limbs with 
exposed bone segments. The five patients had a total of seven wounds. 
Initial debridement

[[Page 33617]]

occurred in the operating room, followed by application of wound matrix 
and covered with silicone mesh. All seven wounds healed and the 
patients did not have to have planned amputations on the limbs with the 
wounds. The mean duration of treatment to achieve full closure of the 
wound was 25  10 weeks and ranged from 13 to 41 weeks. This 
study did not have a comparator group to determine if there was 
substantial clinical improvement with Kerecis Omega3 Wound compared to 
other skin substitute products.
---------------------------------------------------------------------------

    \12\ Trinh, T.T., et al. Marine Omega3 wound matrix for: the 
treatment of complicated wounds; Phlebologie 2016; 45: 93-98.
---------------------------------------------------------------------------

    There is no clinical data provided by the applicant to suggest that 
Kerecis Omega3 Wound provides a substantial clinical improvement over 
other similar skin substitute products. We are inviting public comments 
on whether Kerecis Omega3 Wound meets the substantial clinical 
improvement criterion.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. With respect to the cost criterion, the 
applicant stated that KerecisTM Omega3 Wound would be 
reported with CPT codes 15271 through 15278, which cover the 
application of skin substitute grafts to different areas of the body 
for high-cost skin substitutes. To meet the cost criterion for device 
pass-through payment, a device must pass all three tests of the cost 
criterion for at least one APC. CPT codes 15271 through 15278 are 
assigned to either APC 5054 (Level 4 Skin Procedures), with a CY 2016 
payment rate of $1,411.21 and a device offset amount of $4.52, or APC 
5055 (Level 5 Skin Procedures), with a CY 2016 payment rate of 
$2,137.49 and a device offset amount of $25.44. According to the 
applicant, the cost of substitute graft procedures when performed with 
KerecisTM Omega3 Wound is $2,030.
    Section 419.66(d)(1), the first cost significance requirement, 
provides that the estimated average reasonable cost of devices in the 
category must exceed 25 percent of the applicable APC payment amount 
for the service related to the category of devices. The estimated 
average reasonable cost of $2,030 for KerecisTM Omega3 Wound 
exceeds the applicable APC payment amount for the service related to 
the category of devices of $1,411.21 by 144 percent ($2,030/$1,411.21 x 
100 percent = 144 percent). Therefore, it appears that 
KerecisTM Omega3 Wound meets the first cost significance 
test.
    The second cost significance test, at Sec.  419.66(d)(2), provides 
that the estimated average reasonable cost of the devices in the 
category must exceed the cost of the device-related portion of the APC 
payment amount for the related service by at least 25 percent, which 
means 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). The average reasonable cost of $2,030 for 
KerecisTM Omega3 Wound exceeds the device-related portion of 
the APC payment amount of $4.52 by 44,911 percent ($2,030/$4.52 x 100 
percent = 449 percent). Therefore, it appears that KerecisTM 
Omega3 Wound meets the second cost significance test.
    The third cost significance test, at Sec.  419.66(d)(3), requires 
that 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 must exceed 10 percent of the APC payment amount for the 
related service. The difference between the average reasonable cost of 
$2,030 for KerecisTM Omega3 Wound and the portion of the APC 
payment amount for the device of $4.52 exceeds the APC payment amount 
for the related service of $1,411 by 144 percent (($2,030 - $4.52)/
$1,411.21) x 100 percent = 144 percent). Therefore, it appears that 
KerecisTM Omega3 Wound meets the third cost significance 
test. Based on the costs submitted by the applicant and the 
calculations noted earlier, it appears that KerecisTM Omega3 
Wound meets the cost criterion.
    We are inviting public comments on whether KerecisTM 
Omega3 Wound meets the device pass-through payment criteria discussed 
in this section.
(5) X-WRAP[supreg]
    Applied Biologics, LLC submitted an application for a new device 
category for transitional pass-through payment status for X-
WRAP[supreg]. X-WRAP[supreg] is a chorion-free, amnion membrane 
allograft that can be used as a biological wrap or patch at any 
surgical site. It is used as a treatment for surgical or traumatic 
injury to bone or soft tissue. It is used to minimize adhesions, reduce 
inflammation, and promote soft tissue healing. The X-WRAP[supreg] is 
made from the intermediate amniotic epithelial layer of the placenta, 
recovered from a Cesarean delivery of pre-screened donors. It is 
available in a variety of sizes and is used as a biologic augmentation 
to a variety of orthopedic repairs.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
applicant indicated that X-WRAP[supreg] conforms to the FDA regulatory 
path under section 361 of the PHS Act and 21 CFR part 1271 for Human 
Cells, Tissues, and Cellular and Tissue-Based Products (HCT/Ps). Under 
this regulatory path, FDA requires the manufacturer to register and 
list their HCT/Ps with the Center for Biologics Evaluation and Research 
(CBER) within 5 days after beginning operations and to update their 
registrations annually. Applied Biologics, LLC has a FDA field 
establishment identifier (FEI) under the HHS-FDA-Establishment 
Registration and Listing for Human Cells, Tissues, and Cellular and 
Tissue-Based Products (HCT/Ps). The applicant submitted an annual 
registration/listing for dated December 30, 2015. It is not clear when 
the initial CBER filing occurred for the X-WRAP[supreg] product, and 
therefore, it is unclear if the newness criterion for X-WRAP[supreg] is 
met.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, X-WRAP[supreg] is integral to the service 
provided, is used for one patient only, comes in contact with human 
skin, and is applied in or on a wound or other skin lesion. The 
applicant also claimed X-WRAP[supreg] meets the device eligibility 
requirements of Sec.  419.66(b)(4) because it is not an instrument, 
apparatus, implement or item for which depreciation and financing 
expenses are recovered, and it is not a supply or material furnished 
incident to a service.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. We have not 
identified an existing pass-through payment device category that 
describes X-WRAP[supreg]. The applicant proposed a pass-through device 
category for X-WRAP[supreg] with a category descriptor of ``Amniotic 
Membrane Soft Tissue Allografts''. We are inviting public comments on 
this issue.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines that a device to be included 
in the category has demonstrated that it will 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. With regard to the substantial

[[Page 33618]]

clinical improvement criterion, the applicant submitted a list of 
studies in the application that showed general effectiveness of 
amniotic fluid and amniotic membrane-based products. However, these 
studies were not specific to the X-WRAP[supreg] product. The applicant 
also submitted one study \13\ that was a retrospective review with 
prospective follow-up of patients (n=8) with recurrent surgical primary 
cubital tunnel syndrome (CuTS) who had undergone at least two previous 
ulnar nerve surgeries before having an ulnar neurolysis with X-
WRAP[supreg] dry amniotic membrane barrier. The results showed that the 
participants experienced significant improvement in VAS pain scores, 
QuickDASH outcome scores, and grip strength in comparison to these 
scores prior to the surgery. Mean VAS improved by 3.5 from, 7.3 to 3.8 
(P < .0001). Mean QuickDASH improved by 30 from, 80 to 50 (P < .0001). 
Grip strength improved by 25 pounds on average (P < .0001), a mean 
improvement of 38 percent relative to the contralateral side compared 
with preoperative measurements. Also, none of the patients reported 
progression or worsening of their symptoms compared with 
preoperatively. The applicant's conclusions from the article were that 
using the X-WRAP[supreg] amniotic membrane with revision neurolysis was 
a safe and effective treatment for primary cubital syndrome. The study 
lacked a comparison arm and did not include group assignment or 
blinding of patients.
---------------------------------------------------------------------------

    \13\ Gaspar, M.P., et al. (2016). Recurrent cubital tunnel 
syndrome treated with revision neurolysis and amniotic membrane 
nerve wrapping. Journal of Shoulder and Elbow surgery, 25, 2057-
2065.
---------------------------------------------------------------------------

    Based on the evidence submitted, we believe there is insufficient 
data to determine whether X-WRAP[supreg] offers a substantial clinical 
improvement over other treatments for wound care. We are inviting 
public comments on whether the X-WRAP[supreg] meets the substantial 
clinical improvement criterion.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. The applicant stated that several CPT codes 
would be used to report X-WRAP[supreg], including: CPT codes 29826, 
29827, 29828, 23473, 23420, 23412, 27605, 27650, 29891, 29888, 29889, 
28008, 22551, 22856, 27179, 29861, 29862, 15271, 15272, 15273, and 
15277. 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. These CPT codes are assigned to APCs 5121 through 5125 (Level 1 
through Level 5 Musculoskeletal Procedures) and APCs 5054 and 5055 
(Level 4 and Level 5 Skin Procedures). For our calculations, we used 
APC 5121 (Level 1 Musculoskeletal Procedures), which had a CY 2016 
payment rate of $1,455 and a device offset amount of $15.86 at the time 
the application was received. According to the applicant, the X-
WRAP[supreg] product is available in several sizes, the largest being 
4x8 cm with a cost of $5,280.
    Section 419.66(d)(1), the first cost significance requirement, 
provides that the estimated average reasonable cost of devices in the 
category must exceed 25 percent of the applicable APC payment amount 
for the service related to the category of devices. The estimated 
average reasonable cost of $5,280 for X-WRAP[supreg] exceeds the 
applicable APC payment amount for the service related to the category 
of devices of $1,455 by 363 percent ($5,280/$1,455 x 100 = 363 
percent). Therefore, it appears that X-WRAP[supreg] meets the first 
cost significance test.
    The second cost significance test, at Sec.  419.66(d)(2), provides 
that the estimated average reasonable cost of the devices in the 
category must exceed the cost of the device-related portion of the APC 
payment amount for the related service by at least 25 percent, which 
means 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). The average reasonable cost of $5,280 for X-WRAP[supreg] 
exceeds the device-related portion of the APC payment amount of $15.86 
by 33,291 percent ($5,280/$15.86) x 100 = 33,291 percent). Therefore, 
it appears that X-WRAP[supreg] meets the second cost significance test.
    The third cost significance test, at Sec.  419.66(d)(3), requires 
that 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 must exceed 10 percent of the APC payment amount for the 
related service. The difference between the average reasonable cost of 
$5,280 for X-WRAP[supreg] and the portion of the APC payment amount for 
the device of $15.86 exceeds the APC payment amount for the related 
service of $1,455 by 361 percent (($5280 - $15.86)/$1455 x 100 = 361 
percent). Therefore, it appears that X-WRAP[supreg] meets the third 
cost significance test.
    We are inviting public comments on whether X-WRAP[supreg] meets the 
device pass-through payment criteria discussed in this section.

B. Proposed Device-Intensive Procedures

1. Background
    Under the OPPS, prior to CY 2017, device-intensive APCs were 
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 were calculated and the 
geometric mean device offset of all of the procedures had to 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) applied to device-
intensive APCs and is discussed in detail in section IV.B.4. of this 
proposed rule. A related device policy was 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, prior to CY 2017, the device-intensive methodology 
assigned device-intensive status to all procedures requiring the 
implantation of a device, which were assigned to an APC with a device 
offset greater than 40 percent. Historically, the device-intensive 
designation was at the APC level and applied to the applicable 
procedures within that given APC. In the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79658), we changed our methodology 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. Under this 
policy, all procedures with significant device costs (defined as a 
device offset of more than 40 percent) are assigned device-intensive 
status, regardless of their APC placement. Also, we believe that a 
HCPCS code-level device offset is, in most cases, 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

[[Page 33619]]

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 results in a more accurate representation of the 
cost attributable to implantation of a high-cost device, which ensures 
consistent device-intensive designation of procedures with a 
significant device cost. Further, we believe a HCPCS code-level device 
offset removes inappropriate device-intensive status to procedures 
without a significant device cost but which are granted such status 
because of APC assignment.
    Under our CY 2017 finalized policy, procedures that have an 
individual HCPCS code-level device offset of greater than 40 percent 
are identified as device-intensive procedures and are subject to all 
the policies applicable to procedures assigned device-intensive status 
under our established methodology, including our policies on device 
edits and device credits. Therefore, all procedures requiring the 
implantation of a medical device and that have an individual HCPCS 
code-level device offset of greater than 40 percent are 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 this proposed rule, 
respectively.
    In addition, for new HCPCS codes describing procedures requiring 
the implantation of medical devices that do not yet have associated 
claims data, in the CY 2017 OPPS/ASC final rule with comment period (81 
FR 79658), we finalized a policy 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. This default device offset amount of 41 percent is not 
calculated from claims data; instead, it is 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 is to ensure ASC access for new procedures until claims 
data become available. However, 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 (81 FR 
79658). Once claims data are available for a new procedure requiring 
the implantation of a medical device, device-intensive status will be 
applied to the code if the HCPCS code-level device offset is greater 
than 40 percent, according to our finalized policy of determining 
device-intensive status by calculating the HCPCS code-level device 
offset.
    The full listing of proposed CY 2018 device-intensive procedures is 
included in Addendum P to this proposed rule (which is available via 
the Internet on the CMS Web site).
    In response to comments received in the CY 2017 OPPS/ASC final rule 
with comment period, we specified that 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.
3. Changes to the Device Edit Policy for CY 2017 and Subsequent Years
    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.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79658 
through 79659), we changed our policy 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 
specified that any device code, when reported on a claim with a device-
intensive procedure, will satisfy the edit. In addition, we created 
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.
    We are not proposing any changes to this policy for CY 2018.
4. Proposed 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

[[Page 33620]]

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 and Subsequent Years
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79659 
through 79660), for CY 2017 and subsequent years, we finalized our 
policy to reduce OPPS payment for device intensive procedures, by the 
full or partial credit a provider receives for a replaced device, when 
a hospital furnishes a specified device without cost or with a full or 
partial credit. Under our current policy, hospitals 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.
    In addition, for CY 2017 and subsequent years, we finalized our 
policy 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.
    We are not proposing any changes to this policy for CY 2018.
5. Proposed 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 and finalized 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 the 
CY 2017 OPPS/ASC final rule with comment period (81 FR 79660 through 
79661), we established our current policy 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. 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) was approximately $21,302, and 
the median cost was approximately $19,521. The final CY 2017 payment 
rate (calculated using the median cost) is approximately $18,984.
    For CY 2018, we are proposing to continue with our current policy 
of establishing 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 based on calculations using the median cost 
instead of the geometric mean cost. For CY 2018, this policy would 
continue to apply only to a procedure described by CPT code 0308T in 
APC 5495 because this APC is the only APC containing a device-intensive 
procedure with fewer than 100 total claims in the APC. As we have 
stated before (81 FR 79660), we believe that this approach will help to 
mitigate significant year-to-year payment rate fluctuations while 
preserving accurate claims data-based payment rates for

[[Page 33621]]

low-volume device-intensive procedures. The CY 2018 proposed rule 
median cost for the procedure described by CPT code 0308T is 
approximately $17,643.75. The proposed CY 2018 payment rate (calculated 
using the median cost and the claims that reported the device 
consistent with our device edit policy for device intensive procedures) 
is approximately $16,963.69.

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

A. Proposed 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 proposed rule, the term ``biological'' 
is used because this is the term that appears in section 1861(t) of the 
Act. A ``biological'' as used in this proposed rule includes (but is 
not necessarily limited to) a ``biological product'' or a ``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 those types of drugs or 
biologicals mentioned above that are hospital outpatient services under 
Medicare Part B for which transitional pass-through payment was made on 
the first date the hospital OPPS was implemented.
    Transitional pass-through payments also are provided for certain 
``new'' drugs and biologicals that were not being paid for as an HOPD 
service as of December 31, 1996 and whose cost is ``not insignificant'' 
in relation to the OPPS payments for the procedures or services 
associated with the new drug or biological. For pass-through payment 
purposes, radiopharmaceuticals are included as ``drugs.'' As required 
by statute, transitional pass-through payments for a drug or biological 
described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a 
period of at least 2 years, but not more than 3 years, after the 
payment was first made for the product as a hospital outpatient service 
under Medicare Part B. Proposed CY 2018 pass-through drugs and 
biologicals and their designated APCs are assigned status indicator 
``G'' in Addenda A and B to this proposed rule (which are available via 
the Internet on the CMS Web site).
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act for the 
drug or biological exceeds the portion of the otherwise applicable 
Medicare OPD fee schedule that the Secretary determines is associated 
with the drug or biological. 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 proposed rule, 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 described on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. 3-Year Transitional Pass-Through Payment Period for All Pass-Through 
Drugs, Biologicals, and Radiopharmaceuticals and Quarterly Expiration 
of Pass-Through Status
    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 newly approved 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, prior to CY 2017, we expired pass-through status for drugs and 
biologicals on an annual basis through notice-and-comment rulemaking 
(74 FR 60480). In the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79662), we finalized a policy change, 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 
payment period that is as close to a full 3 years as possible for all 
pass-through drugs, biologicals, and radiopharmaceuticals.
    This change eliminated the variability of the pass-through payment 
eligibility period, which previously varied based on when a particular 
application was initially received. We believe that the timing of a 
pass-through payment application should not determine the duration of 
pass-through payment status, and this approach allows for the maximum 
pass-through payment period for each pass-through drug without 
exceeding the statutory limit of 3 years.
3. Proposed Drugs and Biologicals With Expiring Pass-Through Payment 
Status in CY 2017
    We are proposing that the pass-through payment status of 19 drugs 
and biologicals would expire on December 31, 2017, as listed in Table 
21 below. 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, 2017. These drugs and biologicals were approved for pass-
through payment status on or before January 1, 2016. In accordance with 
the policy finalized last year and described above, pass-through 
payment status for drugs and biologicals newly approved in CY 2017 and 
subsequent years will expire on a quarterly basis, with a pass-through 
payment period as close to 3 years as possible. 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

[[Page 33622]]

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 proposed to be $120 for CY 2018), as discussed 
further in section V.B.2. of this proposed rule. We are proposing that 
if the estimated per day cost for the drug or biological is less than 
or equal to the applicable OPPS drug packaging threshold, we would 
package payment for the drug or biological into the payment for the 
associated procedure in the upcoming calendar year. If the estimated 
per day cost of the drug or biological is greater than the OPPS drug 
packaging threshold, we are proposing to provide separate payment at 
the applicable relative ASP-based payment amount (which is proposed at 
ASP+6 percent for CY 2018, as discussed further in section V.B.3. of 
this proposed rule).

    Table 21--Proposed Drugs and Biologicals for Which Pass-Through Payment Status Expires December 31, 2017
----------------------------------------------------------------------------------------------------------------
                                                                                                   Pass-through
          CY 2017 HCPCS Code            CY 2017 Long descriptor   CY 2017 Status    CY 2017 APC       payment
                                                                    indicator                     effective date
----------------------------------------------------------------------------------------------------------------
A9586................................  Florbetapir f18,                       G             1664      01/01/2015
                                        diagnostic, per study
                                        dose, up to 10
                                        millicuries.
C9447................................  Injection, phenylephrine               G             1663      01/01/2015
                                        and ketorolac, 4 ml
                                        vial.
J0596................................  Injection, c-1 esterase                G             9445      04/01/2015
                                        inhibitor (human),
                                        Ruconest, 10 units.
J0695................................  Injection, ceftolozane                 G             9452      04/01/2015
                                        50 mg and tazobactam 25
                                        mg.
J0875................................  Injection, dalbavancin,                G             1823      01/01/2015
                                        5 mg.
J1833................................  Injection,                             G             9456      10/01/2015
                                        isavuconazonium
                                        sulfate, 1 mg.
J2407................................  Injection, oritavancin,                G             1660      01/01/2015
                                        10 mg.
J2502................................  Injection, pasireotide                 G             9454      07/01/2015
                                        long acting, 1 mg.
J2547................................  Injection, peramivir, 1                G             9451      04/01/2015
                                        mg.
J2860................................  Injection, siltuximab,                 G             9455      07/01/2015
                                        10 mg.
J3090................................  Injection, tedizolid                   G             1662      01/01/2015
                                        phosphate, 1 mg.
J7313................................  Injection, fluocinolone                G             9450      04/01/2015
                                        acetonide intravitreal
                                        implant, 0.01 mg.
J8655................................  Netupitant (300 mg) and                G             9448      04/01/2015
                                        palonosetron (0.5 mg).
J9032................................  Injection, belinostat,                 G             1658      01/01/2015
                                        10 mg.
J9039................................  Injection, blinatumomab,               G             9449      04/01/2015
                                        1 mcg.
J9271................................  Injection,                             G             1490      01/01/2015
                                        pembrolizumab, 1 mg.
J9299................................  Injection, nivolumab, 1                G             9453      07/01/2015
                                        mg.
Q4172................................  PuraPly, and PuraPly                   G             1657      01/01/2015
                                        Antimicrobial, any
                                        type, per square
                                        centimeter.
Q9950................................  Injection, sulfur                      G             9457      10/01/2015
                                        hexafluoride lipid
                                        microsphere, per ml.
----------------------------------------------------------------------------------------------------------------

    The proposed packaged or separately payable status of each of these 
drugs or biologicals is listed in Addendum B to this proposed rule 
(which is available via the Internet on the CMS Web site).
4. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Payment Status in CY 2018
    We are proposing to continue pass-through payment status in CY 2018 
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, 2017. These drugs and biologicals, 
which were approved for pass-through status between January 1, 2016, 
and July 1, 2017, are listed in Table 22 below. The APCs and HCPCS 
codes for these drugs and biologicals approved for pass-through payment 
status through July 1, 2017 are assigned status indicator ``G'' in 
Addenda A and B to this 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 2018, we are proposing 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 2018. We are proposing that a $0 pass-
through payment amount would be paid for pass-through drugs and 
biologicals under the CY 2018 OPPS because the difference between the 
amount authorized under section 1842(o) of the Act, which is proposed 
at ASP+6 percent, and the portion of the otherwise applicable OPD fee 
schedule that the Secretary determines is appropriate, which is 
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 are proposing that their pass-through 
payment amount would be equal to ASP+6 percent for CY 2018 because, if 
not for their pass-through status, payment for these products would be 
packaged into the associated procedure.
    In addition, we are proposing to continue to update pass-through 
payment rates on a quarterly basis on the CMS Web site during CY 2018 
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).
    For CY 2018, consistent with our CY 2017 policy for diagnostic and 
therapeutic radiopharmaceuticals, we are proposing to provide payment 
for both diagnostic and therapeutic radiopharmaceuticals that are 
granted pass-through payment status based on the ASP methodology. As 
stated earlier,

[[Page 33623]]

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 
2018, we are proposing to follow the standard ASP methodology to 
determine the pass-through payment rate that drugs receive under 
section 1842(o) of the Act, which is proposed at ASP+6 percent. If ASP 
data are not available for a radiopharmaceutical, we are proposing 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 are proposing to provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP.
    The 38 drugs and biologicals that we are proposing to continue to 
have pass-through payment status for CY 2018 or have been granted pass-
through payment status as of July 2017 are shown in Table 22 below.

                                  Table 22--Proposed Drugs and Biologicals With Pass-Through Payment Status in CY 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Proposed CY                     Pass-through
           CY 2017 HCPCS code                  CY 2018 HCPCS code           CY 2018 long descriptor        2018 status      Proposed CY       payment
                                                                                                            indicator        2018 APC     effective date
--------------------------------------------------------------------------------------------------------------------------------------------------------
A9515...................................  A9515......................  Choline C 11, diagnostic, per                  G             9461      04/01/2016
                                                                        study dose.
A9587...................................  A9587......................  Gallium ga-68, dotatate,                       G             9056      01/01/2017
                                                                        diagnostic, 0.1 millicurie.
A9588...................................  A9588......................  Fluciclovine f-18, diagnostic, 1               G             9052      01/01/2017
                                                                        millicurie.
C9140...................................  C9140......................  Injection, Factor VIII                         G             9043      01/01/2017
                                                                        (antihemophilic factor,
                                                                        recombinant) (Afstyla), 1 I.U..
C9460...................................  C9460......................  Injection, cangrelor, 1 mg......               G             9460      01/01/2016
C9482...................................  C9482......................  Injection, sotalol                             G             9482      10/01/2016
                                                                        hydrochloride, 1 mg.
C9483...................................  C9483......................  Injection, atezolizumab, 10 mg..               G             9483      10/01/2016
C9484...................................  C9484......................  Injection, eteplirsen, 10 mg....               G             9484      04/01/2017
C9485...................................  C9485......................  Injection, olaratumab, 10 mg....               G             9485      04/01/2017
C9486...................................  C9486......................  Injection, granisetron extended                G             9486      04/01/2017
                                                                        release, 0.1 mg.
Q9989...................................  Q9989......................  Ustekinumab, for Intravenous                   G             9487      04/01/2017
                                                                        Injection, 1 mg.
C9488...................................  C9488......................  Injection, conivaptan                          G             9488      04/01/2017
                                                                        hydrochloride, 1 mg.
C9489...................................  C9489......................  Injection, nusinersen, 0.1 mg...               G             9489      07/01/2017
C9490...................................  C9490......................  Injection, bezlotoxumab, 10 mg..               G             9490      07/01/2017
J0570...................................  J0570......................  Buprenorphine implant, 74.2 mg..               G             9058      01/01/2017
J1942...................................  J1942......................  Injection, aripiprazole                        G             9470      04/01/2016
                                                                        lauroxil, 1 mg.
J2182...................................  J2182......................  Injection, mepolizumab, 1 mg....               G             9473      04/01/2016
J2786...................................  J2786......................  Injection, reslizumab, 1 mg.....               G             9481      10/01/2016
J2840...................................  J2840......................  Injection, sebelipase alfa, 1 mg               G             9478      07/01/2016
J7179...................................  J7179......................  Injection, von willebrand factor               G             9059      01/01/2017
                                                                        (recombinant), (Vonvendi), 1
                                                                        i.u. vwf:rco.
J7202...................................  J7202......................  Injection, Factor IX, albumin                  G             9171      10/01/2016
                                                                        fusion protein (recombinant),
                                                                        Idelvion, 1 i.u..
J7207...................................  J7207......................  Injection, Factor VIII                         G             1844      04/01/2016
                                                                        (antihemophilic factor,
                                                                        recombinant) PEGylated, 1 I.U..
J7209...................................  J7209......................  Injection, Factor VIII                         G             1846      04/01/2016
                                                                        (antihemophilic factor,
                                                                        recombinant) (Nuwiq), per i.u..
J7322...................................  J7322......................  Hyaluronan or derivative,                      G             9471      04/01/2016
                                                                        Hymovis, for intra-articular
                                                                        injection, 1 mg.
J7328...................................  J7328......................  Hyaluronan or derivative, gel-                 G             1862      04/01/2017
                                                                        syn, for intra-articular
                                                                        injection, 0.1 mg.
J7342...................................  J7342......................  Instillation, ciprofloxacin otic               G             9479      07/01/2016
                                                                        suspension, 6 mg.
J7503...................................  J7503......................  Tacrolimus, extended release,                  G             1845      04/01/2016
                                                                        (envarsus xr), oral, 0.25 mg.
J9034...................................  J9034......................  Injection, bendamustine hcl                    G             1861      01/01/2017
                                                                        (Bendeka), 1 mg.
J9145...................................  J9145......................  Injection, daratumumab, 10 mg...               G             9476      07/01/2016
J9176...................................  J9176......................  Injection, elotuzumab, 1 mg.....               G             9477      07/01/2016
J9205...................................  J9205......................  Injection, irinotecan liposome,                G             9474      04/01/2016
                                                                        1 mg.
J9295...................................  J9295......................  Injection, necitumumab, 1 mg....               G             9475      04/01/2016
J9325...................................  J9325......................  Injection, talimogene                          G             9472      04/01/2016
                                                                        laherparepvec, 1 million plaque
                                                                        forming units (PFU).
J9352...................................  J9352......................  Injection, trabectedin, 0.1 mg..               G             9480      07/01/2016
Q5101...................................  Q5101......................  Injection, Filgrastim (G-CSF),                 G             1822      01/01/2016
                                                                        Biosimilar, 1 microgram.
Q5102...................................  Q5102......................  Injection, Infliximab,                         G             1847      04/01/2017
                                                                        Biosimilar, 10 mg.
Q9982...................................  Q9982......................  Flutemetamol F18, diagnostic,                  G             9459      01/01/2016
                                                                        per study dose, up to 5
                                                                        millicuries.
Q9983...................................  Q9983......................  Florbetaben F18, diagnostic, per               G             9458      01/01/2016
                                                                        study dose, up to 8.1
                                                                        millicuries.
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 33624]]

5. Proposed Provisions for Reducing Transitional Pass-Through Payments 
for Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals To 
Offset Costs Packaged Into APC Groups
    Under the regulations at 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 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). For CY 2018, as we did in CY 2017, 
we are proposing 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 payment offset 
may be applicable for pass-through diagnostic radiopharmaceuticals, 
pass-through contrast agents, pass-through stress agents, and pass-
through skin substitutes are identified in Table 23 below.

       Table 23--Proposed APCS to Which a Policy-Packaged Drug or
         Radiopharmaceutical Offset May Be Applicable in CY 2018
------------------------------------------------------------------------
       Proposed CY 2018 APC              Proposed CY 2018 APC title
------------------------------------------------------------------------
                     Diagnostic Radiopharmaceutical
------------------------------------------------------------------------
5591..............................  Level 1 Nuclear Medicine and Related
                                     Services.
5592..............................  Level 2 Nuclear Medicine and Related
                                     Services.
5593..............................  Level 3 Nuclear Medicine and Related
                                     Services.
5594..............................  Level 4 Nuclear Medicine and Related
                                     Services.
------------------------------------------------------------------------
                             Contrast Agent
------------------------------------------------------------------------
5571..............................  Level 1 Imaging with Contrast.
5572..............................  Level 2 Imaging with Contrast.
5573..............................  Level 3 Imaging with Contrast.
------------------------------------------------------------------------
                              Stress Agent
------------------------------------------------------------------------
5722..............................  Level 2 Diagnostic Tests and Related
                                     Services.
5593..............................  Level 3 Nuclear Medicine and Related
                                     Services.
------------------------------------------------------------------------
                             Skin Substitute
------------------------------------------------------------------------
5054..............................  Level 4 Skin Procedures.
5055..............................  Level 5 Skin Procedures.
------------------------------------------------------------------------

    We are proposing 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.

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

1. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Proposed 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 $110 for CY 
2017 (81 FR 79665).

[[Page 33625]]

    Following the CY 2007 methodology, for this CY 2018 OPPS/ASC 
proposed rule, we used the most recently available four quarter moving 
average PPI levels to trend the $50 threshold forward from the third 
quarter of CY 2005 to the third quarter of CY 2018 and rounded the 
resulting dollar amount ($117.98) to the nearest $5 increment, which 
yielded a figure of $120. 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. Based on these calculations, we are proposing a packaging 
threshold for CY 2018 of $120.
b. Proposed Packaging of Payment for HCPCS Codes That Describe Certain 
Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals Under 
the Cost Threshold (``Threshold-Packaged Drugs'')
    To determine the proposed CY 2018 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 2016 
and were paid (via packaged or separate payment) under the OPPS. We 
used data from CY 2016 claims processed before January 1, 2017 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 this proposed rule, or for 
the following policy-packaged items that we are proposing to continue 
to package in CY 2018: 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 2018, we used the methodology that was described in detail 
in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and 
finalized in the CY 2006 OPPS final rule with comment period (70 FR 
68636 through 68638). For each drug and biological HCPCS code, we used 
an estimated payment rate of ASP+6 percent (which is the payment rate 
we are proposing for separately payable drugs and biologicals for CY 
2018, as discussed in more detail in section V.B.2.b. of this proposed 
rule) to calculate the CY 2018 proposed rule per day costs. We used the 
manufacturer submitted ASP data from the fourth quarter of CY 2016 
(data that were used for payment purposes in the physician's office 
setting, effective April 1, 2017) to determine the proposed rule per 
day cost.
    As is our standard methodology, for CY 2018, we are proposing to 
use payment rates based on the ASP data from the first quarter of CY 
2017 for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to this proposed rule 
(which are available via the Internet on the CMS Web site) because 
these are the most recent data available for use at the time of 
development of this proposed rule. These data also were the basis for 
drug payments in the physician's office setting, effective April 1, 
2017. 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 2016 hospital claims data to determine their per 
day cost.
    We are proposing to package items with a per day cost less than or 
equal to $120, and identify items with a per day cost greater than $120 
as separately payable. Consistent with our past practice, we cross-
walked historical OPPS claims data from the CY 2016 HCPCS codes that 
were reported to the CY 2017 HCPCS codes that we display in Addendum B 
to this proposed rule (which is available via the Internet on the CMS 
Web site) for proposed payment in CY 2018.
    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 2018 OPPS/ASC 
proposed rule, we are proposing to use ASP data from the fourth 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 April 1, 2017, along with updated hospital 
claims data from CY 2016. We note that we also are proposing to use 
these data for budget neutrality estimates and impact analyses for this 
CY 2018 OPPS/ASC proposed rule.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B for the final rule with comment 
period will be based on ASP data from the second quarter of CY 2017. 
These data will be the basis for calculating payment rates for drugs 
and biologicals in the physician's office setting using the ASP 
methodology, effective October 1, 2017. These payment rates would then 
be updated in the January 2018 OPPS update, based on the most recent 
ASP data to be used for physician's office and OPPS payment as of 
January 1, 2018. For items that do not currently have an ASP-based 
payment rate, we are proposing to recalculate their mean unit cost from 
all of the CY 2016 claims data and updated cost report information 
available for the CY 2018 final rule with comment period to determine 
their final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in this 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, we are proposing 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 2018 OPPS drug packaging 
threshold and the drug's payment status (packaged or separately 
payable) in CY 2017. 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). Specifically, for CY 2018, 
consistent with our historical practice, we are proposing to apply the 
following policies to these HCPCS codes for drugs, biologicals, and 
therapeutic radiopharmaceuticals whose relationship to the drug 
packaging threshold changes based on the updated drug packaging 
threshold and on the final updated data:
     HCPCS codes for drugs and biologicals that were paid 
separately in CY 2017 and that were proposed for separate payment in CY 
2018, and that then have per day costs equal to or less than the CY 
2018 final rule drug packaging threshold, based on the updated ASPs and 
hospital claims data

[[Page 33626]]

used for the CY 2018 final rule, would continue to receive separate 
payment in CY 2018.
     HCPCS codes for drugs and biologicals that were packaged 
in CY 2017 and that were proposed for separate payment in CY 2018, and 
that then have per day costs equal to or less than the CY 2018 final 
rule drug packaging threshold, based on the updated ASPs and hospital 
claims data used for the CY 2018 final rule, would remain packaged in 
CY 2018.
     HCPCS codes for drugs and biologicals for which we 
proposed packaged payment in CY 2018 but then have per day costs 
greater than the CY 2018 final rule drug packaging threshold, based on 
the updated ASPs and hospital claims data used for the CY 2018 final 
rule, would receive separate payment in CY 2018.
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. These 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).
d. Proposed 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).
    Skin substitutes assigned to the high cost group are described by 
HCPCS codes 15271 through 15278. Skin substitutes assigned to the low 
cost group are described by HCPCS codes C5271 through C5278. Geometric 
mean costs for the various procedures are calculated using only claims 
for the skin substitutes that are assigned to each group. Specifically, 
claims billed with HCPCS codes 15271, 15273, 15275, or 15277 are used 
to calculate the geometric mean costs for procedures assigned to the 
high cost group, and claims billed with HCPCS codes C5271, C5273, 
C5275, and C5277 are used to calculate the geometric mean costs for 
procedures assigned to the low cost group (78 FR 74935).
    Each of the HCPCS codes described above are assigned to one of the 
following three skin procedure APCs according to the geometric mean 
cost for the code: APC 5053 (Level 3 Skin Procedures) (HCPCS codes 
C5271, C5275, and C5277); APC 5054 (Level 4 Skin Procedures) (HCPCS 
codes C5273, 15271, 15275, and 15277); or APC 5055 (Level 5 Skin 
Procedures) (HCPCS code 15273). In CY 2017, the payment rate for APC 
5053 (Level 3 Skin Procedures) was $466, the payment rate for APC 5054 
(Level 4 Skin Procedures) was $1,468, and the payment rate for APC 5055 
(Level 5 Skin Procedures) was $2,575. This information also is 
available in Addenda A and B of the CY 2017 OPPS/ASC final rule with 
comment period (which is available via the Internet on the CMS Web 
site).
    We have continued the high cost/low cost categories policy since CY 
2014, and are proposing to continue it for CY 2018 with the 
modification discussed below. 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 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 a discussion of the high cost/low cost methodology that was 
adopted in CY 2016 and has been in effect since then, we refer readers 
to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70434 
through 70435). For CY 2018, as in CY 2016 and CY 2017, we are 
proposing to continue 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 CY 2018, as for CY 2017, we are proposing to assign 
each skin substitute that exceeds either the MUC threshold or the PDC 
threshold to the high cost group. In addition, as described in more 
detail later in this section, for CY 2018, as for CY 2017, we are 
proposing to assign any skin substitute with an MUC or a PDC that does 
not exceed either the MUC threshold or the PDC threshold to the low 
cost group. For CY 2018, we are proposing that any skin substitute 
product that was assigned to the high cost group in CY 2017 will be 
assigned to the high cost group for CY 2018, regardless of whether it 
exceeds or falls below the CY 2018 MUC or PDC threshold.
    For this CY 2018 OPPS/ASC proposed rule, and consistent with 
previous methodology as established in the CY 2014 through CY 2017 
final rules with comment period, we analyzed CY 2016 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

[[Page 33627]]

substitutes' PDCs). The proposed CY 2018 MUC threshold is $47 per cm\2\ 
(rounded to the nearest $1) and the proposed CY 2018 PDC threshold is 
$755 (rounded to the nearest $1).
    For CY 2018, we are proposing to continue to assign skin 
substitutes with pass-through payment status to the high cost category. 
However, there are no skin substitutes that are proposed to have pass-
through payment status for CY 2018. We are proposing 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 would use WAC+6 
percent or 95 percent of AWP to assign a product to either the high 
cost or low cost category. New skin substitutes without pricing 
information would be assigned to the low cost category until pricing 
information is available to compare to the CY 2018 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).
    Some skin substitute manufacturers have raised concerns about 
significant fluctuation in both the MUC threshold and the PDC threshold 
from year to year. The fluctuation in the thresholds may result in the 
reassignment of several skin substitutes from the high cost group to 
the low cost group which, under current payment rates, can be a 
difference of approximately $1,000 in the payment amount for the same 
procedure. In addition, these stakeholders also were concerned that the 
inclusion of cost data from skin substitutes with pass-through payment 
status in the MUC and PDC calculations would artificially inflate the 
thresholds. Skin substitute stakeholders requested that CMS consider 
alternatives to the current methodology used to calculate the MUC and 
PDC thresholds and also requested that CMS consider whether it might be 
appropriate to establish a new cost group in between the low cost group 
and the high cost group to allow for assignment of moderately priced 
skin substitutes to a newly created middle group.
    We share the goal of promoting payment stability for skin 
substitute products and their related procedures as price stability 
allows hospitals using such products to more easily anticipate future 
payments associated with these products. We have attempted to limit 
year to year shifts for skin substitute products between the high cost 
and low cost groups through multiple initiatives implemented since CY 
2014, including: establishing separate skin substitute application 
procedure codes for low-cost skin substitutes (78 FR 74935); using a 
skin substitute's MUC calculated from outpatient hospital claims data 
instead of an average of ASP+6 percent as the primary methodology to 
assign products to the high cost or low cost group (79 FR 66883); and 
establishing the PDC threshold as an alternate methodology to assign a 
skin substitute to the high cost group (80 FR 70434 through 70435).
    In order to allow additional time to evaluate concerns and 
suggestions from stakeholders about the volatility of the MUC and PDC 
thresholds, for CY 2018, we are proposing that a skin substitute that 
was assigned to the high cost group for CY 2017 would be assigned to 
the high cost group for CY 2018, even if it does not exceed the CY 2018 
MUC or PDC thresholds. Our analysis has found that seven skin 
substitute products that would have otherwise been assigned to the low 
cost group for CY 2018 will instead be assigned to the high cost group 
under this proposed policy. The skin substitute products affected by 
this proposed policy are identified with an ``*'' in Table 24. For CY 
2019 and subsequent years, we are seeking public comment on how we 
should calculate data for products in determining the MUC and PDC 
thresholds that are included in the high cost group solely based on 
assignment to the high cost group in CY 2017.
    The goal of our proposal to retain the same skin substitute cost 
group assignments in CY 2018 as in CY 2017 is to maintain similar 
levels of payment for skin substitute products for CY 2018 while we 
study our current skin substitute payment methodology to determine 
whether refinement to the existing policies is consistent with our 
policy goal of providing payment stability for skin substitutes. We are 
seeking public comments on the methodologies that are used to calculate 
pricing thresholds as well as the payment groupings that recognize a 
low cost group and a high cost group. We are especially interested in 
suggestions that are based on analysis of Medicare claims data from 
hospital outpatient departments that might better promote improved 
payment stability for skin substitute products under the OPPS. This 
proposal is intended to apply for CY 2018 to allow time for the public 
to submit other ideas that could be evaluated for the CY 2019 
rulemaking.
    In summary, we are proposing 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, unless the product was assigned to the 
high cost group in CY 2017, in which case we are proposing to assign 
the product to the high cost group for CY 2018, regardless of whether 
it exceeds the CY 2018 MUC or PDC threshold. We also are proposing to 
assign to the high cost group skin substitute products that exceed the 
CY 2018 MUC or PDC threshold and assign to the low cost group skin 
substitute products that did not exceed either the CY 2017 or CY 2018 
MUC or PDC thresholds and were not assigned to the high cost group in 
CY 2017. We are proposing to continue to use payment methodologies 
including ASP+6 percent, WAC+6 percent, or 95 percent of AWP for skin 
substitute products that have pricing information but do not have 
claims data to determine if their costs exceed the CY 2018 MUC 
threshold. Finally, we are proposing to continue to assign new skin 
substitute products without pricing information to the low cost group.
    Table 24 below displays the proposed CY 2018 high cost or low cost 
category assignment for each skin substitute product.

Table 24--Proposed Skin Substitute Assignments to High Cost and Low Cost
                           Groups for CY 2018
------------------------------------------------------------------------
                                       Current CY 2017  Proposed CY 2018
CY 2018 HCPCS code    CY 2018 short       high/low          high/low
                       descriptor        assignment        assignment
------------------------------------------------------------------------
C9363.............  Integra Meshed    High............  High.
                     Bil Wound Mat.
Q4100.............  Skin Substitute,  Low.............  Low.
                     NOS.
Q4101.............  Apligraf........  High............  High.
Q4102.............  Oasis Wound       Low.............  Low.
                     Matrix.
Q4103.............  Oasis Burn        High............  High.*
                     Matrix.
Q4104.............  Integra BMWD....  High............  High.

[[Page 33628]]

 
Q4105.............  Integra DRT.....  High............  High.
Q4106.............  Dermagraft......  High............  High.
Q4107.............  GraftJacket.....  High............  High.
Q4108.............  Integra Matrix..  High............  High.
Q4110.............  Primatrix.......  High............  High.*
Q4111.............  Gammagraft......  Low.............  Low.
Q4115.............  Alloskin........  Low.............  Low.
Q4116.............  Alloderm........  High............  High.
Q4117.............  Hyalomatrix.....  Low.............  Low.
Q4121.............  Theraskin.......  High............  High.
Q4122.............  Dermacell.......  High............  High.*
Q4123.............  Alloskin........  High............  High.
Q4124.............  Oasis Tri-layer   Low.............  Low.
                     Wound Matrix.
Q4126.............  Memoderm/derma/   High............  High.
                     tranz/integup.
Q4127.............  Talymed.........  High............  High.*
Q4128.............  Flexhd/           High............  High.
                     Allopatchhd/
                     Matrixhd.
Q4131.............  Epifix..........  High............  High.
Q4132.............  Grafix Core.....  High............  High.
Q4133.............  Grafix Prime....  High............  High.
Q4134.............  hMatrix.........  Low.............  Low.
Q4135.............  Mediskin........  Low.............  Low.
Q4136.............  Ezderm..........  Low.............  Low.
Q4137.............  Amnioexcel or     High............  High.
                     Biodexcel, 1cm.
Q4138.............  Biodfence         High............  High.
                     DryFlex, 1cm.
Q4140.............  Biodfence 1cm...  High............  High.
Q4141.............  Alloskin ac, 1cm  High............  High.
Q4143.............  Repriza, 1cm....  High............  High.
Q4146.............  Tensix, 1CM.....  High............  High.
Q4147.............  Architect ecm,    High............  High.*
                     1cm.
Q4148.............  Neox 1k, 1cm....  High............  High.
Q4150.............  Allowrap DS or    High............  High.
                     Dry 1 sq cm.
Q4151.............  AmnioBand,        High............  High.
                     Guardian 1 sq
                     cm.
Q4152.............  Dermapure 1       High............  High.
                     square cm.
Q4153.............  Dermavest 1       High............  High.
                     square cm.
Q4154.............  Biovance 1        High............  High.
                     square cm.
Q4156.............  Neox 100 1        High............  High.
                     square cm.
Q4157.............  Revitalon 1       High............  High.
                     square cm.
Q4158.............  MariGen 1 square  High............  High.*
                     cm.
Q4159.............  Affinity 1        High............  High.
                     square cm.
Q4160.............  NuShield 1        High............  High.
                     square cm.
Q4161.............  Bio-Connekt per   High............  High.*
                     square cm.
Q4162.............  Amnio bio and     Low.............  High.
                     woundex flow.
Q4163.............  Amnion bio and    High............  High.
                     woundex sq cm.
Q4164.............  Helicoll, per     High............  High.
                     square cm.
Q4165.............  Keramatrix, per   Low.............  Low.
                     square cm.
Q4166.............  Cytal, per        Low.............  Low.
                     square cm.
Q4167.............  Truskin, per      Low.............  Low.
                     square cm.
Q4169.............  Artacent wound,   High............  High.
                     per square cm.
Q4170.............  Cygnus, per       Low.............  Low.
                     square cm.
Q4172.............  PuraPly, PuraPly  High............  High.
                     antimic.
Q4173.............  Palingen or       High............  High.
                     palingen xplus,
                     per sq cm.
Q4175.............  Miroderm, per     High............  High.
                     square cm.
------------------------------------------------------------------------
* These products do not exceed either the MUC or PDC threshold for CY
  2018, but are proposed to be assigned to the high cost group since
  they were assigned to the high cost group in CY 2017.

e. Proposed 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, we are proposing 
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 2018.

[[Page 33629]]

    For CY 2018, 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 2016 claims data 
and our pricing information at ASP+6 percent across all of the HCPCS 
codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. The following drugs 
did not have pricing information available for the ASP methodology for 
this CY 2018 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 2016 claims data to make the proposed 
packaging determinations for these drugs: HCPCS code J7100 (infusion, 
dextran 40,500 ml) and HCPCS code J7110 (infusion, dextran 75,500 ml).
    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 2018 drug packaging threshold of 
$120 (so that all HCPCS codes for the same drug or biological would be 
packaged) or greater than the proposed CY 2018 drug packaging threshold 
of $120 (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 2018 
is displayed in Table 25 below.

    Table 25--Proposed HCPCS Codes to Which the CY 2018 Drug-Specific
               Packaging Determination Methodology Applies
------------------------------------------------------------------------
                                                             Proposed CY
      CY 2018 HCPCS code         CY 2018 long descriptor       2018 SI
------------------------------------------------------------------------
C9257........................  Injection, bevacizumab,                K
                                0.25 mg.
J9035........................  Injection, bevacizumab, 10             K
                                mg.
J1020........................  Injection,                             N
                                methylprednisolone
                                acetate, 20 mg.
J1030........................  Injection,                             N
                                methylprednisolone
                                acetate, 40 mg.
J1040........................  Injection,                             N
                                methylprednisolone
                                acetate, 80 mg.
J1460........................  Injection, gamma globulin,             K
                                intramuscular, 1 cc.
J1560........................  Injection, gamma globulin,             K
                                intramuscular over 10 cc.
J1642........................  Injection, heparin sodium,             N
                                (heparin lock flush), per
                                10 units.
J1644........................  Injection, heparin sodium,             N
                                per 1000 units.
J1840........................  Injection, kanamycin                   N
                                sulfate, up to 500 mg.
J1850........................  Injection, kanamycin                   N
                                sulfate, up to 75 mg.
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.).
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.
J7030........................  Infusion, normal saline                N
                                solution, 1000 cc.
J7040........................  Infusion, normal saline                N
                                solution, sterile (500
                                ml=1 unit).
J7050........................  Infusion, normal saline                N
                                solution, 250 cc.
J7100........................  Infusion, dextran 40, 500              N
                                ml.
J7110........................  Infusion, dextran 75, 500              N
                                ml.
J7515........................  Cyclosporine, oral, 25 mg..            N
J7502........................  Cyclosporine, oral, 100 mg.            N
J8520........................  Capecitabine, oral, 150 mg.            N
J8521........................  Capecitabine, oral, 500 mg.            N
J9250........................  Methotrexate sodium, 5 mg..            N
J9260........................  Methotrexate sodium, 50 mg.            N
------------------------------------------------------------------------

2. Proposed Payment for Drugs and Biologicals Without Pass-Through 
Status That Are Not Packaged
a. Proposed 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

[[Page 33630]]

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.\14\
---------------------------------------------------------------------------

    \14\ Medicare Payment Advisory Committee. June 2005 Report to 
the Congress. Chapter 6: Payment for pharmacy handling costs in 
hospital outpatient departments. Available at: http://www.medpac.gov/docs/default-source/reports/June05_ch6.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    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 this CY 2018 
OPPS/ASC proposed rule, we are proposing 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, CY 2016, and CY 2017 (81 FR 79673).
b. Proposed CY 2018 Payment Policy
    For CY 2018, we are proposing 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 
are proposing 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 are proposing 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 scalar is not applied in 
determining payments for these separately paid drugs and biologicals.
    We note that we are proposing below to pay for separately payable, 
nonpass-through drugs acquired with a 340B discount at a rate of ASP 
minus 22.5 percent. We refer readers to the full discussion of this 
proposal in section V.B.7. of this proposed rule.
    Also, we note that separately payable drug and biological payment 
rates listed in Addenda A and B to this proposed rule (available via 
the Internet on the CMS Web site), which illustrate the proposed CY 
2018 payment of ASP+6 percent for separately payable nonpass-through 
drugs and biologicals and ASP+6 percent for pass-through drugs and 
biologicals, reflect either ASP information that is the basis for 
calculating payment rates for drugs and biologicals in the physician's 
office setting effective April 1, 2017, or WAC, AWP, or mean unit cost 
from CY 2016 claims data and updated cost report information available 
for this proposed rule. In general, these published payment rates are 
not the same as the actual January 2018 payment rates. This is because 
payment rates for drugs and biologicals with ASP information for 
January 2018 will be determined through the standard quarterly process 
where ASP data submitted by manufacturers for the third quarter of 2017 
(July 1, 2017 through September 30, 2017) will be used to set the 
payment rates that are released for the quarter beginning in January 
2018 near the end of December 2017. In addition, payment rates for 
drugs and biologicals in Addenda A and B to this proposed rule for 
which there was no ASP information available for April 2017 are based 
on mean unit cost in the available CY 2016 claims data. If ASP 
information becomes available for payment for the quarter beginning in 
January 2018, 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 
proposed rule (reflecting April 2017 ASP data) that do not have ASP 
information available for the quarter beginning in January 2018. These 
drugs and biologicals would then be paid based on mean unit cost data 
derived from CY 2016 hospital claims. Therefore, the proposed payment 
rates listed in Addenda A and B to this proposed rule are not for 
January 2018 payment purposes and are only illustrative of the proposed 
CY 2018 OPPS payment methodology using the most recently available 
information at the time of issuance of this proposed rule.
c. Biosimilar Biological Products
    For CY 2016 and CY 2017, 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). For CY 2018, we are 
proposing to continue this same payment policy for biosimilar 
biological products.
    Public comments on the Medicare Part B biosimilar biological 
product payment policy should be submitted in response to the 
biosimilar payment policy comment solicitation in the CY 2018 MPFS 
proposed rule.
3. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    For CY 2018, we are proposing 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

[[Page 33631]]

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 2018. Therefore, we are proposing for CY 2018 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 are proposing to rely on CY 2016 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 unavailable. 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 2018 payment rates for 
nonpass-through, separately payable therapeutic radiopharmaceuticals 
are in Addenda A and B to this proposed rule (which are available via 
the Internet on the CMS Web site).
4. Proposed 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 2018 and did not identify any new information that would 
cause us to modify payment. Therefore, for CY 2018, we are proposing to 
continue to provide an additional $10 payment for radioisotopes 
produced by non-HEU sources.
5. Proposed Payment for Blood Clotting Factors
    For CY 2017, 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 (81 FR 79676). That is, for CY 2017, 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 2017 updated furnishing fee was $0.209 per unit.
    For CY 2018, we are proposing to pay for blood clotting factors at 
ASP+6 percent, consistent with our proposed payment policy for other 
nonpass-through, separately payable drugs and biologicals, and to 
continue our policy for payment of the furnishing fee using an updated 
amount. Our policy to pay for a furnishing fee for blood clotting 
factors under the OPPS is consistent with the methodology applied in 
the physician'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 is 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 are 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 are proposing 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.
6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims 
Data
    For CY 2018, we are proposing to continue to use the same payment 
policy as in CY 2017 for nonpass-through drugs, biologicals, and 
radiopharmaceuticals with HCPCS codes but without OPPS hospital claims 
data, which describes how we determine the payment rate for drugs, 
biologicals, or radiopharmaceuticals without an ASP. For a detailed 
discussion of the payment policy and methodology, we refer readers the 
CY 2016 OPPS/ASC final rule with comment period (80 FR 70442 through 
70443). The proposed CY 2018 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 
proposed rule, which is available via the Internet on the CMS Web site.

[[Page 33632]]

7. Alternative Payment Methodology for Drugs Purchased Under the 340B 
Drug Discount Program
a. Background
    The 340B Drug Discount Program, which was established by section 
340B of the Public Health Service Act by the Veterans Health Care Act 
of 1992, is administered by the Health Resources and Services 
Administration (HRSA) within HHS. The 340B program allows participating 
hospitals and other health care providers to purchase certain ``covered 
outpatient drugs'' (as defined under section 1927(k) of the Act and 
interpreted by HRSA through various guidance documents) at discounted 
prices from drug manufacturers. The statutory intent of the 340B 
program is to maximize scarce Federal resources as much as possible, 
reaching more eligible patients, and providing care that is more 
comprehensive.\15\
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    \15\ The House report that accompanied the authorizing 
legislation for the 340B program stated, ``In giving these ``covered 
entities'' access to price reductions the Committee intends to 
enable these entities to stretch scarce Federal resources as far as 
possible, reaching more eligible patients and providing more 
comprehensive services.'' (H.R. Rep No. 102-384(II), at 12 (1992)).
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    The 340B statute defines which health care providers are eligible 
to participate in the program (``covered entities''). In addition to 
Federal health care grant recipients, covered entities include 
hospitals with a Medicare disproportionate share hospital (DSH) 
percentage above 11.75 percent. However, under Pub. L. 111-148, section 
7101 expanded eligibility to critical access hospitals (CAHs), 
children's hospitals with a DSH adjustment greater than 11.75 percent, 
sole community hospitals with a DSH adjustment percentage of 8.0 
percent or higher, rural referral centers with a DSH adjustment 
percentage of 8.0 percent or higher, and freestanding cancer hospitals 
with a DSH adjustment percentage above 11.75 percent. In accordance 
with section 340B(a)(4)(L) of the Public Health Service Act, DSH 
hospitals and CAH participants must meet other criteria, such as being 
owned by a State or local government, or be a nonprofit hospital under 
contract with a State or local government to provide services to low-
income patients who are not eligible for Medicare or Medicaid.
    HRSA calculates the ceiling price for each covered outpatient drug. 
The ceiling price is the drug's average manufacturer price (AMP) minus 
the unit rebate amount (URA), which is a statutory formula that varies 
depending on whether the drug is an innovator single source drug (no 
generic available), an innovator multiple source drug (a brand drug 
with available generic(s)), or a noninnovator multiple source (generic) 
drug. The ceiling price represents the maximum price a drug 
manufacturer can charge a covered entity for the drug. However, covered 
entities also have the option to participate in HRSA's Prime Vendor 
Program (PVP), under which the prime vendor, in some circumstances, can 
negotiate even deeper discounts (known as ``subceiling prices'') on 
many covered outpatient drugs. By the end of FY 2014, the PVP had 
nearly 7,000 products available to participating entities below the 
340B ceiling price, including 3,557 covered outpatient drugs with an 
estimated average savings of 10 percent below the 340B ceiling 
price.\16\
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    \16\ Department of Health and Human Services. 2016. Fiscal Year 
2017. Health Resources and Services Administration justification of 
estimates for appropriations committees. Washington, DC: HHS. 
https://www.hrsa.gov/about/budget/budgetjustification2017.pdf.
---------------------------------------------------------------------------

    Several recent studies and reports on Medicare Part B payments for 
340B purchased drugs highlight a difference in Medicare Part B drug 
spending between 340B hospitals and non-340B hospitals as well as 
varying differences in the amount by which the Part B payment exceeds 
the drug acquisition cost.17 18 19 Links to the full reports 
referenced in this section can be found in the footnotes.
---------------------------------------------------------------------------

    \17\ Office of Inspector General. ``Part B Payment for 340B 
Purchased Drugs OEI-12-14-00030''. November 2015. Available at: 
https://oig.hhs.gov/oei/reports/oei-12-14-00030.pdf.
    \18\ Medicare Payment Advisory Commission. Report to the 
Congress: Overview of the 340B Drug Pricing Program. May 2015. 
Available at: http://www.medpac.gov/docs/default-source/reports/may-2015-report-to-the-congress-overview-of-the-340b-drug-pricing-program.pdf?sfvrsn=0
    \19\ Government Accountability Office. ``Medicare Part B Drugs: 
Action Needed to Reduce Financial Incentives to Prescribe 340B Drugs 
at Participating Hospitals GAO-15-442''. June 2015. Available at: 
https://www.gao.gov/assets/680/670676.pdf.
---------------------------------------------------------------------------

    In its May 2015 Report to Congress, MedPAC analyzed Medicare 
hospital outpatient claims (excluding CAHs) along with information from 
HRSA on which hospitals participate in the 340B program. MedPAC 
included data on all separately payable drugs under the OPPS except for 
vaccines and orphan drugs provided by freestanding cancer hospitals, 
rural referral centers, and sole community hospitals. To estimate costs 
that 340B hospitals incur to acquire drugs covered under the OPPS, it 
generally used the formula for calculating the 340B ceiling price: 
(average manufacturer price (AMP)-unit rebate amount (URA)) x drug 
package size. Because MedPAC did not have access to AMP data, it used 
each drug's ASP as a proxy for AMP. MedPAC notes that ASP is typically 
slightly lower than AMP. In addition, MedPAC noted that, due to data 
limitations, its estimates of ceiling prices are conservative and 
likely higher (possibly much higher) than actual ceiling prices. 
Further details on the methodology used to calculate the average 
minimum discount for separately payable drugs can be found in Appendix 
A of its May 2015 Report to Congress. In this report, MedPAC estimated 
that, on average, hospitals in the 340B program ``receive a minimum 
discount of 22.5 percent of the [ASP] for drugs paid under the 
[OPPS].''
    In its March 2016 MedPAC Report to Congress, MedPAC noted that the 
OIG recently estimated that discounts across all 340B providers 
(hospitals and certain clinics) average 33.6 percent of ASP, allowing 
these providers to generate significant profits when they administer 
Part B drugs (MedPAC March 2016, page 79). According to the U.S. 
Government Accountability Office (GAO) report, the amount of the 340B 
discount ranges from an estimated 20 to 50 percent discount, compared 
to what the entity would have otherwise paid. In addition, 
participation in the PVP often results in a covered entity paying a 
subceiling price (estimated to be approximately 10 percent below the 
ceiling price). (U.S. Department of Health and Human Services, HRSA FY 
2015 Budget Justification.) Participation in the PVP is voluntary and 
free.
    With respect to chemotherapy drugs and drug administration 
services, MedPAC examined Part B spending for 340B and non-340B 
hospitals for a 5-year period from 2008 to 2012 and found that 
``Medicare spending grew faster among hospitals that participated in 
the 340B program for all five years than among hospitals that did not 
participate in the 340B program at any time during [the study] 
period.'' (MedPAC May 2015, page 14). This is just one example of drug 
spending increases that is correlated with participation in the 340B 
program and calls into question whether Medicare's current payment 
policy for separately payable drugs at ASP+ 6 percent is appropriate in 
light of the discounted rates at which 340B hospitals acquire such 
drugs, especially because beneficiary cost-sharing for these drugs is 
based on the Medicare payment rate.
    Further, GAO found that ``. . . in both 2008 and 2012, per 
beneficiary Medicare Part B drug spending, including oncology drug 
spending, was substantially higher at 340B DSH hospitals than at non-
340B hospitals.'' According to the GAO report, this

[[Page 33633]]

indicates that, on average, beneficiaries at 340B DSH hospitals were 
either prescribed more drugs or more expensive drugs than beneficiaries 
at the other non-340B hospitals in GAO's analysis. For example, in 
2012, average per beneficiary spending at 340B DSH hospitals was $144, 
compared to approximately $60 at non-340B hospitals. The differences 
did not appear to be explained by the hospital characteristics GAO 
examined or patients' health status. (GAO 15-442, page 20)
    Under the OPPS, all hospitals (other than CAHs, which are paid 
based on 101 percent of reasonable costs as required by section 1834(g) 
of the Act) are currently paid the same rate for separately payable 
drugs (ASP plus 6 percent), regardless of whether the hospital 
purchased the drug at a discount through the 340B program. Medicare 
beneficiaries are liable for a copayment that is equal to 20 percent of 
the OPPS payment rate, which is currently ASP+6 percent (regardless of 
the 340B purchase price for the drug). Based on an analysis of almost 
500 drugs billed in the hospital outpatient setting in 2013, the OIG 
found that, for 35 drugs, the ``difference between the Part B amount 
and the 340B ceiling price was so large that, in a least one quarter of 
2013, the beneficiary's coinsurance alone . . . was greater than the 
amount a covered entity spent to acquire the drug'' (OIG November 2015, 
OEI-12-14-00030, page 9).
    In the CY 2009 OPPS/ASC final rule with comment period, we 
requested comment regarding the drug costs of hospitals that 
participate in the 340B program and whether we should consider an 
alternative drug payment methodology for participating 340B hospitals 
(73 FR 68655). As noted above, in the time since that comment 
solicitation, access to the 340B program was expanded under section 
7101 of Public Law 111-148, which amended section 340B(a)(4) of the 
Public Health Service Act to expand the types of covered entities 
eligible to participate in the 340B program. In addition, in its March 
2016 Report to Congress, MedPAC recommended a legislative proposal 
related to payment for Part B drugs furnished by 340B hospitals under 
which Medicare would reduce payment rates for 340B hospitals' 
separately payable 340B drugs by 10 percent of the ASP and direct the 
program savings from reducing Part B drug payment rates to the Medicare 
funded uncompensated care pool.\20\ In its November 2015 report 
entitled ``Part B Payments for 340B-Purchased Drugs,'' the Office of 
the Inspector General (OIG) found that Part B payments were 58 percent 
more than 340B ceiling prices, which allowed covered entities to retain 
approximately $1.3 billion in 2013 (OEI-12-14-00030, page 8). In the 
same report, the OIG described three options under which both the 
Medicare program and Medicare beneficiaries would be able to share in 
the savings realized by hospitals and other covered entities that 
participate in the 340B program (OEI-12-14-00030, pages 11-12). These 
options ranged from paying ASP with no additional add-on percentage, to 
making payment based on the 340B ceiling price plus 6 percent of ASP 
for each 340B purchased drug (OEI-12-14-00030, page 11). Analysis in 
several of these reports notes limitations in estimating 340B purchased 
drugs acquisition costs and the inability to identify which drugs were 
purchased through the 340B program within Medicare claims data was 
another limitation.
---------------------------------------------------------------------------

    \20\ Medicare Payment Advisory Commission. March 2016 Report to 
the Congress: Medicare Payment Policy. March 2016. Available at: 
http://www.medpac.gov/docs/default-source/reports/chapter-3-hospital-inpatient-and-outpatient-services-march-2016-report-.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    It is estimated that covered entities saved $3.8 billion on 
outpatient drugs purchased through the 340B program in 2013.\21\ In 
addition, the number of hospitals participating in the program has 
grown from 583 in 2005 to 1,365 in 2010 and 2,140 in 2014 (MedPAC May 
2015). Given the growth in the number of providers participating in the 
340B program and recent trends in high and growing prices of several 
separately payable drugs administered under Medicare Part B to hospital 
outpatients, we believe it is timely to reexamine the appropriateness 
of continuing to pay the current OPPS methodology of ASP+6 percent to 
hospitals that have acquired those drugs under the 340B program at 
significantly discounted rates. This is especially important because of 
the inextricable link of the Medicare payment rate to the beneficiary 
cost-sharing amount. In addition, we are concerned about the rising 
prices of certain drugs and that Medicare beneficiaries, including low-
income seniors, are resonsible for paying 20 percent of the Medicare 
payment rate for these drugs. We are concerned that the current payment 
methodology may lead to unnecessary utilization and potential 
overutilization of separately payable drugs.
---------------------------------------------------------------------------

    \21\ U.S. Department of Health and Human Services, HRSA FY 2015 
Budget Justification, p. 342.
---------------------------------------------------------------------------

b. Proposed OPPS Payment Rate for 340B Purchased Drugs
    In this proposed rule, we are proposing changes to our current 
Medicare Part B drug payment methodology for 340B hospitals that we 
believe would better, and more appropriately, reflect the resources and 
acquisition costs that these hospitals incur. Such changes would allow 
Medicare beneficiaries (and the Medicare program) to pay less when 
hospitals participating in the 340B program furnish drugs to Medicare 
beneficiaries that are purchased under the 340B program.
    Our goal is to make Medicare payment for separately payable drugs 
more aligned with the resources expended by hospitals to acquire such 
drugs while recognizing the intent of the 340B program to allow covered 
entities, including eligible hospitals, to stretch scarce resources 
while continuing to provide access to care. Medicare expenditures on 
Part B drugs are rising due to underlying factors such as growth of the 
340B program, higher price drugs, or price increases for drugs.\22\ We 
believe that any payment changes we adopt should be limited to 
separately payable drugs under the OPPS, with other additional 
exclusions. These exclusions include (1) drugs on pass-through status, 
which are required to be paid based on the ASP methodology and (2) 
vaccines, which are excluded from the 340B program. Also, as stated 
later in this section, we are soliciting comment on whether other types 
of drugs, such as blood clotting factors, should also be excluded from 
the reduced payment.
---------------------------------------------------------------------------

    \22\ Department of Health and Human Services. Office of the 
Assistant Secretary for Planning and Evaluation. Issue Brief: 
Medicare Part B Drugs: Pricing and Incentives. 2016. https://aspe.hhs.gov/system/files/pdf/187581/PartBDrug.pdf.
---------------------------------------------------------------------------

    Current data limitations inhibit identification of which drugs were 
acquired under the 340B program in the Medicare OPPS claims data. This 
lack of information within the claims data has limited researchers' and 
our ability to precisely analyze differences in acquisition cost of 
340B and non-340B-acquired drugs with Medicare claims data. 
Accordingly, we intend to establish a modifier, to be effective January 
1, 2018, for hospitals to report with separately payable drugs that 
were not acquired under the 340B program. Because a significant portion 
of hospitals paid under the OPPS participate in the 340B program, we 
believe it is appropriate to presume that a separately payable drug 
reported on an OPPS claim was purchased under the

[[Page 33634]]

340B program, unless the hospital identifies that the drug was not 
purchased under the 340B program. We intend to provide further details 
about this modifier in the CY 2018 OPPS/ASC final rule with comment 
period and/or through subregulatory guidance, including guidance 
related to billing for dually eligible beneficiaries (that is, 
beneficiaries covered under Medicare and Medicaid) for whom covered 
entities do not receive a discount under the 340B program.
    Further, we note that the confidentiality of ceiling and subceiling 
prices limits our ability to precisely calculate the price paid by 340B 
hospitals for a particular covered outpatient drug. Accordingly, we 
believe using an average discounted price is appropriate for our 
proposal. Therefore, for CY 2018, we are proposing to apply an average 
discount of 22.5 percent of the average sales price for nonpass-through 
separately payable drugs purchased under the 340B program, as estimated 
by MedPAC (MedPAC's May 2015 Report to Congress, page 7).
    In the near-term, we believe that the estimated average minimum 
discount MedPAC calculated--22.5 percent of the ASP--adequately 
represents the average minimum discount that a 340B participating 
hospital receives for separately payable drugs under the OPPS. Given 
the limitations in calculating a precise discount for each separately 
payable drug, we have not attempted to do so for this proposed rule. 
Instead, we believe that using the analysis from the MedPAC report is 
appropriate and note that the analysis is spelled out in detail and can 
be replicated by interested parties. As MedPAC noted, its estimate was 
conservative and the actual average discount experienced by 340B 
hospitals is likely much higher than 22.5 percent. As GAO mentioned, 
discounts under 340B range from 20 to 50 percent (GAO-11-836, page 2). 
We believe that such reduced payment would meet the requirements under 
section 1833(t)(14)(A)(iii)(II) the Act, which states that if hospital 
acquisition cost data are not available, the payment for an applicable 
drug shall be the average price for the drug in the year established 
under section 1842(o), section 1847A, or section 1847B of the Act, as 
the case may be, as calculated and adjusted by the Secretary as 
necessary. We do not have hospital acquisition cost data for 340B drugs 
and, therefore, are proposing to continue to pay for these drugs under 
our authority at section 1833(t)(14)(A)(iii)(II) of the Act at ASP, and 
then to adjust that amount by applying a reduction of 22.5 percent, 
which, as explained throughout this section, is the adjustment we 
believe is necessary for drugs acquired under the 340B program.
    Specifically, in this CY 2018 OPPS/ASC proposed rule, we are 
proposing to apply section 1833(t)(14)(A)(iii)(II) of the Act to all 
separately payable drugs and biologicals, including SCODs. However, we 
are proposing to exercise the Secretary's authority to adjust the 
applicable payment rate as necessary and, for separately payable drugs 
and biologicals (other than drugs on pass-through and vaccines) 
acquired under the 340B program, are proposing to adjust the rate to 
ASP minus 22.5 percent which we believe better represents the average 
acquisition cost for these drugs and biologicals.
    As indicated above, because ceiling prices are confidential, we are 
unable to publicly disclose those prices or set payment rates in a way 
that would allow the public to determine the ceiling price for a 
particular drug. We believe that the MedPAC analysis that found the 
average minimum discount of 22.5 percent of ASP adequately reflects the 
average minimum discount that 340B hospitals paid under the OPPS 
receive. Additionally, we believe that using an average discount to set 
payment rates for separately payable drugs would achieve the dual goals 
of (1) adjusting payments to better reflect resources expended to 
acquire such drugs while (2) also protecting the confidential nature of 
discounts applied to a specific drug. Moreover, we do not believe that 
Medicare beneficiaries should be liable for a copayment rate that is 
tied to the current methodology of ASP+6 percent when the actual cost 
to the hospital to purchase the drug is much lower than the ASP for the 
drug.
    We note that MedPAC excluded vaccines from its analysis since 
vaccines are not covered under 340B, but it did not exclude drugs on 
pass-through status. Further, because data used to calculate ceiling 
prices is not publicly available, MedPAC instead estimated ``the lower 
bound of the average discount received by 340B hospitals for drugs paid 
under the [OPPS]'' (MedPAC 2015, page 6). Accordingly, it is likely 
that the average discount is higher, potentially significantly higher, 
than the average minimum of 22.5 percent that MedPAC found through its 
analysis. We encourage the public to analyze the analysis presented in 
Appendix A of MedPAC's May 2015 Report to Congress.
    As noted above, we believe that the discount amount of 22.5 percent 
below the ASP reflects the average minimum discount that 340B hospitals 
receive for drugs acquired under the 340B program, and it is likely 
that the average discount may be higher due to participation in the 
PVP, substitution of ASP (which includes additional rebates) for AMP, 
and that drugs with pass-through status were included rather than 
excluded from the MedPAC analysis. We believe that a payment rate of 
ASP+6 percent does not sufficiently recognize the significantly lower 
acquisition costs of such drugs incurred by a 340B hospital. 
Accordingly, as noted above, we are proposing to reduce payment for 
separately payable drugs, excluding drugs on pass-through status and 
vaccines that were acquired under the 340B program, by 22.5 percent of 
ASP for all drugs for which a hospital does not append on the claim the 
modifier proposed above.
    Finally, as detailed in the impact analysis section (section XIX.) 
of this proposed rule, we also are proposing that the reduced payments 
for separately payable drugs and biologicals purchased under the 340B 
program 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 scalar is not applied in determining payments for these 
separately paid drugs and biologicals purchased under the 340B program. 
In that section, we also are soliciting public comments on whether we 
should apply all or part of the savings generated by this payment 
reduction to increase payments for specific services paid under the 
OPPS, or under Part B generally, in CY 2018, rather than simply 
increasing the conversion factor. In particular, we are seeking 
comments on whether and how the offsetting increase could be targeted 
to hospitals that treat a large share of indigent patients, especially 
those patients who are uninsured. In addition, we are seeking comments 
on whether the redistribution of savings associated with this proposal 
would result in unnecessary increases in the volume of covered services 
paid under the OPPS which should be adjusted in accordance with section 
1833(t)(2)(F) of the Act. More information on the impact estimate 
associated with this proposal is included in section XIX. of this 
proposed rule.
c. Comment Solicitation on Additional 340B Considerations
    As discussed above, we recognize there are data limitations in 
estimating the average discount of 340B drugs. We welcome stakeholder 
input with regard to MedPAC's May 2015 analysis and the resulting 
estimate of ASP minus 22.5

[[Page 33635]]

percent as the proposed payment rate for separately payable, nonpass-
through OPPS drugs purchased under the 340B drug discount program in CY 
2018. We also are requesting comment on whether we should adopt a 
different payment rate to account for the average minimum discount of 
OPPS drugs purchased under the 340B drug discount program. Also, we are 
seeking comment on whether the proposal to pay ASP minus 22.5 percent 
for 340B purchased drugs should be phased in over time (such as over a 
period of 2 to 3 years).
    In addition, we recognize that the acquisition costs for drugs may 
vary among hospitals, depending on a number of factors such as size, 
patient volume, labor market area and case-mix. Accordingly, in the 
longer term, we are interested in exploring ways to identify the actual 
acquisition costs that each hospital incurs rather than using an 
average minimum discounted rate that would apply uniformly across all 
340B hospitals. We are seeking public comment on whether, as a longer 
term option, Medicare should require 340B hospitals to report their 
acquisition costs in addition to charges for each drug on the Medicare 
claim. Having the acquisition cost on a drug-specific basis would 
enable us to pay a rate under the OPPS that is directly tied to the 
acquisition costs for each separately payable drug. To the extent that 
the acquisition costs for some drugs may equal the ceiling price for a 
drug, we recognize that there may be challenges with keeping the 
ceiling price confidential as required by section 1927(b)(3)(D) of the 
Act and are seeking comment on this point.
    Lastly, for consideration for future policy refinements, we are 
seeking public comment on (1) whether, due to access to care issues, 
exceptions should be granted to certain groups of hospitals, such as 
those with special adjustments under the OPPS (for example, rural sole-
community hospitals or PPS-exempt cancer hospitals) if a policy were 
adopted to adjust OPPS payments to 340B participating hospitals (if so, 
describe how adjusted rates for drugs purchased under the 340B program 
would disproportionately affect access in these provider settings); (2) 
whether other types of drugs, such as blood clotting factors, should 
also be excluded from the reduced payment; and (3) whether hospital-
owned or affiliated ASCs have access to 340B discounted drugs.

VI. Proposed 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 a proposed estimate of pass-through 
spending in CY 2018 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 2018. 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 2017 or beginning in CY 
2018. The sum of the proposed CY 2018 pass-through spending estimates 
for these two groups of device categories equals the proposed total CY 
2018 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 this proposed rule, we are 
proposing 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 2018, we also are proposing 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 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 are proposing to pay for most nonpass-through 
separately payable drugs and biologicals under the CY 2018 OPPS at 
ASP+6 percent, and because we are proposing to pay for CY 2018 pass-
through drugs and biologicals at ASP+6 percent, as we discussed in 
section V.A. of this proposed rule, our estimate of drug and biological 
pass-through payment for CY 2018 for this group of items is $0, as 
discussed below. We note that our estimate does not reflect the 
proposed payment policy for drugs purchased through the 340B program, 
as we discuss in section V.B.7. of this proposed rule.
    Furthermore, payment for certain drugs, specifically diagnostic 
radiopharmaceuticals and contrast

[[Page 33636]]

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 this proposed rule. We are proposing 
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 2018. Therefore, our estimate of 
pass-through payment for policy-packaged drugs and biologicals with 
pass-through payment status approved prior to CY 2018 is not $0, as 
discussed below. In section V.A.5. of this proposed rule, we discuss 
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 are proposing 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 are proposing 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 2018. 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 2017 or beginning in CY 2018. The sum of 
the CY 2018 pass-through spending estimates for these two groups of 
drugs and biologicals equals the total CY 2018 pass-through spending 
estimate for drugs and biologicals with pass-through payment status.

B. Estimate of Pass-Through Spending

    We are proposing to set the applicable pass-through payment 
percentage limit at 2.0 percent of the total projected OPPS payments 
for CY 2018, consistent with section 1833(t)(6)(E)(ii)(II) of the Act 
and our OPPS policy from CY 2004 through CY 2017 (81 FR 79676 through 
79678).
    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 2018, there are no active 
categories for CY 2018. Because there are no device active categories 
for CY 2018, we are proposing an estimate for the first group of 
devices of $0.
    In estimating our proposed CY 2018 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 2018; 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, 2018; and contingent projections for new device categories 
established in the second through fourth quarters of CY 2018. We are 
proposing 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 this proposed rule, the proposed estimate of CY 
2018 pass-through spending for this second group of device categories 
is $10 million.
    To estimate proposed CY 2018 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 2018, we are proposing 
to use the most recent Medicare hospital outpatient 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 2018 OPPS utilization of 
the products.
    For the known drugs and biologicals (excluding policy-packaged 
diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, 
and radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure, and drugs and biologicals that function 
as supplies when used in a surgical procedure) that will be continuing 
on pass-through payment status in CY 2018, 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 are proposing to include in the CY 2018 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 this 
proposed rule, using the proposed methodology described above, we 
calculated a CY 2018 proposed spending estimate for this first group of 
drugs and biologicals of approximately $7.7 million.
    To estimate proposed CY 2018 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 this proposed rule were newly 
eligible for pass-through payment in CY 2018, 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, 2017, and projections for new drugs and biologicals that could be 
initially eligible for pass-through payment in the second through 
fourth quarters of CY 2018), we are proposing 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 2018 pass-through payment 
estimate. We also are proposing to consider the most recent OPPS 
experience in approving new pass-through drugs and biologicals. Using 
our proposed methodology for estimating CY 2018 pass-through payments 
for this second group of drugs, we calculated a proposed spending 
estimate for this

[[Page 33637]]

second group of drugs and biologicals of approximately $8.5 million.
    In summary, in accordance with the methodology described earlier in 
this section, for this proposed rule, 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 
2018 and those device categories, drugs, and biologicals that first 
become eligible for pass-through payment during CY 2018 is 
approximately $26.2 million (approximately $10 million for device 
categories and approximately $16.2 million for drugs and biologicals), 
which represents 0.24 percent of total projected OPPS payments for CY 
2018. Therefore, we estimate that pass-through spending in CY 2018 will 
not amount to 2.0 percent of total projected OPPS CY 2018 program 
spending.

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

    As we did in the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79678), for CY 2018, we are proposing to continue with and not 
make 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 are proposing to continue with and not propose any 
change to our payment policy for critical care services for CY 2018. 
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 this proposed rule, we 
are seeking public comments on any changes to these codes that we 
should consider for future rulemaking cycles. We encourage those 
parties who comment to provide the data and analysis necessary to 
justify any suggested changes.

VIII. Proposed 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, 
which includes, but is not limited to, conditions such as depression, 
schizophrenia, and substance use disorders. 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 a distinct and organized intensive ambulatory 
treatment service, offering less than 24-hour-daily care, in a location 
other than an individual's home or 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, at 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 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, along with 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

[[Page 33638]]

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. 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.
    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 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 refer readers to the CY 2014 
OPPS/ASC final rule with comment period (78 FR 75047 through 75050).
    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 described our extensive analysis of the claims and 
cost data and ratesetting methodology. We found aberrant data from some 
hospital-based PHP providers that were not captured using the existing 
OPPS 3 standard deviation trims for extreme CCRs and 
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. Consequently, we 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 a geometric mean cost per 
day that is above or below 2 (2) standard deviations from 
the mean. 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.
    In addition, in the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70459 through 70460), we corrected a cost inversion that 
occurred in the final rule data with respect to hospital-based PHP 
providers. 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.
    Finally, we 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 CY 2017 OPPS/ASC final rule with comment period (81 FR 79687 
through 79691), we continued 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, we finalized a policy 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 believed 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, for 
example by avoiding the cost inversions for hospital-based PHPs 
addressed in the CY 2016 and CY 2017 OPPS/ASC final rules with comment 
period (80 FR 70459 and 81 FR 79682).

[[Page 33639]]

We implemented an 8-percent outlier cap for CMHCs to mitigate potential 
outlier billing vulnerabilities by limiting the impact of inflated CMHC 
charges on outlier payments. We will continue to monitor the trends in 
outlier payments and consider policy adjustments as necessary.
    For a comprehensive description on the background of PHP payment 
policy, we refer readers to the CY 2016 and CY 2017 OPPS/ASC final 
rules with comment period (80 FR 70453 through 70455 and 81 FR 79678 
through 79680).

B. Proposed PHP APC Update for CY 2018

1. Proposed PHP APC Geometric Mean Per Diem Costs
    For CY 2018, we are proposing 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. Specifically, we are proposing to continue 
to use CMHC APC 5853 (Partial Hospitalization (3 or More Services Per 
Day)) and hospital-based PHP APC 5863 (Partial Hospitalization (3 or 
More Services Per Day)). We would continue to calculate the geometric 
mean per diem costs for CY 2018 for APC 5853 for CMHCs using only CY 
2016 CMHC claims data and the most recent CMHC cost data, and the CY 
2018 geometric mean per diem costs for APC 5863 for hospital-based PHPs 
using only CY 2016 hospital-based PHP claims data and the most recent 
hospital cost data.
2. Development of the Proposed PHP APC Geometric Mean Per Diem Costs
    For CY 2018 and subsequent years, we are proposing to follow the 
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' proposed geometric mean per diem 
costs and to calculate the proposed payment rates for APCs 5853 and 
5863, incorporating the modifications made in our CY 2017 OPPS/ASC 
final rule with comment period. As discussed in section VIII.B.1. of 
the CY 2017 OPPS/ASC final rule with comment period, the proposed 
geometric mean per diem cost for 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, the proposed geometric 
mean per diem cost for CMHC APC 5853 would be based upon actual CMHC 
claims and costs for CMHC service days providing 3 or more services.
    The CMHC or hospital-based PHP APC per diem costs are the provider-
type 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 proposed rule.
    We are proposing to apply our established methodologies in 
developing the proposed geometric mean per diem costs and payment 
rates, 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 this proposed rule, prior to calculating the proposed geometric 
mean per diem cost for 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. Before any trims or exclusions, there were 47 CMHCs in 
the 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 2018 ratesetting, in this proposed rule, 4 
CMHCs with geometric mean per diem costs per day below the trim's lower 
limit of $49.33 and 2 CMHCs above the trim's upper limit of $361.02 
were excluded from the proposed ratesetting for CY 2018. This standard 
deviation trim removed 6 providers from ratesetting whose data would 
have skewed the calculated proposed geometric mean per diem cost.
    In accordance with our PHP ratesetting methodology, in this 
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 this CY 2018 proposed rule ratesetting, 
two 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). Our longstanding PHP OPPS ratesetting methodology defaults any 
CMHC CCR>1 to the statewide hospital ancillary CCR (80 FR 70457). In 
our CY 2018 proposed rule ratesetting, we identified one CMHC that had 
a CCR>1. This CMHC's CCR was 1.002, and it was defaulted to its 
appropriate statewide hospital ancillary CCR for CY 2018 ratesetting 
purposes.
    In summary, these data preparation steps adjusted the CCR for 1 
CMHC and excluded 8 CMHCs, resulting in the inclusion of a total of 39 
CMHCs in our CY 2018 proposed rule ratesetting modeling. The trims 
removed 1,733 CMHC claims from the 14,400 total CMHC claims, resulting 
in 12,667 CMHC claims used in ratesetting. We believe that excluding 
providers with extremely low or high geometric mean costs per day or 
extremely low or high 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.
    After applying all of the above trims, exclusions, or adjustments, 
the proposed CY 2018 geometric mean per diem cost for all CMHCs for 
providing 3 or more services per day (APC 5853) is $128.81.
b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions
    For this CY 2018 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 this proposed rule there 
were 420 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

[[Page 33640]]

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 4 hospital-based 
PHP providers with CCRs ranging from 6.6494 to 17.4803 from our 
proposed rule ratesetting. However, all of the service days for these 4 
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, 1 hospital-based PHP was removed for 
missing wage index data, and 3 hospital-based PHPs were removed by the 
OPPS 3 standard deviation trim on costs per day.
    Finally, in our proposed rule ratesetting, we excluded 19 hospital-
based PHP providers that reported zero daily costs on their claims, in 
accordance with established PHP ratesetting policy (80 FR 70465). 
Therefore, we excluded a total of 27 hospital-based PHP providers, 
resulting in 393 hospital-based PHP providers in the data used for 
proposed rule ratesetting. After completing these data preparation 
steps, we calculated the proposed geometric mean per diem cost for 
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 (hospital-based PHP APC 
5863) is $213.60.
    The proposed CY 2018 PHP APC geometric mean per diem costs for the 
CMHC and hospital-based PHP APCs are shown in Table 26 of this proposed 
rule. The proposed PHP APC payment rates are included in Addendum A to 
this proposed rule (which is available via the Internet on the CMS Web 
site).

    Table 26--CY 2018 Proposed PHP APC Geometric Mean Per Diem Costs
------------------------------------------------------------------------
                                                           Proposed PHP
                                                           APC geometric
          CY 2018 APC                  Group title         mean per diem
                                                               costs
------------------------------------------------------------------------
5853...........................  Partial Hospitalization         $128.81
                                  (3 or more services
                                  per day) for CMHCs.
5863...........................  Partial Hospitalization          213.60
                                  (3 or more services
                                  per day) for hospital-
                                  based PHPs.
------------------------------------------------------------------------

3. PHP Service Utilization Updates
    In the CY 2016 OPPS/ASC final rule with comment, we expressed 
concern over the low frequency of individual therapy provided to 
beneficiaries (81 FR 79684 through 79685). The CY 2016 claims data used 
for this CY 2018 proposed rule revealed some increases in the provision 
of individual therapy. In CY 2016, hospital-based PHPs provided 
individual therapy on 4.7 percent of days with only 3 services and 5.6 
percent of days with 4 or more services (compared to 4.0 percent and 
6.2 percent, respectively, in CY 2015). Similarly, in CY 2016, CMHCs 
provided individual therapy on 9.0 percent of days with only 3 services 
provided and 4.9 percent of days with 4 or more services provided 
(compared to 7.9 percent and 4.4 percent, respectively, in CY 2015 
claims).
    We are aware that our single-tier payment policy may influence a 
change in service provision because providers are able to obtain 
payment that is heavily weighted to the cost of providing 4 or more 
services when they provide only 3 services. We are interested in 
ensuring that providers furnish an appropriate number of services to 
beneficiaries enrolled in PHPs. Therefore, with the CY 2017 
implementation of APC 5853 and APC 5863 for providing 3 or more PHP 
services per day, we are continuing to monitor utilization of days with 
only 3 PHP services.
    For this CY 2018 proposed rule, we used CY 2016 claims. The CY 2016 
claims data showed that PHPs maintained an appropriately low 
utilization of 3 service days compared to CY 2015:

                           Table 27--Percentage of PHP Days by Service Unit Frequency
----------------------------------------------------------------------------------------------------------------
                                                      CY 2015  %      CY 2016  %       Change  %
--------------------------------------------------------------------------------------------------
CMHCs:
    Percent of Days with 3 services...............             4.7             4.1            -0.6
    Percent of Days with 4 services...............            62.9            72.6             9.7
    Percent of Days with 5 or more services.......            32.4            23.3            -9.1
Hospital-based PHPs:
    Percent of Days with 3 services...............            12.4            10.2            -2.2
    Percent of Days with 4 services...............            69.8            67.5            -2.3
    Percent of Days with 5 or more services.......            17.8            22.3             4.5
----------------------------------------------------------------------------------------------------------------

    As we noted in the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79685), we will continue to monitor the provision of days with 
only 3 services, particularly now that the combined PHP APCs 5853 and 
5863 are in place for providing 3 or more services per day to CMHCs and 
hospital-based PHPs, respectively.
    It is important to reiterate our expectation that days with only 3 
services are meant to be an exception and not the typical PHP day. In 
the CY 2009 OPPS/ASC final rule we clearly stated that we consider the 
acceptable minimum units of PHP services required in a PHP day to be 3 
and explained that it was never our intention that 3 units of service 
represent the number of services to be provided in a typical PHP day. 
PHP is furnished in lieu of inpatient psychiatric hospitalization and 
is intended to be more intensive than a half-day program. We further 
indicated that a typical PHP day should include 5 to 6 hours of 
services (73 FR 68687 through 68694). We explained that days with only 
3 units of services may be appropriate to bill in certain

[[Page 33641]]

limited circumstances, such as when a patient might need to leave early 
for a medical appointment and, therefore, would be unable to complete a 
full day of PHP treatment. At that time, we noted that if a PHP were to 
only provide days with 3 services, it would be difficult for patients 
to meet the eligibility requirement in 42 CFR 410.43, that patients 
must require a minimum of 20 hours per week of therapeutic services as 
evidenced in their plan of care (73 FR 68689).
4. Minimum Service Requirement: 20 Hours per Week
    In the CY 2009 OPPS/ASC final rule with comment period, we codified 
patient eligibility criteria to reflect the intensive nature of a PHP. 
At that time, we noted that many of the patient eligibility criteria 
had been longstanding policy requirements that did not reflect a change 
in policy. The added regulatory text was intended to strengthen and 
enhance the integrity of the PHP benefit (73 FR 68694). We further 
stated that because PHP is provided in lieu of inpatient care, it 
should be a highly structured and clinically intensive program. Our 
goal was to improve the level of service furnished in a day of PHP, 
while also ensuring that the appropriate population utilizes the PHP 
benefit (73 FR 68695).
    When we codified these eligibility criteria, we acknowledged 
commenters' concerns related to the eligibility requirement that a 
patient must require a minimum of 20 hours per week of therapeutic 
services as evidenced in their plan of care. For example, we recognized 
commenters' concerns that it may sometimes be difficult for patients to 
receive 20 hours per week of therapeutic services, such as when 
transitioning into or out of a PHP program (73 FR 68695). Therefore, to 
permit flexibility in treating PHP patients, we required a minimum of 
20 hours per week of therapeutic services, with the understanding that 
patients may not always meet this minimum, such as during the week of 
admission and the week of discharge, and qualified the requirement by 
adding ``as evidenced in their plan of care.'' This eligibility 
requirement only addresses the minimum amount of PHP services 
beneficiaries must require as evidenced in their plan of care. It does 
not address whether or not beneficiaries receive a particular number of 
therapeutic services per week. However, we have noted in multiple prior 
OPPS/ASC final rules with comment periods that a typical PHP day would 
include 5 to 6 hours per day of PHP services (70 FR 68548, 71 FR 67999, 
72 FR 66671, and 73 FR 68687).
    Most recently, we discussed the 20 hours of services requirement in 
the CY 2017 rulemaking when we reminded providers that our regulations 
at Sec. Sec.  410.43(a)(3) and (c)(1) continue to require that PHP 
beneficiaries must require a minimum of 20 hours per week of 
therapeutic services as evidenced in their plan of care, and that PHP 
services must be furnished in accordance with a physician certification 
and the beneficiary's plan of care reflecting that need.
    We analyzed CY 2015 and CY 2016 PHP claims data to assess the 
intensity of PHP services provided, using PHP-allowable HCPCS codes and 
provider and service date information. To calculate the number of hours 
of PHP services provided to each beneficiary each day, we assumed each 
unit of service equaled one hour of time. Each service day was then 
mapped to its Sunday-through-Saturday calendar week, and the number of 
PHP hours per week was calculated for each beneficiary. Next, the 
service weeks for each beneficiary were sorted chronologically and 
assessed: The first service week in a continuous series of service 
weeks was flagged as an ``Admission'' week, and the last service week 
in a continuous series of service weeks was flagged as a ``Discharge'' 
week. We removed from the analysis the admission and discharge weeks 
for each beneficiary to permit us to assess the intensity of services 
provided to beneficiaries fully engaged in PHPs (that is, those in 
``nontransitional'' weeks). We then calculated the total number of 
service weeks and the number of service weeks with at least 20 PHP 
hours for each beneficiary. These two values were then used to 
determine the percentage of nontransitional service weeks that met the 
20-hour PHP threshold for each beneficiary.
    We found that a majority of PHP patients did not receive at least 
20 hours of PHP services per week. Just over half of PHP beneficiaries 
received 20 hours or more of services in 50 percent or more of 
nontransitional weeks. In CY 2016 claims data, only 16.4 percent of 
beneficiaries in CMHCs and 34.8 percent of beneficiaries in hospital-
based PHPs received at least 20 hours of PHP services in 100 percent of 
nontransitional weeks.

      Table 28--Number and Percentage of Beneficiaries Receiving at Least 20 Hours of PHP Services per Week
                                            [CY 2015 Through CY 2016]
----------------------------------------------------------------------------------------------------------------
                                                  Beneficiaries receiving 20 or
                                                 more hours of PHP services per     CY 2015 (%)     CY 2016 (%)
                                                     nontransitional week *
----------------------------------------------------------------------------------------------------------------
Number/Percentage of CMHC Beneficiaries.......  In 50% or more of weeks.........      1,205/53.1      1,016/57.3
                                                In 100% of weeks................        319/14.1        291/16.4
Number/Percentage of Hospital-based PHP         In 50% or more of weeks.........      8,610/51.0      8,333/56.7
 Beneficiaries.                                 In 100% of weeks................      5,003/29.6      5,115/34.8
----------------------------------------------------------------------------------------------------------------
* Weeks are trimmed to exclude admission and discharge weeks based on a Sunday through Saturday week.
Nontransitional weeks are weeks that are not admission or discharge weeks.

    Overall, the data suggest that some PHPs may not provide the 
intensive services that eligible beneficiaries actually need. We are 
concerned about these findings, and encourage PHPs to review their 
admission practices and ensure they are providing the services 
beneficiaries need.
    Given these concerns, in the CY 2017 OPPS/ASC final rule with 
comment period, we solicited public comments on potential future 
editing of PHP claims for the 20 hours per week minimum eligibility 
requirement and on strengthening the tie between a beneficiary's 
receipt of 20 hours per week of PHP services and payment for those 
services (81 FR 79686). We received nine comments in response to our 
solicitation. Overall, commenters requested that we monitor data for a 
year before implementing any payment edits. A number of commenters 
suggested that if CMS chose to edit PHP claims for the 20-hour minimum 
requirement, CMS should: (1) Provide exceptions to the editing; (2) not 
require weekly billing; and (3) implement the edits in a fashion that 
is not administratively burdensome.

[[Page 33642]]

    A number of commenters were not supportive of editing that would 
lead to payment denial. A few commenters indicated that attending a PHP 
for 20 hours per week is not a condition of payment. Several commenters 
suggested that editing would be premature until CMS could analyze 
monitoring data, consider the effect of the newly implemented single 
APC payment tier, and seek engagement from the PHP provider community. 
Some commenters also noted that the current PHP HCPCS codes may require 
some refinement to fully enable providers to record service times.
    Several commenters expressed concerns that edits to deny payment 
for weeks with fewer than 20 hours of PHP services could reduce access 
to the PHP benefit. Several commenters suggested that noncompliance 
with a 20-hour requirement could be addressed through medical review, 
and suggested that PHPs' documenting the reasons for absences in the 
medical record should be sufficient. Another commenter questioned the 
necessity of an edit for occasional beneficiary absences beyond the 
PHP's control. We will consider these comments as we evaluate our 
options for possible future editing.
    In addition, in this CY 2018 OPPS/ASC proposed rule, we are 
soliciting public comments on the advisability of applying a payment 
requirement conditioned on a beneficiary's receipt of a minimum of 20 
hours of therapeutic services per week. We also are soliciting public 
comments addressing the need for exceptions to such a policy. 
Specifically, we want to know and understand the type of occurrences or 
circumstances that would cause a PHP patient to not receive at least 20 
hours of PHP services per week, particularly where payment would still 
be appropriate.
    Our goal is for PHP providers to continue to have flexibility in 
providing PHP services. However, we must ensure that beneficiaries 
enrolled in PHPs are legitimately eligible for PHP services and receive 
appropriately intensive treatment. As we seek to understand the usage 
of PHP services by Medicare patients, we also will continue to monitor 
the intensity of services provided on a weekly basis, and look forward 
to reviewing stakeholder comments when considering options to address 
situations where an appropriately intensive level of service is not 
provided.

C. Proposed Outlier Policy for CMHCs

    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 concluded that establishing a separate 
OPPS outlier policy for CMHCs would be appropriate. Beginning in CY 
2004, we created a separate outlier policy specific to the estimated 
costs and OPPS payments provided to CMHCs. 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 CY 2017, we 
implemented a CMHC outlier payment cap to be applied at the provider 
level, such that in any given year, an individual CMHC will receive no 
more than a set percentage of its CMHC total per diem payments in 
outlier payments (81 FR 79692 through 79695). This outlier payment cap 
only affects CMHCs, and does not affect other provider types. This 
outlier payment cap is in addition to and separate from the current 
outlier policy and reconciliation policy in effect. We finalized the 
CMHC outlier payment cap to be set at 8 percent of the CMHC's total per 
diem payments (81 FR 79694 through 79695).
    In this CY 2018 OPPS/ASC proposed rule, we are proposing to 
continue to designate a portion of the estimated 1.0 percent hospital 
outpatient outlier threshold specifically for CMHCs, consistent with 
the percentage of projected payments to CMHCs under the OPPS in CY 
2018, 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. CMHCs are projected to receive 0.02 percent of total hospital 
outpatient payments in CY 2018, excluding outlier payments. Therefore, 
we are proposing to designate approximately 0.0027 percent of the 
estimated 1.0 percent hospital outpatient 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 2018, in this 
proposed rule, we are proposing to continue to set the cutoff point for 
outlier payments for CY 2018 at 3.4 times the highest CMHC APC payment 
rate implemented for that calendar year, which for CY 2018 is the 
payment rate for CMHC APC 5853. In addition, we are proposing to 
continue to apply the same outlier payment percentage that applies to 
hospitals. Therefore, for CY 2018, we are proposing to continue to pay 
50 percent of CMHC APC geometric mean per diem costs over the cutoff 
point. For example, for CY 2018, if a CMHC's cost for partial 
hospitalization services paid under CMHC APC 5853 exceeds 3.4 times the 
proposed payment rate for 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 CMHC APC 5853.
    In section II.G. of this proposed rule, for the hospital outpatient 
outlier payment policy, we are proposing 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 that 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 are not 
proposing to set a dollar threshold for CMHC outlier payments.
    In summary, we are proposing to continue to calculate our CMHC 
outlier threshold and CMHC outlier payments according to our 
established policies.

IX. Proposed Procedures That Would 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 proposed list of codes that would be paid 
by Medicare in CY 2018 as inpatient only procedures (the proposed IPO 
list) is included as Addendum E to this proposed rule (which is 
available via the Internet on the CMS Web site).

[[Page 33643]]

B. Proposed Changes to the Inpatient Only (IPO) List

    In this proposed rule, for CY 2018, we are proposing 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. We have established five criteria that are part 
of this methodology. As noted in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74353), we utilize these criteria when reviewing 
procedures to determine whether or not they should be removed from the 
IPO list and assigned to an APC group for payment under the OPPS when 
provided in the hospital outpatient setting. We note that a procedure 
is not required to meet all of the established criteria to be removed 
from the IPO list. The criteria include the following:
    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 are proposing to remove the 
procedures described by the following codes from the IPO list for CY 
2018: CPT code 27447 (Arthroplasty, knee, condyle and plateau; medical 
and lateral compartments with or without patella resurfacing (total 
knee arthroplasty)) and CPT code 55866 (Laparoscopy, surgical 
prostatectomy, retropubic radical, including nerve sparing, includes 
robotic assistance, when performed).
    For a number of years, total knee arthroplasty (TKA) has been a 
topic of discussion for removal from the IPO list with both stakeholder 
support and opposition. Most recently, in the CY 2017 OPPS/ASC proposed 
rule (81 FR 45679 through 45681), we sought public comments on the 
removal of the TKA procedure from the IPO list from interested parties, 
including specifically: 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. In the comment solicitation, we 
requested stakeholder input on whether the TKA procedure met the 
established criteria used to identify procedures to remove from the IPO 
list. We also requested input regarding how to modify current Medicare 
payment models that include TKA, such as the Bundled Payments for Care 
Improvement (BPCI) and the Comprehensive Care for Joint Replacement 
(CJR) initiatives, if the procedure was removed from the IPO list.
    The public comments we received were varied and nuanced. A number 
of commenters believed that continued refinements in the TKA surgical 
procedure allowed it to be performed safely on properly selected 
Medicare beneficiaries in the outpatient setting. A number of 
facilities indicated that they were currently performing TKA procedures 
on an outpatient basis in both the HOPD and ASC on non-Medicare 
patients. Commenters who supported removing the TKA procedure from the 
IPO list also noted recent peer-reviewed publications that reported on 
investigations of the feasibility of outpatient TKA with positive 
results; that is, TKA outpatients did not experience higher rates of 
complications or readmissions in comparison to TKA inpatients.
    A minority of commenters (including teaching hospital stakeholders 
and some professional organizations representing orthopedic surgeons) 
stated that the risk of postsurgical complications was too high for 
patients with the TKA procedure performed in the outpatient setting for 
the Medicare population and noted that patients appropriate for the TKA 
procedure performed on an outpatient basis tend to be younger, more 
active, have fewer complications, and have more at home support than 
most Medicare beneficiaries. These commenters also believed there was 
insufficient research on the TKA procedure performed on an outpatient 
basis to definitively claim that the procedure could be safely 
performed in the outpatient setting.
    Some commenters noted that if the TKA procedure was removed from 
the IPO list, inpatient TKA cases should not be subject to Recovery 
Audit Contractor (RAC) review for appropriate site-of-service. In 
addition, some commenters expressed concerns about the effect that 
removing the TKA procedure from the IPO list could have on the BPCI and 
CJR Medicare payment models. We stated in the CY 2017 OPPS/ASC final 
rule with comment period (81 FR 79699) that we would consider all 
public comments received in future policymaking.
    We have reviewed the clinical characteristics of the TKA procedure 
and related evidence, including current length-of-stay (LOS) data for 
inpatient TKA procedures and peer-reviewed literature related to 
outpatient TKA procedures. We also have considered input from the 
comment solicitation in the CY 2017 OPPS/ASC final rule with comment 
period and the professional opinions of orthopedic surgeons and CMS 
clinical advisors. In addition, we have taken into account the 
recommendation from the summer 2016 Advisory Panel on Hospital 
Outpatient Payment (HOP Panel) meeting to remove the TKA procedure from 
the IPO list. Based on this information, we have determined that the 
TKA procedure would be an appropriate candidate for removal from the 
IPO list. We expect providers to carefully develop evidence-based 
patient selection criteria to identify patients who are appropriate 
candidates for an outpatient TKA procedure as well as exclusionary 
criteria that would disqualify a patient from receiving an outpatient 
TKA procedure. We believe that the subset of Medicare beneficiaries who 
meet patient selection criteria for performance of the TKA procedure on 
an outpatient basis may have the procedure performed safely in the 
outpatient setting.
    We believe that the TKA procedure meets a number of criteria for 
removal from the IPO list, including criteria 1, 2, and 4. We are 
seeking comments on whether the public believes that these criteria are 
met and whether the TKA procedure meets any other of the five criteria 
stated in the beginning of this section.
    We are proposing that CPT code 27447 would be assigned to C-APC 
5115 (Level 5 Musculoskeletal Procedures) with status indicator ``J1''.
    We also note, as stated in the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79697), that removal from the IPO list does not 
require the covered surgical procedures to be performed only on an 
outpatient basis. Removal of a procedure from the IPO list allows for 
Medicare coverage and payment for the procedure when it is furnished 
either in an inpatient or outpatient hospital setting. 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 may still be

[[Page 33644]]

covered and paid for by Medicare when they are performed on individuals 
who are inpatients. The decision regarding the most appropriate care 
setting for a given surgical procedure is a complex medical judgment 
made by the physician based on the beneficiary's individual clinical 
needs and preferences and on the general coverage rules requiring that 
any procedure be reasonable and necessary. Therefore, if we finalize 
our proposal to remove the TKA procedure from the IPO list, we would 
also prohibit Recovery Audit Contractor (RAC) review for patient status 
for TKA procedures performed in the inpatient setting for a period of 2 
years to allow time and experience for these procedures under this 
setting. We would not want hospitals to err on the side of 
inappropriately performing the procedure on an outpatient basis due to 
concerns about the possibility of an inpatient TKA claim being denied 
for patient status. That is, given that this surgical procedure would 
be newly eligible for payment under either the IPPS or the OPPS, RAC 
denial of a hospital claim for patient status would be prohibited. We 
note that contractor reviews for issues other than patient status as an 
inpatient or outpatient would continue to be permitted, including those 
for underlying medical necessity.
    We also are proposing to remove the procedure described by CPT code 
55866 from the IPO list for CY 2018. We are proposing that CPT code 
55866 would be assigned to C-APC 5362 (Level 2 Laparoscopy & Related 
Services) with status indicator ``J1''. After consulting with 
stakeholders and our clinical advisors regarding this procedure, we 
believe that this procedure meets criteria 1 and 2. We are seeking 
comment on whether the public believes that these criteria are met and 
whether CPT code 55866 meets any other of the five criteria stated in 
the beginning of this section.
    The procedures that we are proposing to remove from the IPO list 
for CY 2018 and subsequent years, including the HCPCS code, long 
descriptors, and the proposed CY 2018 payment indicators, are displayed 
in Table 29 below.

              Table 29--Proposed Procedures To Be Removed From the Inpatient Only List for CY 2018
----------------------------------------------------------------------------------------------------------------
                                                                                                   Proposed CY
                                                                                   Proposed CY      2018 OPPS
              CY 2018 CPT code                     CY 2018 long descriptor        2018 OPPS APC       status
                                                                                   assignment       indicator
----------------------------------------------------------------------------------------------------------------
27447......................................  Arthroplasty, knee, condyle and               5115              J1
                                              plateau; medical and lateral
                                              compartments with or without
                                              patella resurfacing (total knee
                                              arthroplasty).
55866......................................  Laparoscopy, surgical                         5362              J1
                                              prostatectomy, retropubic
                                              radical, including nerve sparing,
                                              includes robotic assistance, when
                                              performed.
----------------------------------------------------------------------------------------------------------------

    We are inviting public comments on our proposals to remove the 
procedures described by CPT code 27447 and CPT code 55866 from the IPO 
list beginning in CY 2018. In addition, in section XII.C.1.b. of this 
proposed rule, we are soliciting public comments on whether the TKA 
procedure meets the criteria to be added to the list of ASC covered 
surgical procedures.
    The complete proposed list of codes (the IPO list) that would be 
paid by Medicare in CY 2018 as inpatient only procedures is included as 
Addendum E to this proposed rule (which is available via the Internet 
on the CMS Web site).

C. Solicitation of Public Comments on the Possible Removal of Partial 
Hip Arthroplasty (PHA) and Total Hip Arthroplasty (THA) Procedures From 
the IPO List

1. Background
    Partial hip arthroplasty (PHA), CPT code 27125 (Hemiarthroplasty, 
hip, partial (eg, femoral stem prosthesis, bipolar arthroplasty)), and 
total hip arthroplasty (THA) or total hip replacement, CPT code 27130 
(Arthroplasty, acetabular and proximal femoral prosthetic replacement 
(total hip arthroplasty), with or without autograft or allograft), have 
traditionally been considered inpatient surgical procedures. The 
procedures were placed on the original IPO list in the CY 2001 OPPS 
final rule (65 FR 18780). 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 18455). 
In 2000, the geometric mean average length of stay for the DRG to which 
uncomplicated PHA and THA procedures were assigned was 4.6 days, and in 
2016, the average length of stay for current uncomplicated PHA and THA 
procedures for the MS-DRG was 2.7 days.
    In the CY 2017 OPPS/ASC proposed rule, we solicited public comments 
on the possible removal of total knee arthroplasty (TKA) from the IPO 
list (81 FR 45679 through 45681). Included in the public comments 
received related to the removal of TKA from the IPO list were several 
comments in support of removal of THA from the IPO list as well. Among 
those commenters expressing support for removal of THA from the IPO 
list were several surgeons and other stakeholders who believed that, 
given thorough preoperative screening by medical teams with significant 
experience and expertise involving hip replacement procedures, the THA 
procedure could be provided on an outpatient basis for some Medicare 
beneficiaries. These 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 providing the THA procedure on an 
outpatient basis will lead to significant enhancements in patient well-
being, improved efficiency, and cost savings to the Medicare program, 
including shorter hospital stays resulting in fewer medical 
complications, improved results, and enhanced patient satisfaction.
    Recent innovations have enabled surgeons to perform the PHA and THA 
procedures on an outpatient basis on non-Medicare patients (both in the 
HOPD and in the ASC). These innovations in PHA and THA care include 
minimally invasive techniques, improved perioperative anesthesia, 
alternative postoperative pain management, and expedited rehabilitation 
protocols. Patients undergoing minimally invasive surgical procedures 
instead of open surgical techniques generally benefit from a shorter 
hospital stay. However, not all patients are candidates for minimally 
invasive PHA or THA. Commenters on

[[Page 33645]]

the CY 2017 OPPS/ASC proposed rule comment solicitation on the TKA 
procedure have stated that benefits of outpatient PHA and THA 
procedures 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, both PHA and THA need 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 may likely be good candidates for 
an outpatient PHA or THA procedure. These patients may be determined to 
also be able to tolerate outpatient rehabilitation in either an 
outpatient facility or at home postsurgery. On the other hand, patients 
with multiple medical comorbidities, 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 PHA and THA procedures in public 
comments in response to our CY 2017 OPPS/ASC proposed rule comment 
solicitation on the TKA procedure have emphasized the importance of 
careful patient selection and strict protocols to optimize outpatient 
hip replacement 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, ambulation, and performance 
of activities of daily living.
    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. Topics and Questions for Public Comments
    We are seeking public comments on whether we should remove the 
procedures described by CPT codes 27125 and 27130 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 PHA and/or THA 
procedures; hospitals and hospital trade associations; and any other 
interested stakeholders. We are also specifically seeking public 
comments on the following questions:
     Are most outpatient departments equipped to provide PHA 
and/or THA to some Medicare beneficiaries?
     Can the simplest procedure described by CPT codes 27125 
and 27130 be performed in most outpatient departments?
     Are the procedures described by CPT codes 27125 and 27130 
sufficiently related to or similar to other procedures we have already 
removed from the IPO list?
     How often is the procedure described by CPT codes 27125 
and 27130 being performed on an outpatient basis (either in an HOPD or 
ASC) on non-Medicare patients?
     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 of either a PHA or THA procedure 
as a hospital outpatient, which may or may not include a 24-hour period 
of recovery in the hospital after the operation?
    In addition, we are soliciting public comments on whether the PHA 
and THA procedures may meet the criteria to be added to the ASC Covered 
Procedures List. We refer readers to section XII.C.1.c. of this 
proposed rule for a complete discussion of the ASC Covered Procedures 
List.
    Finally, as noted when we solicited public comment on removing the 
TKA procedure from the IPO list in the CY 2017 rulemaking, we solicited 
public comment on the effect of removing the TKA procedure from the IPO 
list on the Comprehensive Care for Joint Replacement (CJR) Model and 
the Bundled Payment for Care Improvements (BPCI) Model. We refer 
readers to the CY 2017 OPPS/ASC proposed rule for a discussion of 
questions we raised for public comments and again are seeking public 
comment on the effect of removing the PHA and THA procedures from the 
IPO list on these models. For a discussion of these models in the CY 
2017 rulemaking, we refer readers to 81 FR 79698 through 79699.

X. Proposed Nonrecurring Policy Changes

A. Payment for Certain Items and Services Furnished by Certain Off-
Campus Departments of a Provider

1. Background
    Section 603 of the Bipartisan Budget Act of 2015 (Pub. L. 114-74), 
enacted on November 2, 2015, amended section 1833(t) of the Act by 
amending paragraph (1)(B) and adding a new paragraph (21). As a general 
matter, under sections 1833(t)(1)(B)(v) and (t)(21) of the Act, 
applicable items and services furnished by certain off campus 
outpatient departments of a provider on or after January 1, 2017, will 
not be considered covered OPD services as defined under section 
1833(t)(1)(B) of the Act for purposes of payment under the OPPS and 
will instead be paid ``under the applicable payment system'' under 
Medicare Part B if the requirements for such payment are otherwise met. 
To be considered part of a hospital, an off campus department of a 
hospital must meet the provider-based criteria established under 42 CFR 
413.65. The implementation of section 603 of the Bipartisan Budget Act 
of 2015 was finalized in the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79699 through 79719) and interim final rule with comment 
period (79720 through 79729).
2. Summary of Public Comments and Our Responses Regarding Expansion of 
Services by Excepted Off-Campus Hospital Outpatient Departments
    In the CY 2017 OPPS/ASC final rule with comment period, we 
expressed interest in receiving feedback on the limitation on expansion 
of services of hospital outpatient departments as it related to 
excepted off-campus provider-based departments (PBDs) (81 FR 79707). 
Below we discuss certain proposals and present a summary of the public 
comments received and our responses to those comments.
    As discussed in the CY 2017 OPPS/ASC proposed rule and final rule 
with comment period (81 FR 45685 through 45686 and 81 FR 79706 through 
79707), we stated that we believe section

[[Page 33646]]

1833(t)(21)(B)(ii) of the Act, as added by section 603 of Public Law 
114-74, excepts off-campus provider based departments (PBDs) and the 
items and services that are furnished by such excepted off-campus PBDs 
for purposes of paragraphs (1)(B)(v) and (21) of section 1833(t) of the 
Act as they were being furnished on the date of enactment of section 
603 of Public Law 114-74, as guided by our regulatory definition of a 
department of a provider at Sec.  413.65(a)(2). Therefore, we proposed 
that the excepted off-campus PBD items and services that would continue 
to be paid under the OPPS would be limited to the provision of items 
and services it was furnishing prior to the date of enactment of 
section 603 of Public Law 114-74. Moreover, we proposed that items and 
services that are not part of a clinical family of services furnished 
and billed by the excepted off-campus PBD prior to November 2, 2015 
would be subject to paragraphs (1)(B)(v) and (21) of section 1833(t) of 
the Act; that is, not payable under the OPPS (81 FR 45685 through 
45686).
    As noted in both the CY 2017 OPPS/ASC proposed rule and final rule 
with comment period, we believe that the amendments to section 1833(t) 
of the Act by section 603 of Public Law 114-74 were intended to address 
items and services furnished at physicians' offices that are converted 
to hospital off-campus PBDs on or after November 2, 2015 from being 
paid at OPPS rates (81 FR 45685 through 45686 and 81 FR 79706 through 
79707). One issue we contemplated is how expanded services of an 
excepted off-campus PBD could affect payments to a hospital in regard 
to newly acquired physicians' offices or new off-campus PBDs 
established after the date of enactment of section 603 of Public Law 
114-74. Particularly, in the CY 2017 OPPS/ASC proposed rule, we 
indicated that we were concerned that if excepted off-campus PBDs could 
expand the types of services provided at the excepted off-campus PBDs 
and also be paid OPPS rates for these new types of services, hospitals 
may be able to purchase additional physician practices and add those 
physicians to existing excepted off campus PBDs (81 FR 45685). This 
could result in newly purchased physician practices furnishing services 
that are paid at OPPS rates, which we believe these amendments to 
section 1833(t) of the Act were intended to address.
    After reviewing the statutory authority and the concerns raised by 
stakeholders, we proposed for CY 2017, for purposes of paragraphs 
(1)(B)(v) and (21) of section 1833(t) of the Act, that excepted status 
of items and services furnished in excepted off-campus PBDs would be 
limited to the items and services (defined as clinical families of 
services in Table 21 of the proposed rule (81 FR 45685 through 45686)) 
such a department was billing for under the OPPS and were furnished 
prior to November 2, 2015. We proposed that if an excepted off-campus 
PBD furnishes services from a clinical family of services that it did 
not furnish prior to November 2, 2015, and therefore did not also bill 
for, these new or expanded clinical families of services would not be 
covered OPD services, and instead would be subject to paragraphs 
(1)(B)(v) and (21) of section 1833(t) of the Act. We did not propose to 
limit the volume of excepted items and services within a clinical 
family of services that an excepted off-campus PBD could furnish.
    In addition, we considered, but did not propose, specifying a 
timeframe in which service lines had to be billed under the OPPS for 
covered OPD services furnished prior to November 2, 2015. We sought 
public comment through the CY 2017 OPPS/ASC proposed rule on whether we 
should adopt a specific timeframe for which the billing had to occur, 
such as CY 2013 through November 1, 2015.
    Under our CY 2017 proposal, while excepted off-campus PBDs would 
not be eligible to receive OPPS payments for expanded clinical families 
of services, such excepted off-campus PBDs would continue to be 
eligible to receive OPPS payment for clinical families of services that 
were furnished and billed prior to that date.
    After consideration of the public comments we received in response 
to the CY 2017 OPPS/ASC proposed rule, we did not finalize our proposed 
policy to limit service line expansion. Therefore, for CY 2017, an 
excepted off-campus PBD receives payments under the OPPS for all billed 
items and services, regardless of whether it furnished such types of 
items and services prior to the date of enactment of Public Law 114-74, 
as long as the excepted off-campus PBD remains excepted; that is, it 
meets the relocation and change of ownership requirements adopted in 
the CY 2017 OPPS/ASC final rule with comment period (81 FR 79707). 
Furthermore, in the CY 2017 OPPS/ASC final rule with comment period, we 
stated our intent to monitor service line expansion and continue to 
consider how a potential limitation on expansion would work. To that 
end, in the CY 2017 OPPS/ASC final rule with comment period, we sought 
public comments on how either a limitation on volume of services, as 
MedPAC described in its comments, or a limitation on lines of service, 
as we laid out in the proposed rule, could be implemented (81 FR 
79707). Specifically, we stated we were interested in what data are 
currently available or could be collected that would allow us to 
implement a limitation on service expansion. We also stated our 
interest in receiving suggestions for changes to the clinical families 
of services that we set forth in Table 21 of the proposed rule (81 FR 
45685 through 45686) as we move forward.
    Several of the public comments received in response to the November 
2016 comment solicitation were repeated from the same stakeholders in 
response to the CY 2017 OPPS/ASC proposed rule. These commenters again 
expressed concern regarding CMS' authority to address changes in 
service-mix; how a limitation on service expansion or volume would 
stifle innovative care delivery and use of new technologies; and how 
the clinical families of service are not workable. Because these 
commenters did not provide new information, we refer readers to the CY 
2017 OPPS/ASC final rule with comment period for our response to 
comments on statutory authority and hindrance to access to innovative 
technologies (81 FR 79707). A summary of and our responses to the other 
comments received in response to the November 2016 comment solicitation 
follow:
    Comment: One commenter raised concern that CMS will implement 
policies that prohibit expansion of services at excepted off-campus 
PBDs. The commenter believed that excepted and nonexcepted off-campus 
PBDs should be allowed to expand their service offerings.
    Response: We believe the commenter may have misunderstood the 
policy proposal to limit service line expansion as a proposal to 
disallow excepted off-campus PBDs from ever altering their service 
offerings or from treating new patients. To clarify, we proposed that 
the items and services furnished by an excepted off-campus PBD that 
would continue to be paid under the OPPS would be limited to the 
provision of items and services within the clinical families of 
services the excepted off-campus PBD was furnishing prior to November 
2, 2015. In addition, we proposed that items and services that were not 
part of a clinical family of services furnished and billed by the 
excepted off-campus PBD prior to November 2, 2015 would be paid under 
the MPFS. We did not propose to prohibit expansion of clinical services

[[Page 33647]]

furnished by either excepted or nonexcepted off-campus PBDs. In the CY 
2017 OPPS/ASC final rule with comment period, in response to public 
comments, we did not finalize our proposal to limit payment under the 
OPPS for expansion of services at excepted off-campus PBDs, but 
expressed interest in additional feedback to help us consider whether 
excepted off-campus PBDs that expand the types of services offered 
after November 2, 2015 should be paid for furnishing those items and 
services under the applicable payment system (that is, the MPFS) 
instead of the OPPS. Specifically, we requested comments on how either 
a limitation on volume or a limitation on lines of service would work 
in practice (81 FR 79707). For example, if we were to adopt a 
limitation on payment for expanded service lines at an excepted off-
campus PBD and such PBD primarily provided infusion services prior to 
November 2, 2015, but added cardiology services after November 2, 2015, 
should payment for the cardiology services be made under the MPFS while 
payment for the infusion services would be made under the OPPS?
    We recognize that services provided in off-campus PBDs may evolve 
to reflect changes in clinical practice and community health care 
needs. However, as stated in prior rulemaking, we believe that section 
1833(t)(21)(B)(ii) of the Act excepted off-campus PBDs as they existed 
at the time that Public Law 114-74 was enacted, and provides the 
authority to define excepted off-campus PBDs, including those items and 
services furnished and billed by such a PBD that may be paid under the 
OPPS, as opposed to the authority under section 1833(t)(21)(C) of the 
Act.
    Comment: A few commenters supported CMS' intent to monitor service 
line expansion and changes in billing patterns by excepted off-campus 
PBDs. These commenters urged CMS to work to operationalize a method 
that would preclude an excepted off-campus PBD from expanding its 
payment advantage under the OPPS into wholly new clinical areas.
    Response: We appreciate the commenters' support. We are collecting 
data on the claims billed by off-campus PBDs with modifier ``PO'' (for 
excepted services) and modifier ``PN'' (for nonexcepted services). We 
believe that data collected using these modifiers will be a useful tool 
in furthering our efforts to monitor service line expansion, and 
address any issues as they may arise.
    Comment: A few commenters urged CMS to pursue a limitation on 
service line expansion to ensure designation as an excepted off-campus 
PBD is not ``abused.'' One commenter suggested that CMS already has the 
necessary data to limit excepted off-campus PBDs to billing under the 
OPPS for only those items and services that were furnished prior to 
November 2, 2015. The commenter suggested that CMS evaluate outpatient 
claims with the ``PO'' modifier to develop a list of ``grandfathered'' 
items and services for which the excepted off-campus PBD may continue 
to be paid under the OPPS.
    Response: We appreciate the commenters' suggestions. While the 
``PO'' modifier claims data are helpful to assess the billing patterns 
of off-campus PBDs, reporting of this modifier was voluntary for CY 
2015 and did not become mandatory until CY 2016. Because of the 
voluntary nature of ``PO'' modifier reporting in CY 2015, the data may 
not accurately reflect all items and services furnished at excepted 
off-campus PBDs. We also are concerned with the practicality of 
developing a list of excepted items and services for each excepted off-
campus PBD, given the magnitude of such a list. Any future proposal on 
service expansion would need to be practicable and take into 
consideration the administrative burden on providers and the Federal 
Government.
    Comment: A few commenters expressed concern that either a 
limitation on services or volume of services at an excepted off-campus 
PBD would result in varying beneficiary copayments at a single site, 
which could create confusion and inequity. Therefore, the commenters 
requested that CMS minimize beneficiary confusion by treating all items 
and services furnished at an excepted off-campus PBD as excepted under 
Sec.  419.48.
    Response: We appreciate these comments. We note that the cost-
sharing liability under both the OPPS and the MPFS is prescribed by 
statute and that there is not flexibility with respect to the copayment 
amount that would be due for a given service.
    Comment: A few commenters believed that MedPAC's proposal to cap 
service volume from a baseline period would still be administratively 
complex and unduly burdensome. In addition, the commenters disagreed 
with MedPAC's proposal to establish the baseline period using the 12-
month period that preceded November 2, 2015 (that is, November 2, 2014 
through November 1, 2015) as a baseline for volume caps. These 
commenters believed that such an approach would negatively affect 
excepted off-campus PBDs that began operations any time during the year 
before the enactment of section 603 of Public Law 114-74, by possibly 
preventing all of the items and services furnished by that excepted 
off-campus PBD from being excepted from the provisions of section 603. 
Therefore, the commenters requested that any baseline period run no 
earlier than the 12-month period immediately prior to the effective 
date of the policy, or, for excepted off-campus PBDs that began 
operations within the 5-year period prior to the effective date of the 
policy, the 12-month period following the excepted off-campus PBD's 
fifth year of operations. The commenters also believed that 
establishment of a cap based on the modifier ``PO'' data is 
inappropriate, given that use of the modifier was not mandatory until 
January 1, 2016, or nearly 2 months after enactment of section 603 of 
Public Law 114-74. One commenter suggested that a volume cap would need 
to be adjusted annually to account for changes in coding and bundling 
of services; changes in population of community served; hospital market 
basket increases to OPPS payment rates; and efficiency improvements.
    Response: We appreciate these comments and concerns relating to 
proposing a cap on service volume and the limitations of the ``PO'' 
modifier data. We will take this feedback into consideration in the 
development of potential future proposals to either limit service 
expansion or cap volume of services payable under the OPPS.
    Comment: A few commenters suggested that CMS delay establishing any 
limitation on service expansion or volume until claims data with the 
``PN'' modifier are available. However, the commenters believed that, 
even with ``PO'' modifier data from excepted off-campus PBDs and ``PN'' 
modifier data from nonexcepted off-campus PBDs, it would be a 
challenging task for CMS and providers to retroactively assess and 
compare which services were provided at each PBD for a 1-year period 
prior to November 2, 2015. As an alternative, one commenter suggested 
that additional questions on the CMS 855A enrollment form would be a 
more sensible approach to gathering information on types of services 
furnished at excepted off-campus PBDs, but did not provide any specific 
questions.
    Response: We agree that evaluating data reported with the ``PN'' 
modifier by nonexcepted off-campus PBDs will be instructive as we 
consider options for any potential future proposal on limitation of 
service line expansion or volume. While we did not finalize any

[[Page 33648]]

policy on clinical service expansion that would establish the baseline 
period as a 1-year period prior to November 2, 2015, we appreciate the 
feedback. Regarding changes to the CMS 855A enrollment form, we are 
unclear on what types of questions could be added to glean a better 
understanding of services provided at nonexcepted off-campus PBDs; 
therefore, we cannot respond to this comment at this time.
    We appreciate the commenters' suggestions and concerns on the issue 
of a limitation on clinical service line expansion or a limitation on 
service line volume. After consideration of the public comments we 
received, for CY 2018, we are not making any proposals to limit 
clinical service line expansion or volume increases at excepted off-
campus PBDs, but will continue to monitor claims data for changes in 
billing patterns and utilization, and continue to invite public 
comments on this issue.
    We refer readers to the CY 2018 MPFS proposed rule for proposed 
payment rates under the MPFS for nonexcepted items and services 
furnished by nonexcepted off-campus provider-based departments of 
hospitals.
3. Implementation of Section 16002 of the 21st Century Cures Act 
(Treatment of Cancer Hospitals in Off Campus Outpatient Department of a 
Provider Policy)
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79699), we finalized a number of proposals to implement section 603 of 
the Bipartisan Budget Act of 2016 (Pub. L. 114-74), enacted on November 
2, 2015, which amended section 1833(t) of the Act. Specifically, this 
provision amended the OPPS statute to require that certain items and 
services furnished by certain off-campus outpatient departments of a 
provider (off-campus PBDs) on or after January 1, 2017 will not be 
considered covered OPD services as defined under section 1833(t)(1)(B) 
of the Act for purposes of payment under the OPPS, and instead will be 
paid ``under the applicable payment system'' under Medicare Part B if 
the requirements for such payment are otherwise met. In the CY 2017 
OPPS/ASC final rule with comment period (81 FR 79699), we established 
the Medicare Physician Fee Schedule as the ``applicable payment 
system'' for the majority of the nonexcepted items and services 
furnished by nonexcepted off-campus PBDs.
    Section 16002(a) of the 21st Century Cures Act (Pub. L. 114-255) 
amended the Act at section 1833(t)(20)(B) and provided that with 
respect to applicable items and services furnished during 2017 or a 
subsequent year, the term ``off-campus outpatient department of a 
provider'' excludes certain cancer hospitals. To meet this exclusion, 
section 16002(a) requires that such cancer hospitals (1) be described 
in section 1886(d)(1)(B)(v) of the Act; and (2) for hospital outpatient 
departments that meet the requirements for 42 CFR 413.65, after 
November 1, 2015 and before December 15, 2016, that the Secretary has 
received from the provider an attestation that the department met such 
requirements not later than 60 days after the date of enactment of 
section 16002 (December 13, 2016), or, for departments that meet the 
requirements after December 13, 2016, the Secretary has received from 
the provider an attestation that the department met the requirements 
not later than 60 days after the date the department first met the 
requirements of 42 CFR 413.65. Through operational guidance, we have 
provided direction to all MACs regarding this provision. We have also 
provided guidance on this provision to hospital providers, which can be 
found on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/Sections-16001-16002.pdf.
    Section 16002(b) of Public Law 114-255 amended section 1833(t)(18) 
of the Act by adding a new subparagraph (C) that requires the 
Secretary, in applying 42 CFR 419.43(i) for services furnished on or 
after January 1, 2018, to use a target PCR that is 1 percentage point 
less than the target PCR that would otherwise apply. In addition to the 
1 percentage point reduction, the Secretary may consider making an 
additional percentage point reduction to the target PCR that takes into 
account payment rates for applicable items and services described in 
section 1833(t)(21)(C) of the Act other than for services furnished by 
certain cancer hospitals. Further, in making any budget neutrality 
adjustments under section 1833(t) of the Act, the Secretary shall not 
take into account the reduced expenditures that result from application 
of section 1833(t)(18)(C) of the Act. We refer readers to section II.F. 
of this proposed rule for a discussion on the calculation of the 
proposed target PCR for cancer hospitals for CY 2018.

B. Medicare Site-of-Service Price Transparency (Section 4011 of the 
21st Century Cures Act)

    Section 4011 of the 21st Century Cures Act (Pub. L. 114-255), 
enacted on December 13, 2016, amended section 1834 of the Act by adding 
a new subsection (t). New section 1834(t) of the Act provides that, in 
order to facilitate price transparency with respect to items and 
services for which payment may be made either to a hospital outpatient 
department or to an ambulatory surgical center under Title XVIII, the 
Secretary shall, for 2018 and each year thereafter, make available to 
the public via a searchable Web site, with respect to an appropriate 
number of items and services, the estimated payment amount for the item 
or service under the OPPS and ASC payment system and the estimated 
beneficiary liability applicable to the item or service. We are 
announcing our plan to establish the searchable Web site required by 
section 1834(t) of the Act. Details regarding the Web site will be 
issued through our subregulatory process. We anticipate that the Web 
site will be made available in early CY 2018.

C. Appropriate Use Criteria for Advanced Diagnostic Imaging Services

    Section 218(b) of the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-93) added subsection (q) to section 1834 of the 
Act, which directs the Secretary to establish a program to promote the 
use of appropriate use criteria (AUC) for advanced diagnostic imaging 
services (the AUC program). Section 1834(q)(1)(B) of the Act defines 
AUC as criteria that are evidence-based (to the extent feasible) and 
assist professionals who order and furnish applicable imaging services 
to make the most appropriate treatment decisions for a specific 
clinical condition. The current policies for the AUC program for 
advanced diagnostic imaging services are codified in the regulations at 
42 CFR 414.94.
    There are three key components of the AUC program for advanced 
diagnostic imaging services program. In the CY 2016 MPFS final rule 
with comment period (80 FR 71102 through 71116 and 80 FR 71380 through 
71382), we addressed the first component of the Medicare AUC program. 
The first component includes the requirements and process for the 
establishment and specification of the AUC. In the CY 2017 MPFS final 
rule with comment period (81 FR 80403 through 80428 and 81 FR 80554 
through 80555), we addressed the second component of the AUC program. 
The second component includes the specification of qualified clinical 
decision support mechanisms (CDSMs). A CDSM is the electronic tool 
through which the ordering practitioner consults AUC. In the CY 2018 
MPFS proposed rule, we are proposing to address the third component of 
the AUC program. The third component includes the

[[Page 33649]]

requirements for an ordering professional to consult with a qualified 
CDSM when ordering an applicable imaging service and communicate 
information about the AUC consultation to the furnishing professional, 
and for the furnishing professional to include that information on 
claims for the service that is furnished in an applicable setting and 
paid under an applicable payment system. Based on the statutory 
language of section 1834(q)(4)(B) of the Act, the AUC program applies 
to advanced imaging services for which payment is made under the 
following applicable payment systems: The MPFS; the OPPS; and the ASC 
payment system. Information on the latest proposals for requirements 
for the AUC program can be found in the CY 2018 MPFS proposed rule. 
Public comments on these proposals should be submitted in response to 
the CY 2018 MPFS proposed rule.

D. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in Critical Access Hospitals (CAHs) and Certain 
Small Rural Hospitals

    In the CY 2009 OPPS/ASC proposed rule and final rule with comment 
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704, 
respectively), we clarified that direct supervision is required for 
hospital outpatient therapeutic services covered and paid by Medicare 
that are furnished in hospitals as well as in provider-based 
departments (PBDs) of hospitals, as set forth in the CY 2000 OPPS final 
rule with comment period (65 FR 18525). In the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60575 through 60591), we finalized a 
technical correction to the title and text of the applicable 
regulations at 42 CFR 410.27 to clarify that this standard applies in 
CAHs as well as hospitals. In response to concerns expressed by the 
hospital community, in particular CAHs and small rural hospitals, that 
they would have difficulty meeting this standard, on March 15, 2010, we 
instructed all Medicare administrative contractors not to evaluate or 
enforce the supervision requirements for therapeutic services provided 
to outpatients in CAHs from January 1, 2010 through December 31, 2010, 
while the agency revisited the supervision policy during the CY 2011 
OPPS/ASC rulemaking cycle.
    Due to continued concerns expressed by CAHs and small rural 
hospitals, we extended this notice of nonenforcement (``enforcement 
instruction'') as an interim measure for CY 2011, and expanded it to 
apply to small rural hospitals having 100 or fewer beds (75 FR 72007). 
We continued to consider the issue further in our annual OPPS notice-
and-comment rulemaking, and implemented an independent review process 
in 2012 to obtain advice from the Hospital Outpatient Payment Panel 
(the Panel) on this matter (76 FR 74360 through 74371). Under this 
process used since CY 2012, the Panel considers and advises CMS 
regarding stakeholder requests for changes in the required level of 
supervision of individual hospital outpatient therapeutic services. In 
addition, we extended the enforcement instruction through CY 2012 and 
CY 2013. The enforcement instruction has not been in effect since 
December 31, 2013. Congress has taken legislative action (Pub. L. 113-
198 and Pub. L. 114-112) to extend nonenforcement of the direct 
supervision of hospital outpatient therapeutic services in CAHs and 
small rural hospitals having 100 or fewer beds since December 31, 2013. 
The latest legislative action (Pub. L. 114-255) extended nonenforcement 
until December 31, 2016. The current enforcement instruction is 
available on the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/Downloads/Moratorium-on-Hospital-Supervision-Enforcement.pdf.
    Stakeholders have consistently requested that we continue the 
nonenforcement of the direct supervision of hospital outpatient 
therapeutic services for CAHs and small rural hospitals having 100 or 
fewer beds. Stakeholders stated that some small rural hospitals and 
CAHs have insufficient staff available to furnish direct supervision. 
The primary contributing factors cited were difficulty recruiting 
physician and nonphysician practitioners to practice in rural areas. 
These stakeholders noted that it is particularly difficult to furnish 
direct supervision for critical specialty services, such as radiation 
oncology services, that cannot be directly supervised by a hospital 
emergency department physician or nonphysician practitioner because of 
the volume of emergency patients or lack of specialty expertise. In 
addition, we are not aware of any quality of care complaints from 
beneficiaries or providers relating to general physician supervision as 
compared to direct physician supervision for outpatient hospital 
therapeutic services.
    Therefore, we are proposing to reinstate the nonenforcement of 
direct supervision enforcement instruction for outpatient therapeutic 
services for CAHs and small rural hospitals having 100 or fewer beds 
for CY 2018 and 2019 to give CAHs and small rural hospitals having 100 
or fewer beds more time to comply with the supervision requirements for 
outpatients therapeutic services and to give all parties time to submit 
specific services to be evaluated by the Advisory Panel on Hospital 
Outpatient Payment for a recommended change in the supervision level. 
These hospitals will continue to be subject to conditions of 
participation for hospitals and other Medicare rules regarding 
supervision. We welcome public comments on this proposal.

E. Payment Changes for Film X-Ray Services and Proposed Payment Changes 
for X-Rays Taken Using Computed Radiography Technology

    Section 502 of the Consolidated Appropriations Act, 2016 (Pub. L. 
114-113), which was enacted on December 18, 2015, contains provisions 
to incentivize the transition from traditional X-ray imaging to digital 
radiography. In particular, section 502(b) of Public Law 114-113 
amended section 1833(t)(16) of the Act by adding subparagraph (F), 
which includes provisions that limit payment for film x-ray imaging 
services and computed radiography imaging services.
    Section 1833(t)(16)(F)(i) of the Act specifies that, effective for 
services furnished during 2017 or a 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 subparagraph 
(F)(i) and before application of any other adjustment under section 
1833(t)) shall be reduced by 20 percent. Section 1833(t)(16)(F)(iii) of 
the Act provides that the reductions made under section 1833(t)(16)(F) 
of the Act shall not be considered an adjustment under section 
1833(t)(2)(E) of the Act, and shall not be implemented in a budget 
neutral manner.
    Consistent with section 1833(t)(16)(F)(iv) of the Act, which 
requires the implementation of the reductions in payment set forth in 
subparagraph (F) through appropriate mechanisms, which may include 
modifiers, we implemented section 1833(t)(16)(F)(i) of the Act by 
establishing the modifier ``FX'' (X-ray taken using film), effective 
January 1, 2017. The payment for X-rays taken using film and furnished 
during 2017 or a subsequent year will be reduced by 20 percent when 
modifier ``FX'' (X-ray taken using film) is reported with the 
appropriate HCPCS codes. The applicable HCPCS codes describing

[[Page 33650]]

imaging services can be found in Addendum B to this proposed rule 
(which is available via the Internet on the CMS Web site). When payment 
for an X-ray service taken using film is packaged into the payment for 
another item or service under the OPPS, no separate payment for the X-
ray service is made and, therefore, there is no payment amount that can 
be attributed to the X-ray service. Accordingly, the amount of the 
payment reduction for a packaged film X-ray service is $0 (20 percent 
of $0). Further discussion of these policies and modifier ``FX'' can be 
found in the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79729 through 79730).
    Section 1833(t)(16)(F)(ii) of the Act provides for a phased-in 
reduction of payments for imaging services that are taken using 
computed radiography technology (as defined in section 1848(b)(9)(C) of 
the Act). Payments for such services (including the X-ray component of 
a packaged service) furnished during CY 2018, 2019, 2020, 2021, or 
2022, that would otherwise be determined under section 1833(t) of the 
Act (without application of subparagraph (F)(ii) and before application 
of any other adjustment), shall be reduced by 7 percent, and if such 
services are furnished during CY 2023 or a subsequent year, by 10 
percent. For purposes of this reduction, computed radiography 
technology is defined in section 1848(b)(9)(C) of the Act as cassette-
based imaging which utilizes an imaging plate to create the image 
involved.
    To implement this provision, we are establishing a new modifier 
``XX'', as permitted by section 1833(t)(16)(F)(iv) of the Act, that 
would be reported on claims to identify those HCPCS codes that describe 
X-rays taken using computed radiography technology. We are proposing 
that the payment reduction would be taken when this payment modifier is 
reported with the applicable HCPCS code(s) to describe imaging services 
that are taken using computed radiography technology. The applicable 
HCPCS codes describing imaging services can be found in Addendum B to 
this proposed rule (which is available via the Internet on the CMS Web 
site). We note that modifier ``XX'' is a placeholder modifier whose 2-
digit modifier and long descriptor will be described in the CY 2018 
OPPS/ASC final rule with comment period. When payment for an X-ray 
service taken using computed radiography imaging is packaged into the 
payment for another item or service under the OPPS, no separate payment 
for the X-ray service is made and, therefore, there is no payment 
amount that can be attributed to the X-ray. Accordingly, the amount of 
the payment reduction for a packaged X-ray service would be $0 (7 
percent of $0, and 10 percent of $0). We are inviting public comments 
on these proposals.
    Although we adopted the payment reduction required by section 
1833(t)(16)(F)(i) of the Act in the CY 2017 OPPS/ASC final rule with 
comment period, we did not adopt corresponding regulation text. 
Therefore, in this CY 2018 OPPS/ASC proposed rule, we are proposing to 
add new regulation text at 42 CFR 419.71 to codify our existing 
policies and our proposed policies for computed radiography technology 
services. We are proposing to add the definition of ``computed 
radiography technology'', as it is defined in section 1848(b)(9)(C) of 
the Act, in paragraph (a) of proposed new Sec.  419.71. The proposed 
regulation text under paragraph (b) of proposed new Sec.  419.71 would 
specify the 20-percent reduction for film X-ray imaging services. We 
are proposing that the phased-in payment reduction for computed 
radiography technology imaging services would be codified at paragraph 
(c) of proposed new Sec.  419.71. Paragraph (d) of proposed new Sec.  
419.71 would provide that the payment reductions taken under the 
section are not considered adjustments under section 1833(t)(2)(E) of 
the Act and are not implemented in a budget neutral manner. We are 
inviting public comments on this proposed regulation text.

F. Potential Revisions to the Laboratory Date of Service Policy

1. Background on the Medicare Part B Laboratory Date of Service Policy
    The date of service (DOS) is a required data field on all Medicare 
claims for laboratory services. However, a laboratory service may take 
place over a period of time--the date the physician orders the 
laboratory test, the date the specimen is collected from the patient, 
the date the laboratory accesses the specimen, the date the laboratory 
performs the test, and the date results are produced may occur on 
different dates. In the final rule on coverage and administrative 
policies for clinical diagnostic laboratory services published in the 
Federal Register on November 23, 2001 (66 FR 58791 through 58792), we 
adopted a policy under which the DOS for clinical diagnostic laboratory 
services generally is the date the specimen is collected.
    A special rule was developed to apply to ``archived'' specimens. 
For laboratory tests that use an archived specimen, we established that 
the DOS is the date the specimen was obtained from storage (66 FR 
58792).
    In 2002, we issued Program Memorandum AB-02-134 which permitted 
contractors discretion in making determinations regarding the length of 
time a specimen must be stored to be considered ``archived.'' In 
response to comments requesting that we issue a national standard to 
clarify when a stored specimen can be considered ``archived,'' in the 
Procedures for Maintaining Code Lists in the Negotiated National 
Coverage Determinations for Clinical Diagnostic Laboratory Services 
final notice, published in the Federal Register on February 25, 2005 
(70 FR 9357), we defined an ``archived'' specimen as a specimen that is 
stored for more than 30 calendar days before testing. We established 
that the DOS for archived specimens is the date the specimen was 
obtained from storage. Specimens stored for 30 days or less continued 
to have a DOS of the date the specimen was collected.
2. Current Medicare DOS Policy (``14-Day Rule'')
    In the final rule with comment period entitled, in relevant part, 
``Revisions to Payment Policies, Five-Year Review of Work Relative 
Value Units, Changes to the Practice Expense Methodology Under the 
Physician Fee Schedule, and Other Changes to Payment Under Part B'' 
published in the Federal Register on December 1, 2006 (MPFS final rule) 
(71 FR 69705 through 69706), we added a new Sec.  414.510 in Title 42 
of the CFR regarding the clinical laboratory DOS requirements and 
revised our DOS policy for stored specimens. We explained in the MPFS 
final rule that the DOS of a test may affect payment for the test, 
especially in situations in which a specimen that is collected while 
the patient is being treated in a hospital setting (for example, during 
a surgical procedure), is later used for testing after the patient has 
been discharged from the hospital. We noted that payment for the test 
is usually bundled with payment for the hospital service, even where 
the results of the test did not guide treatment during the hospital 
stay. To address concerns raised for tests related to cancer recurrence 
and therapeutic interventions, we finalized modifications to the DOS 
policy in Sec.  414.510(b)(2)(i) for a test performed on a specimen 
stored less than or equal to 30 calendar days from the date it was 
collected (a non-archived specimen), so that the DOS is the date the 
test was

[[Page 33651]]

performed (instead of the date of collection) if the following 
conditions are met:
     The test is ordered by the patient's physician at least 14 
days following the date of the patient's discharge from the hospital;
     The specimen was collected while the patient was 
undergoing a hospital surgical procedure;
     It would be medically inappropriate to have collected the 
sample other than during the hospital procedure for which the patient 
was admitted;
     The results of the test do not guide treatment provided 
during the hospital stay; and
     The test was reasonable and medically necessary for the 
treatment of an illness.
    As we stated in the MPFS final rule, we established these five 
criteria, which we refer to as the ``14-day rule,'' to distinguish 
laboratory tests performed as part of post-hospital care from the care 
a beneficiary receives in the hospital. When the 14-day rule applies, 
laboratory tests are not bundled into the hospital stay, but are 
instead paid separately under Medicare Part B (as explained in more 
detail below).
    We also revised the DOS requirements for a chemotherapy sensitivity 
test performed on live tissue. As discussed in the MPFS final rule (71 
FR 69706), we agreed with commenters that these tests, which are 
primarily used to determine post-hospital chemotherapy care for 
patients who also require hospital treatment for tumor removal or 
resection, appear to be unrelated to the hospital treatment in cases 
where it would be medically inappropriate to collect a test specimen 
other than at the time of surgery, especially when the specific drugs 
to be tested are ordered at least 14 days following hospital discharge. 
As a result, we revised the DOS policy for chemotherapy sensitivity 
tests, based on our understanding that the results of these tests, even 
if they were available immediately, would not typically affect the 
treatment regimen at the hospital. Specifically, we modified the DOS 
for chemotherapy sensitivity tests performed on live tissue in Sec.  
414.510(b)(3) so that the DOS is the date the test was performed if the 
following conditions are met:
     The decision regarding the specific chemotherapeutic 
agents to test is made at least 14 days after discharge;
     The specimen was collected while the patient was 
undergoing a hospital surgical procedure;
     It would be medically inappropriate to have collected the 
sample other than during the hospital procedure for which the patient 
was admitted;
     The results of the test do not guide treatment provided 
during the hospital stay; and
     The test was reasonable and medically necessary for the 
treatment of an illness.
    We explained in the MPFS final rule that, for chemotherapy 
sensitivity tests that meet this DOS policy, Medicare would allow 
separate payment under Medicare Part B, that is, separate from the 
payment for hospital services.
3. Billing and Payment for Laboratory Services Under the OPPS
    The DOS requirements at 42 CFR 414.510 are used to determine 
whether a hospital bills Medicare for a clinical diagnostic laboratory 
test (CDLT) or whether the laboratory performing the test bills 
Medicare directly. This is because separate regulations at 42 CFR 
410.42(a) and 411.15(m) generally provide that Medicare will not pay 
for a service furnished to a hospital patient during an encounter by an 
entity other than the hospital unless the hospital has an arrangement 
(as defined in 42 CFR 409.3) with that entity to furnish that 
particular service to its patients, with certain exceptions and 
exclusions. These regulations, which we will call the ``under 
arrangements'' provisions in this discussion, require that if the DOS 
falls during an inpatient or outpatient stay, payment for the 
laboratory test is usually bundled with the hospital service.
    Under our current rules, if a test meets all DOS requirements in 
Sec.  414.510(b)(2)(i) or Sec.  414.510(b)(3), the DOS is the date the 
test was performed, and the laboratory would bill Medicare directly for 
the test and would be paid under the Clinical Laboratory Fee Schedule 
(CLFS) directly by Medicare. However, if the test does not meet the DOS 
requirements in Sec.  414.510(b)(2)(i) or Sec.  414.510(b)(3), the DOS 
is the date the specimen was collected from the patient. In that case, 
the hospital would bill Medicare for the test and then would pay the 
laboratory that performed the test, if the laboratory provided the test 
under arrangement.
    In recent rulemakings, we have reviewed appropriate payment under 
the OPPS for certain diagnostic tests that are not commonly performed 
by hospitals. In CY 2014, we finalized a policy to package certain 
CDLTs under the OPPS (78 FR 74939 through 74942 and 42 CFR 419.2(b)(17) 
and 419.22(l)). In CYs 2016 and 2017, we made some modifications to 
this policy (80 FR 70348 through 70350; 81 FR 79592 through 79594). 
Under our current policy, certain CDLTs that are listed on the CLFS are 
packaged as integral, ancillary, supportive, dependent, or adjunctive 
to the primary service or services provided in the hospital outpatient 
setting during the same outpatient encounter and billed on the same 
claim. Specifically, we conditionally package most CDLTs and only pay 
separately for a laboratory test when it is (1) the only service 
provided to a beneficiary on a claim; (2) considered a preventive 
service; (3) a molecular pathology test; or (4) an advanced diagnostic 
laboratory test (ADLT) that meets the criteria of section 
1834A(d)(5)(A) of the Act (78 FR 74939 through 74942; 80 FR 70348 
through 70350; and 81 FR 79592 through 79594). In the CY 2016 OPPS/ASC 
final rule with comment period, we excluded all molecular pathology 
laboratory tests from packaging because we believed these relatively 
new tests may have a different pattern of clinical use, which may make 
them generally less tied to a primary service in the hospital 
outpatient setting than the more common and routine laboratory tests 
that are packaged.
    For similar reasons, in the CY 2017 OPPS/ASC final rule with 
comment period, we extended the exclusion to also apply to all ADLTs 
that meet the criteria of section 1834A(d)(5)(A) of the Act.\23\ We 
stated that we will assign status indicator ``A'' (Separate payment 
under the CLFS) to ADLTs once a laboratory test is designated an ADLT 
under the CLFS. Laboratory tests that are separately payable and are 
listed on the CLFS are paid at the CLFS payment rates.
---------------------------------------------------------------------------

    \23\ Under section 1834A(d)(5)(A) of the Act, an ADLT is a 
``CDLT that is offered and furnished only by a single laboratory and 
not sold for use by a laboratory other than the original developing 
laboratory (or a successor owner) and . . . is an analysis of 
multiple biomarkers of DNA, RNA, or proteins combined with a unique 
algorithm to yield a single patient-specific result.'' CMS has 
established a regulatory definition for this type of ADLT in 42 CFR 
414.502.
---------------------------------------------------------------------------

4. ADLTs Under the New Private Payor Rate-Based CLFS
    Section 1834A of the Act, as established by section 216(a) of the 
Protecting Access to Medicare Act of 2014 (PAMA), requires significant 
changes to how Medicare pays for CDLTs under the CLFS. Section 216(a) 
of PAMA also establishes a new subcategory of CDLTs known as ADLTs with 
separate reporting and payment requirements under section 1834A of the 
Act. In the CLFS final rule published in the Federal Register on June 
23, 2016, entitled ``Medicare Program; Medicare Clinical Diagnostic

[[Page 33652]]

Laboratory Tests Payment System Final Rule'' (CLFS final rule) (81 FR 
41036), we implemented the requirements of section 1834A of the Act.
    As defined in Sec.  414.502, an ADLT is a CLDT covered under 
Medicare Part B that is offered and furnished only by a single 
laboratory. Additionally, an ADLT cannot be sold for use by a 
laboratory other than the single laboratory that designed the test or a 
successor owner. And, an ADLT must meet either Criterion (A), which 
implements section 1834A(d)(5)(A) of the Act, or Criterion (B), which 
implements section 1834A(d)(5)(B) of the Act, as follows:
     Criterion (A): The test--is an analysis of multiple 
biomarkers of deoxyribonucleic acid (DNA), ribonucleic acid (RNA), or 
proteins; when combined with an empirically derived algorithm, yields a 
result that predicts the probability a specific individual patient will 
develop a certain condition(s) or respond to a particular therapy(ies); 
provides new clinical diagnostic information that cannot be obtained 
from any other test or combination of tests; and may include other 
assays.

Or:

     Criterion (B): The test is cleared or approved by the Food 
and Drug Administration (FDA).
    Generally, under the revised CLFS, ADLTs are paid using the same 
methodology based on the weighted median of private payor rates as 
other CDLTs. However, updates to ADLT payment rates occur annually 
instead of every 3 years. The payment methodology for ADLTs is detailed 
in the CLFS final rule (81 FR 41076 through 41083).
5. Potential Revisions to the Laboratory DOS Policy
    In the December 1, 2006 MPFS final rule (71 FR 69706), we explained 
that we were very concerned that only tests that can legitimately be 
distinguished from the care a beneficiary receives in the hospital be 
subject to the 14-day rule, which changes the DOS from the date the 
specimen was collected to the date the test was performed and results 
in a separate payment for the test. We also stated that we believed it 
is more difficult to determine that a test ordered less than 14 days 
before discharge is appropriately separable from the hospital stay that 
preceded the test. We indicated that we wanted more information about 
tests that may be ordered by the patient's physician less than 14 days 
following the date of the discharge that would not guide the care 
during a hospital stay before taking any additional action in this 
area.
    Recently, we have heard from certain laboratory stakeholders about 
operational issues the current laboratory DOS policy creates for 
hospitals and laboratories with regard to molecular pathology tests and 
laboratory tests they expect will be designated by CMS as ADLTs that 
meet the criteria of section 1834A(d)(5)(A) of the Act. These 
stakeholders have expressed that although these particular tests are 
not packaged under the OPPS, under current DOS policy, if the tests are 
ordered within 14 days of a patient's discharge from the hospital, 
Medicare still treats the tests as though they were ordered and 
furnished by the hospital itself. Under those circumstances, 
laboratories cannot directly seek Medicare payment for the molecular 
pathology test or ADLT. The hospital must bill Medicare for the test, 
and the laboratory must seek payment from the hospital. Specifically, 
stakeholders representing laboratories have expressed the following 
concerns:
     The current DOS policy permits hospitals to bill for tests 
they did not perform and that may have no relationship to or bearing on 
treatment received by the patient while in the hospital.
     The DOS policy may create inconsistent billing for 
specialty laboratories. For example, if the hospital is located in a 
different jurisdiction than the Medicare Administrative Contractor 
(MAC) used by the laboratory, a different MAC may be billed.
     Hospitals may be discouraged from utilizing ADLTs because 
billing for such tests that are not performed by hospitals could create 
administrative and financial complexities.
     The DOS policy is a potential barrier to CMS' goal of 
promoting personalized medicine because the policy may 
disproportionately impact smaller laboratories performing innovative 
diagnostic tests.
     Billing complexities may affect beneficiary access to 
needed laboratory tests and therapies. For example, orders might be 
delayed until at least 14 days after discharge or even canceled to 
avoid the DOS policy. This may restrict patient access to tests and 
reduce efficacy of treatment plans due to hospitals delaying or 
forgoing patient testing to avoid financial risk.
     The DOS policy may limit access for Medicare beneficiaries 
under original Medicare fee-for-service (that is, Medicare Part A and 
Part B) due to the fact that Medicare Advantage Plans under Medicare 
Part C and private payers allow laboratories to bill directly for tests 
they perform.
    We recognize that the current laboratory DOS rule may impose 
administrative difficulties for hospitals and laboratories that furnish 
laboratory tests that are excluded from OPPS packaging and therefore 
paid separately at CLFS payment rates. Hospitals may be reluctant to 
bill Medicare for laboratory tests they do not perform, which as noted 
by stakeholders, could lead to delays in patient access to care.
    In light of the concerns raised by stakeholders, we are considering 
potential modifications to the DOS policy that would allow laboratories 
to bill Medicare directly for certain laboratory tests excluded from 
the OPPS packaging policy. One approach under consideration would 
create a new exception to the DOS policy for molecular pathology tests 
and ADLTs that meet the criteria of section 1834A(5)(A) of the Act and 
have been granted ADLT status by CMS. As we stated in the CY 2017 OPPS/
ASC final rule with comment period (81 FR 79592 through 79594), we 
believe these 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 more common and routine laboratory tests that 
are packaged. We are seeking public comment on whether these tests, by 
their nature, are appropriately separable from the hospital stay that 
preceded the test and therefore should have a DOS that is the date of 
performance rather than the date of collection.
    For example, we are considering modifying Sec.  414.510(b) by 
adding a new paragraph (5) to establish that in the case of a molecular 
pathology test or an ADLT that meets the criteria of section 
1834A(d)(5)(A) of the Act, the DOS must be the date the test was 
performed only if:
     The physician orders the test following the date of a 
hospital outpatient's discharge from the hospital outpatient 
department;
     The specimen was collected from a hospital outpatient 
during an encounter (as both are defined 42 CFR 410.2);
     It would be medically inappropriate to have collected the 
sample from the hospital outpatient other than during the hospital 
outpatient encounter;
     The results of the test do not guide treatment provided 
during the hospital outpatient encounter; and
     The test was reasonable and medically necessary for the 
treatment of an illness.

[[Page 33653]]

    We are requesting specific comments on this potential modification 
to the current laboratory DOS policy, which would allow laboratories to 
bill Medicare directly for molecular pathology tests and ADLTs that 
meet the criteria of section 1834A(d)(5)(A) of the Act and have been 
granted ADLT status by CMS, when the specimen is collected during a 
hospital outpatient procedure and the test is ordered after the patient 
is discharged from the hospital outpatient department.
(a) Limiting the DOS Rule Exception to ADLTs
    We also are considering potentially revising the DOS rule to create 
an exception only for ADLTs that meet the criteria in section 
1834A(d)(5)(A) of the Act. This exception would not cover molecular 
pathology tests. We are considering this approach because ADLTs 
approved by CMS under Criterion (A), like all ADLTs, are offered and 
furnished only by a single laboratory (as defined in 42 CFR 414.502). 
The hospital, or another laboratory, that is not the single laboratory 
(as defined in 42 CFR 414.502), cannot furnish the ADLT. Therefore, 
there may be additional beneficiary access concerns for these ADLTs 
that may not apply to molecular pathology tests, and that could be 
addressed by allowing the laboratories to bill Medicare directly for 
these tests. For example, a hospital may not have an arrangement with 
the single laboratory that furnishes a particular ADLT, which could 
lead the hospital to delay the order for the ADLT until 14 days after 
the patient's discharge to avoid financial risk and thus potentially 
delay medically necessary care for the beneficiary.
    We believe the circumstances may be different for molecular 
pathology tests, which are not required to be furnished by a single 
laboratory. In particular, we understand there may be ``kits'' for 
certain molecular pathology tests that a hospital can purchase, 
allowing the hospital to perform the test. Therefore, molecular 
pathology tests may not present the same concerns of delayed access to 
medically necessary care as ADLTs, which must be performed by a single 
laboratory.
    We are requesting specific comments on potentially creating an 
exception to the DOS policy that is limited to ADLTs that meet the 
criteria in section 1834A(d)(5)(A) of the Act and have been granted 
ADLT status by CMS. We also are requesting public comments on how the 
current laboratory DOS policy may affect billing for other separately 
payable laboratory test codes that are not packaged under the OPPS, 
such as a laboratory test that is the only service provided to a 
beneficiary on a claim or molecular pathology tests.
(b) Other Alternative Approaches
    Finally, we are inviting public comments on alternative approaches 
to addressing stakeholders' concerns regarding the DOS policy, such as 
potentially modifying the ``under arrangements'' provisions in Sec.  
410.42 and Sec.  411.15(m). Specifically, we are requesting comments on 
whether an exception should be added to Sec.  410.42(b) and/or Sec.  
411.15(m)(3) for molecular pathology tests and ADLTs that are excluded 
from the OPPS packaging policy under 42 CFR 419.2(b) and how such an 
exception should be framed.
    We believe that feedback on the topics discussed in this section 
will help inform us regarding potential refinements to our DOS policy. 
We welcome comments on these topics from the public, including 
hospitals, laboratories, and other interested stakeholders. We are 
especially interested in comments regarding how the current DOS policy 
and ``under arrangements'' provisions may affect access to care for 
Medicare beneficiaries. We would consider finalizing the modifications 
described in this section.

XI. Proposed CY 2018 OPPS Payment Status and Comment Indicators

A. Proposed CY 2018 OPPS Payment Status Indicator Definitions

    Payment status indicators (SIs) that we assign to HCPCS codes and 
APCs serve an important role in determining payment for services under 
the OPPS. They indicate whether a service represented by a HCPCS code 
is payable under the OPPS or another payment system and also whether 
particular OPPS policies apply to the code.
    For CY 2018, we are not proposing to make any changes to the 
definitions of status indicators that were listed in Addendum D1 of the 
CY 2017 OPPS/ASC final rule with comment period available on the CMS 
Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1656-FC.html?DLPage=1&DLEntries=10&DLSort=2&DLSortDir=descending. We believe 
that the existing definitions of the OPPS status indicators would 
continue to be appropriate for CY 2018.
    The complete list of the payment status indicators and their 
definitions that we are proposing to apply for CY 2018 is displayed in 
Addendum D1 to this proposed rule, which is available on the CMS Web 
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    The proposed CY 2018 payment status indicator assignments for APCs 
and HCPCS codes are shown in Addendum A and Addendum B, respectively, 
to this proposed rule, which are available on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

B. Proposed CY 2018 Comment Indicator Definitions

    In this CY 2018 OPPS/ASC proposed rule, we are proposing to use 
four comment indicators for the CY 2018 OPPS. These comment indicators, 
``CH'', ``NC'', ``NI'', and ``NP'', are in effect for CY 2017 and we 
are proposing to continue their use in CY 2018. The proposed CY 2018 
OPPS comment indicators are as follows:
     ``CH''--Active HCPCS code in current and next calendar 
year, status indicator and/or APC assignment has changed; or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``NC''--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 for which we are 
requesting comments in the proposed rule, final APC assignment; 
comments will not be accepted on the final APC assignment for the new 
code.
     ``NI''--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, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code.
     ``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.
    The definitions of the proposed OPPS comment indicators for CY 2018 
are listed in Addendum D2 to this proposed rule, which is available on 
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

[[Page 33654]]

    We are requesting public comment on our proposed status indicators 
and comment indicators for CY 2018.

XII. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment 
System

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for 
the ASC Payment System
    For a detailed discussion of the legislative history and statutory 
authority related to payments to ASCs under Medicare, we refer readers 
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74377 
through 74378) and the June 12, 1998 proposed rule (63 FR 32291 through 
32292). For a discussion of prior rulemaking on the ASC payment system, 
we refer readers to the CYs 2012, 2013, 2014, 2015, 2016, and 2017 
OPPS/ASC final rules with comment period (76 FR 74378 through 74379; 77 
FR 68434 through 68467; 78 FR 75064 through 75090; 79 FR 66915 through 
66940; 80 FR 70474 through 70502; and 81 FR 79732 through 79753, 
respectively).
2. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    Under 42 CFR 416.2 and 416.166 of the Medicare regulations, subject 
to certain exclusions, covered surgical procedures in an ASC are 
surgical procedures that are separately paid under the OPPS, that would 
not be expected to pose a significant risk to beneficiary safety when 
performed in an ASC, and for which standard medical practice dictates 
that the beneficiary would not typically be expected to require active 
medical monitoring and care at midnight following the procedure 
(``overnight stay''). We adopted this standard for defining which 
surgical procedures are covered under the ASC payment system as an 
indicator of the complexity of the procedure and its appropriateness 
for Medicare payment in ASCs. We use this standard only for purposes of 
evaluating procedures to determine whether or not they are appropriate 
to be furnished to Medicare beneficiaries in ASCs. We define surgical 
procedures as those described by Category I CPT codes in the surgical 
range from 10000 through 69999, as well as those Category III CPT codes 
and Level II HCPCS codes that directly crosswalk or are clinically 
similar to procedures in the CPT surgical range that we have determined 
do not pose a significant safety risk, that we would not expect to 
require an overnight stay when performed in ASCs, and that are 
separately paid under the OPPS (72 FR 42478).
    In the August 2, 2007 final rule (72 FR 42495), we also established 
our policy to make separate ASC payments for the following ancillary 
items and services when they are provided integral to ASC covered 
surgical procedures: (1) Brachytherapy sources; (2) certain implantable 
items that have pass-through payment status under the OPPS; (3) certain 
items and services that we designate as contractor-priced, including, 
but not limited to, procurement of corneal tissue; (4) certain drugs 
and biologicals for which separate payment is allowed under the OPPS; 
and (5) certain radiology services for which separate payment is 
allowed under the OPPS. In the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66932 through 66934), we expanded the scope of ASC 
covered ancillary services to include certain diagnostic tests within 
the medicine range of CPT codes for which separate payment is allowed 
under the OPPS when they are provided integral to an ASC covered 
surgical procedure. Covered ancillary services are specified in Sec.  
416.164(b) and, as stated previously, are eligible for separate ASC 
payment. Payment for ancillary items and services that are not paid 
separately under the ASC payment system is packaged into the ASC 
payment for the covered surgical procedure.
    We update the lists of, and payment rates for, covered surgical 
procedures and covered ancillary services in ASCs in conjunction with 
the annual proposed and final rulemaking process to update the OPPS and 
the ASC payment system (Sec.  416.173; 72 FR 42535). We base ASC 
payment and policies for most covered surgical procedures, drugs, 
biologicals, and certain other covered ancillary services on the OPPS 
payment policies, and we use quarterly change requests (CRs) to update 
services covered under the OPPS. We also provide quarterly update CRs 
for ASC covered surgical procedures and covered ancillary services 
throughout the year (January, April, July, and October). We release new 
and revised Level II HCPCS codes and recognize the release of new and 
revised CPT codes by the AMA and make these codes effective (that is, 
the codes are recognized on Medicare claims) via these ASC quarterly 
update CRs. We recognize the release of new and revised Category III 
CPT codes in the July and January CRs. These updates implement newly 
created and revised Level II HCPCS and Category III CPT codes for ASC 
payment and update the payment rates for separately paid drugs and 
biologicals based on the most recently submitted ASP data. New and 
revised Category I CPT codes, except vaccine codes, are released only 
once a year and are implemented only through the January quarterly CR 
update. New and revised Category I CPT vaccine codes are released twice 
a year and are implemented through the January and July quarterly CR 
updates. We refer readers to Table 41 in the CY 2012 OPPS/ASC proposed 
rule for an example of how this process, which we finalized in the CY 
2012 OPPS/ASC final rule with comment period, is used to update HCPCS 
and CPT codes (76 FR 42291; 76 FR 74380 through 74381).
    In our annual updates to the ASC list of, and payment rates for, 
covered surgical procedures and covered ancillary services, we 
undertake a review of excluded surgical procedures (including all 
procedures newly proposed for removal from the OPPS inpatient list), 
new codes, and codes with revised descriptors, to identify any that we 
believe meet the criteria for designation as ASC covered surgical 
procedures or covered ancillary services. Updating the lists of ASC 
covered surgical procedures and covered ancillary services, as well as 
their payment rates, in association with the annual OPPS rulemaking 
cycle is particularly important because the OPPS relative payment 
weights and, in some cases, payment rates, are used as the basis for 
the payment of many covered surgical procedures and covered ancillary 
services under the revised ASC payment system. This joint update 
process ensures that the ASC updates occur in a regular, predictable, 
and timely manner.
3. Definition of ASC Covered Surgical Procedures
    Since the implementation of the ASC prospective payment system, we 
have defined a ``surgical'' procedure under the payment system as any 
procedure described within the range of Category I CPT codes that the 
CPT Editorial Panel of the American Medical Association (AMA) defines 
as ``surgery'' (CPT codes 10000 through 69999) (72 FR 42478). We also 
have included as ``surgical,'' procedures that are described by Level 
II HCPCS codes or by Category III CPT codes that directly crosswalk or 
are clinically similar to procedures in the CPT surgical range that we 
have determined do not pose a significant safety risk, would not expect 
to require an overnight stay when performed in an ASC, and are 
separately paid under the OPPS (72 FR 42478).

[[Page 33655]]

    As we noted in the CY 2008 final rule that implemented the revised 
ASC payment system, using this definition of surgery would exclude from 
ASC payment certain invasive, ``surgery-like'' procedures, such as 
cardiac catheterization or certain radiation treatment services that 
are assigned codes outside the CPT surgical range (72 FR 42477). We 
stated in that final rule that we believed continuing to rely on the 
CPT definition of surgery is administratively straightforward, 
logically related to the categorization of services by physician 
experts who both establish the codes and perform the procedures, and 
consistent with a policy to allow ASC payment for all outpatient 
surgical procedures (72 FR 42477).
    Recently, some stakeholders have suggested that certain procedures 
that are outside the CPT surgical range but that are similar to 
surgical procedures currently covered in an ASC setting should be ASC 
covered surgical procedures. For example, these stakeholders stated 
that certain cardiac catheterization services, cardiac device 
programming services, and electrophysiology services should be added to 
the covered surgical procedures list. While we continue to believe that 
using the CPT code range to define surgery represents a logical, 
appropriate, and straightforward approach to defining a surgical 
procedure, we also believe it may be appropriate for us to use the CPT 
surgical range as a guide rather than a requirement as to whether a 
procedure is surgical, which would give us more flexibility to include 
``surgery-like'' procedures on the ASC Covered Procedures List (CPL). 
We are cognizant of the dynamic nature of ambulatory surgery and the 
continued shift of services from the inpatient setting to the 
outpatient setting over the past decade. Therefore, in this CY 2018 
OPPS/ASC proposed rule, we are soliciting public comments regarding 
services that are described by Category I CPT codes outside of the 
surgical range, or Level II HCPCS codes or Category III CPT codes that 
do not directly crosswalk and are not clinically similar to procedures 
in the CPT surgical range, but that nonetheless may be appropriate to 
include as covered surgical procedures payable when furnished in the 
ASC setting. In particular, we are interested in commenters' views 
regarding additional criteria we might use to consider when a procedure 
that is surgery-like could be included on the ASC CPL. We are 
requesting that commenters on this issue take into consideration 
whether each individual procedure can be safely and appropriately 
performed in an ASC as required by the regulations at 42 CFR 416.166 
(including that standard medical practice dictates that the beneficiary 
would not typically be expected to require active medical monitoring 
and care at midnight following the procedure), and whether the 
procedure requires the resources, staff, and equipment typical of an 
ASC. We also are interested in commenters' views on whether and how, if 
we were to include such services as ASC covered surgical procedures, we 
would need to revise our definition ASC covered surgical procedures.

B. Proposed 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
    Category I CPT, Category III CPT, and Level II HCPCS codes are used 
to report procedures, services, items, and supplies under the ASC 
payment system. Specifically, we recognize the following codes on ASC 
claims:
     Category I CPT codes, which describe surgical procedures 
and vaccine codes;
     Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and
     Level II HCPCS codes, which are used primarily to identify 
items, supplies, temporary procedures, and services not described by 
CPT codes.
    We finalized a policy in the August 2, 2007 final rule (72 FR 42533 
through 42535) to evaluate each year all new and revised Category I and 
Category III CPT codes and Level II HCPCS codes that describe surgical 
procedures, and to make preliminary determinations during the annual 
OPPS/ASC rulemaking process regarding whether or not they meet the 
criteria for payment in the ASC setting as covered surgical procedures 
and, if so, whether or not they are office-based procedures. In 
addition, we identify new and revised codes as ASC covered ancillary 
services based upon the final payment policies of the revised ASC 
payment system. In prior rulemakings, we refer to this process as 
recognizing new codes. However, this process has always involved the 
recognition of new and revised codes. We consider revised codes to be 
new when they have substantial revision to their code descriptors that 
necessitate a change in the current ASC payment indicator. To clarify, 
we refer to these codes as new and revised in this CY 2018 OPPS/ASC 
proposed rule.
    We have separated our discussion below based on when the codes are 
released and whether we are proposing to solicit public comments in 
this proposed rule (and respond to those comments in the CY 2018 OPPS/
ASC final rule with comment period) or whether we will be soliciting 
public comments in the CY 2018 OPPS/ASC final rule with comment period 
(and responding to those comments in the CY 2019 OPPS/ASC final rule 
with comment period).
    We note that we sought public comments in the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79735 through 79736) on the new 
and revised Level II HCPCS codes effective October 1, 2016, or January 
1, 2017. These new and revised codes, with an effective date of October 
1, 2016, or January 1, 2017, were flagged with comment indicator ``NI'' 
in Addenda AA and BB to the CY 2017 OPPS/ASC final rule with comment 
period to indicate that we were assigning them an interim payment 
status and payment rate, if applicable, which were subject to public 
comment following publication of the CY 2017 OPPS/ASC final rule with 
comment period. We will respond to public comments and finalize the 
treatment of these codes under the ASC payment system in the CY 2018 
OPPS/ASC final rule with comment period.
    In Table 30 below, we summarize our process for updating codes 
through our ASC quarterly update CRs, seeking public comments, and 
finalizing the treatment of these new codes under the OPPS.

                  Table 30--Comment and Finalization Timeframes for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
     ASC quarterly update CR         Type of code       Effective date      Comments sought     When finalized
----------------------------------------------------------------------------------------------------------------
April l, 2017...................  Level II HCPCS      April 1, 2017.....  CY 2018 OPPS/ASC    CY 2018 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.

[[Page 33656]]

 
July 1, 2017....................  Level II HCPCS      July 1, 2017......  CY 2018 OPPS/ASC    CY 2018 OPPS/ASC
                                   Codes.                                  proposed rule.      final rule with
                                                                                               comment period.
                                  Category I          July 1, 2017......  CY 2018 OPPS/ASC    CY 2018 OPPS/ASC
                                   (certain vaccine                        proposed rule.      final rule with
                                   codes) and III                                              comment period.
                                   CPT codes.
October 1, 2017.................  Level II HCPCS      October 1, 2017...  CY 2018 OPPS/ASC    CY 2019 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
January 1, 2018.................  Level II HCPCS      January 1, 2018...  CY 2018 OPPS/ASC    CY 2019 OPPS/ASC
                                   Codes.                                  final rule with     final rule with
                                                                           comment period.     comment period.
                                  Category I and III  January 1, 2018...  CY 2018 OPPS/ASC    CY 2018 OPPS/ASC
                                   CPT Codes.                              proposed rule.      final rule with
                                                                                               comment period.
----------------------------------------------------------------------------------------------------------------
Note: 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. We refer readers to section III.A.3. of this CY 2018 OPPS/ASC proposed rule for further
  discussion of this issue.

2. Proposed Treatment of New and Revised Level II HCPCS Codes 
Implemented in April 2017 for Which We Are Soliciting Public Comments 
in This Proposed Rule
    In the April 2017 ASC quarterly update (Transmittal 3726, CR 9998, 
dated March 3, 2017), we added six new drug and biological Level II 
HCPCS codes to the list of covered ancillary services. Table 31 below 
lists the new Level II HCPCS codes that were implemented April 1, 2017, 
along with their proposed payment indicators for CY 2018. The proposed 
payment rates, where applicable, for these April codes can be found in 
Addendum BB to this proposed rule (which is available via the Internet 
on the CMS Web site).

    Table 31--New Level II HCPCS Codes for Covered Ancillary Services
                       Effective on April 1, 2017
------------------------------------------------------------------------
                                                            Proposed CY
       CY 2017 HCPCS code        CY 2017 long descriptor   2018 payment
                                                             indicator
------------------------------------------------------------------------
C9484..........................  Injection, eteplirsen,               K2
                                  10 mg.
C9485..........................  Injection, olaratumab,               K2
                                  10 mg.
C9486..........................  Injection, granisetron               K2
                                  extended release, 0.1
                                  mg.
C9487*.........................  Ustekinumab, for                     K2
                                  intravenous injection,
                                  1 mg.
C9488..........................  Injection, conivaptan                K2
                                  hydrochloride, 1 mg.
J7328..........................  Hyaluronan or                        K2
                                  derivative, gel-syn,
                                  for intra-articular
                                  injection, 0.1 mg.
------------------------------------------------------------------------
* HCPCS code C9487, which was effective April 1, 2017, was deleted June
  30, 2017 and replaced with HCPCS code Q9989 (Ustekinumab, for
  intravenous injection, 1 mg) effective July 1, 2017.

    We are inviting public comments on these proposed payment 
indicators and the proposed payment rates for the new Level II HCPCS 
codes that were recognized as ASC covered ancillary services in April 
2017 through the quarterly update CRs, as listed in Table 31 above. We 
are proposing to finalize their payment indicators and their payment 
rates in the CY 2018 OPPS/ASC final rule with comment period.
3. Proposed Treatment of New and Revised Level II HCPCS Codes 
Implemented in July 2017 for Which We Are Soliciting Public Comments in 
This Proposed Rule
    In the July 2017 ASC quarterly update (Transmittal 3792, CR 10138, 
dated June 9, 2017), we added seven new Level II HCPCS codes to the 
list of covered surgical procedures and ancillary services. Table 32 
below lists the new Level II HCPCS codes that are effective July 1, 
2017. The proposed payment rates, where applicable, for these July 
codes can be found in Addendum BB to this proposed rule (which is 
available via the Internet on the CMS Web site).

 Table 32--New Level II HCPCS Codes for Covered Surgical Procedures and
              Ancillary Services Effective on July 1, 2017
------------------------------------------------------------------------
                                                            Proposed CY
       CY 2017 HCPCS code        CY 2017 long descriptor   2018 payment
                                                             indicator
------------------------------------------------------------------------
C9489..........................  Injection, nusinersen,               K2
                                  0.1 mg.
C9490..........................  Injection,                           K2
                                  bezlotoxumab, 10 mg.
C9745..........................  Nasal endoscopy,                     J8
                                  surgical; balloon
                                  dilation of eustachian
                                  tube.
C9746..........................  Transperineal                        J8
                                  implantation of
                                  permanent adjustable
                                  balloon continence
                                  device, with
                                  cystourethroscopy,
                                  when performed and/or
                                  fluoroscopy, when
                                  performed.

[[Page 33657]]

 
C9747..........................  Ablation of prostate,                G2
                                  transrectal, high
                                  intensity focused
                                  ultrasound (HIFU),
                                  including imaging
                                  guidance.
Q9986..........................  Injection,                           K2
                                  hydroxyprogesterone
                                  caproate (Makena), 10
                                  mg.
Q9989*.........................  Ustekinumab, for                     K2
                                  Intravenous Injection,
                                  1 mg.
------------------------------------------------------------------------
* HCPCS code C9487, which was effective April 1, 2017, was replaced with
  HCPCS code Q9989 (Ustekinumab, for intravenous injection, 1 mg)
  effective July 1, 2017.

    Through the July 2017 quarterly update CR, we also implemented ASC 
payment for one new Category III CPT code as an ASC covered surgical 
procedure, effective July 1, 2017. This code is listed in Table 33 
below, along with its proposed payment indicator. The proposed payment 
rate for this new Category III CPT code can be found in Addendum AA to 
the proposed rule (which is available via the Internet on the CMS Web 
site).

   Table 33--New Category III CPT Code for Covered Surgical Procedure
                        Effective on July 1, 2017
------------------------------------------------------------------------
                                                            Proposed CY
        CY 2017 CPT code         CY 2017 long descriptor   2018 payment
                                                             indicator
------------------------------------------------------------------------
0474T..........................  Insertion of anterior                J8
                                  segment aqueous
                                  drainage device, with
                                  creation of
                                  intraocular reservoir,
                                  internal approach,
                                  into the supraciliary
                                  space.
------------------------------------------------------------------------

    We are inviting public comments on these proposed payment 
indicators and the proposed payment rates for the new Category III CPT 
code and Level II HCPCS codes that were or are expected to be newly 
recognized as ASC covered surgical procedures or covered ancillary 
services in July 2017 through the quarterly update CRs, as listed in 
Tables 32 and 33 above. We are proposing to finalize their payment 
indicators and their payment rates in the CY 2018 OPPS/ASC final rule 
with comment period.
4. Proposed Process for New and Revised Level II HCPCS Codes That Will 
Be Effective October 1, 2017 and January 1, 2018 for Which We Will Be 
Soliciting Public Comments in the CY 2018 OPPS/ASC Final Rule With 
Comment Period
    As has been our practice in the past, we incorporate those new and 
revised Level II HCPCS codes that are effective January 1 in the final 
rule with comment period, thereby updating the OPPS and the ASC payment 
system for the following calendar year. These codes are released to the 
public via the CMS HCPCS Web site, and also through the January OPPS 
quarterly update CRs. In the past, we also released new and revised 
Level II HCPCS codes that are effective October 1 through the October 
OPPS quarterly update CRs and incorporated these new codes in the final 
rule with comment period.
    For CY 2018, consistent with our established policy, we are 
proposing that the Level II HCPCS codes that will be effective October 
1, 2017, and January 1, 2018, would be flagged with comment indicator 
``NI'' in Addendum B to the CY 2018 OPPS/ASC final rule with comment 
period to indicate that we have assigned the codes an interim OPPS 
payment status for CY 2018. We will invite public comments in the CY 
2018 OPPS/ASC final rule with comment period on the interim status 
indicator and APC assignments, and payment rates for these codes that 
will be finalized in the CY 2019 OPPS/ASC final rule with comment 
period.
5. Proposed Process for Recognizing New and Revised Category I and 
Category III CPT Codes That Will Be Effective January 1, 2018 for Which 
We Will Be Soliciting Public Comments in the CY 2018 OPPS/ASC Final 
Rule With Comment Period
    For new and revised CPT codes effective January 1, 2018, that were 
received in time to be included in this proposed rule, we are proposing 
APC and status indicator assignments. We will accept comments and 
finalize the APC and status indicator assignments in the OPPS/ASC final 
rule with comment period. For those new/revised CPT codes that are 
received too late for inclusion in this OPPS/ASC proposed rule, we may 
either make interim final assignments in the final rule with comment 
period or possibly 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.
    For the CY 2018 ASC update, the new and revised CY 2018 Category I 
and III CPT codes will be effective on January 1, 2018, and can be 
found in ASC Addendum AA and Addendum BB to this proposed rule (which 
are available via the Internet on the CMS Web site). The new and 
revised CY 2018 Category I and III CPT codes are assigned to new 
comment indicator ``NP'' to indicate that the code 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 and that comments will be accepted on the proposed 
payment indicator. Further, we remind readers that the CPT code 
descriptors that appear in Addendum AA and Addendum BB are short 
descriptors and do not accurately describe the complete procedure, 
service, or item described by the CPT code. Therefore, we are including 
the 5-digit placeholder codes and their long descriptors for the new 
and revised CY 2018 CPT codes in Addendum O to this proposed rule 
(which is available via the Internet on the CMS Web site) so that the 
public can have time to adequately comment on our proposed payment 
indicator assignments. The 5-digit placeholder codes can be found in 
Addendum O, specifically under the column labeled ``CY 2018 OPPS/ASC 
Proposed Rule 5-Digit Placeholder Code,'' to this

[[Page 33658]]

proposed rule. The final CPT code numbers would be included in the CY 
2018 OPPS/ASC final rule with comment period. We note that not every 
code listed in Addendum O is subject to comment. For the new/revised 
Category I and III CPT codes, we are requesting comments on only those 
codes that are assigned to comment indicator ``NP''.
    In summary, we are soliciting public comments on the proposed CY 
2018 payment indicators for the new and revised Category I and III CPT 
codes that will be effective January 1, 2018. The CPT codes are listed 
in Addendum AA and Addendum BB to this proposed rule with short 
descriptors only. We list them again in Addendum O to this proposed 
rule with long descriptors. We also are proposing to finalize the 
payment indicator for these codes (with their final CPT code numbers) 
in the CY 2018 OPPS/ASC final rule with comment period. The proposed 
payment indicator for these codes can be found in Addendum AA and 
Addendum BB to this proposed rule (which are available via the Internet 
on the CMS Web site).

C. Proposed 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
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC list of covered surgical procedures in CY 2008 or later years that 
we determine are performed predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC list of covered surgical procedures beginning in CY 
2008 that we determined were office-based were identified in Addendum 
AA to that rule by payment indicator ``P2'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later with MPFS nonfacility 
PE RVUs; payment based on OPPS relative payment weight); ``P3'' 
(Office-based surgical procedures added to ASC list in CY 2008 or later 
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE 
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on 
OPPS relative payment weight), depending on whether we estimated the 
procedure would be paid according to the standard ASC payment 
methodology based on its OPPS relative payment weight or at the MPFS 
nonfacility PE RVU-based amount.
    Consistent with our final policy to annually review and update the 
list of covered surgical procedures eligible for payment in ASCs, each 
year we identify covered surgical procedures as either temporarily 
office-based (these are new procedure codes with little or no 
utilization data that we have determined are clinically similar to 
other procedures that are permanently office-based), permanently 
office-based, or nonoffice-based, after taking into account updated 
volume and utilization data.
(2) Proposed Changes for CY 2018 to Covered Surgical Procedures 
Designated as Office-Based
    In developing this proposed rule, we followed our policy to 
annually review and update the covered surgical procedures for which 
ASC payment is made and to identify new procedures that may be 
appropriate for ASC payment, including their potential designation as 
office-based. We reviewed CY 2016 volume and utilization data and the 
clinical characteristics for all covered surgical procedures that are 
assigned payment indicator ``G2'' (Nonoffice-based surgical procedure 
added in CY 2008 or later; payment based on OPPS relative payment 
weight) in CY 2016, as well as for those procedures assigned one of the 
temporary office-based payment indicators, specifically ``P2'', ``P3'', 
or ``R2'' in the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79736 through 79738).
    Our review of the CY 2016 volume and utilization data resulted in 
our identification of two covered surgical procedures, CPT code 37241 
(Vascular embolize/occlude venous) and CPT code 67227 (Destruction 
extensive retinopathy), that we believe meet the criteria for 
designation as office-based. The data indicate that these procedures 
are performed more than 50 percent of the time in physicians' offices, 
and we believe that the services are of a level of complexity 
consistent with other procedures performed routinely in physicians' 
offices. The CPT codes that we are proposing to permanently designate 
as office-based for CY 2018 is listed in Table 34 below.

  Table 34--ASC Covered Surgical Procedures Proposed To Be Newly Designated as Permanently Office-Based for CY
                                                      2018
----------------------------------------------------------------------------------------------------------------
                                                                  CY 2017 ASC payment      Proposed CY 2018 ASC
         CY 2018 CPT code             CY 2018 long descriptor          indicator           payment indicator *
----------------------------------------------------------------------------------------------------------------
37241.............................  Vascular embolization or    G2                       P2/P3
                                     occlusion, inclusive of
                                     all radiological
                                     supervision and
                                     interpretation,
                                     intraprocedural
                                     roadmapping, and imaging
                                     guidance necessary to
                                     complete the
                                     intervention; venous,
                                     other than hemorrhage
                                     (eg, congenital or
                                     acquired venous
                                     malformations, venous and
                                     capillary hemangiomas,
                                     varices, varioceles).
67227.............................  Destruction of extensive    G2                       P2/P3
                                     or progressive
                                     retinopathy (eg, diabetic
                                     retinopathy),
                                     cryotherapy, diathermy.
----------------------------------------------------------------------------------------------------------------
* Proposed payment indicators are based on a comparison of the proposed rates according to the ASC standard
  ratesetting methodology and the MPFS proposed rates. Current law specifies a 0.5 percent update to the MPFS
  payment rates for CY 2018. For a discussion of the MPFS rates, we refer readers to the CY 2018 MPFS proposed
  rule.

    We also reviewed CY 2016 volume and utilization data and other 
information for 10 procedures designated as temporary office-based in 
Tables 48 and 49 in the CY 2017 OPPS/ASC final rule with comment period 
(81

[[Page 33659]]

FR 79736 through 79738). Of these 10 procedures, there were very few 
claims in our data and no claims data for 8 procedures: CPT code 0402T 
(Collagen cross-linking of cornea (including removal of the corneal 
epithelium and intraoperative pachymetry when performed)); CPT code 
10030 (Image-guided fluid collection drainage by catheter (e.g., 
abscess, hematoma, seroma, lymphocele, cyst), soft tissue (e.g., 
extremity, abdominal wall, neck), percutaneous); CPT code 36473 
(Endovenous ablation therapy of incompetent vein, extremity, inclusive 
of all imaging guidance and monitoring, percutaneous, mechanochemical; 
first vein treated); CPT code 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); CPT code 64461 (Paravertebral block (PVB) (paraspinous block), 
thoracic; single injection site (includes imaging guidance, when 
performed); CPT code 64463 (Paravertebral block (PVB) (paraspinous 
block), thoracic; continuous infusion by catheter (includes imaging 
guidance, when performed)); CPT code 65785 (Implantation of 
intrastromal corneal ring segments); and CPT code 67229 (Treatment of 
extensive or progressive retinopathy, one or more sessions; preterm 
infant (less than 37 weeks gestation at birth), performed from birth up 
to 1 year of age (for example, retinopathy of prematurity), 
photocoagulation or cryotherapy). Consequently, we are proposing to 
maintain the temporary office-based designations for these eight codes 
for CY 2018. We list all of these codes for which we are proposing to 
maintain the temporary office-based designations for CY 2018 in Table 
35 below. The procedures for which the proposed office-based 
designations for CY 2018 are temporary also are indicated by asterisks 
in Addendum AA to this proposed rule (which is available via the 
Internet on the CMS Web site).
    The volume and utilization data for one procedure that has a 
temporary office-based designation for CY 2017, HCPCS code G0429 
(Dermal injection procedure(s) for facial lipodystrophy syndrome (LDS) 
and provision of Radiesse or Sculptra dermal filler, including all 
items and supplies), is sufficient to indicate that this procedure is 
performed predominantly in physicians' offices and, therefore, should 
be assigned an office-based payment indicator in CY 2018. Consequently, 
we are proposing to assign payment indicator ``P2/P3'' to this covered 
surgical procedure code in CY 2018.
    HCPCS code 0299T (Extracorporeal shock wave for integumentary wound 
healing, high energy, including topical application and dressing care; 
initial wound) was finalized for temporary office-based status in the 
CY 2017 OPPS/ASC final rule with comment period. However, this code 
will be deleted by the AMA effective December 31, 2017.
    We are inviting public comment on our proposals.

Table 35--Proposed CY 2018 Payment Indicators for ASC Covered Surgical Procedures Designated as Temporary Office-
                          Based in the CY 2017 OPPS/ASC Final Rule With Comment Period
----------------------------------------------------------------------------------------------------------------
                                                                  CY 2017 ASC payment      CY 2018 proposed ASC
         CY 2018 CPT code             CY 2018 long descriptor         indicator *          payment indicator **
----------------------------------------------------------------------------------------------------------------
0299T.............................  Extracorporeal shock wave   R2 *                     NA
                                     for integumentary wound
                                     healing, high energy,
                                     including topical
                                     application and dressing
                                     care; initial wound.
0402T.............................  Collagen cross-linking of   R2 *                     R2 **
                                     cornea (including removal
                                     of the corneal epithelium
                                     and intraoperative
                                     pachymetry when
                                     performed).
10030.............................  Image-guided fluid          P2 *                     P2/P3 **
                                     collection drainage by
                                     catheter (e.g., abscess,
                                     hematoma, seroma,
                                     lymphocele, cyst), soft
                                     tissue (e.g., extremity
                                     abdominal wall, neck),
                                     percutaneous.
36473.............................  Endovenous ablation         P2 *                     P2/P3 **
                                     therapy of incompetent
                                     vein, extremity,
                                     inclusive of all imaging
                                     guidance and monitoring,
                                     percutaneous,
                                     mechanochemical; first
                                     vein treated.
36901.............................  Introduction of needle(s)   P2 *                     P2/P3 **
                                     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.
64461.............................  Paravertebral block (PVB)   P3 *                     P2/P3 **
                                     (paraspinous block),
                                     thoracic; single
                                     injection site (includes
                                     imaging guidance, when
                                     performed).
64463.............................  Continuous infusion by      P3 *                     P2/P3 **
                                     catheter (includes
                                     imaging guidance, when
                                     performed).
65785.............................  Implantation of             R2 *                     P2/P3 **
                                     intrastromal corneal ring
                                     segments.
67229.............................  Treatment of extensive or   R2 *                     P2/P3 **
                                     progressive retinopathy,
                                     one or more sessions;
                                     preterm infant (less than
                                     37 weeks gestation at
                                     birth), performed from
                                     birth up to 1 year of age
                                     (e.g., retinopathy of
                                     prematurity),
                                     photocoagulation or
                                     cryotherapy.
G0429.............................  Dermal injection            P3 *                     P2/P3 **
                                     procedure(s) for facial
                                     lipodystrophy syndrome
                                     (LDS) and provision of
                                     Radiesse or Sculptra
                                     dermal filler, including
                                     all items and supplies.
----------------------------------------------------------------------------------------------------------------
* If designation is temporary.

[[Page 33660]]

 
** Proposed payment indicators are based on a comparison of the proposed rates according to the ASC standard
  ratesetting methodology and the MPFS proposed rates. Current law specifies a 0.5 percent update to the MPFS
  payment rates for CY 2018. For a discussion of the MPFS rates, we refer readers to the CY 2018 MPFS proposed
  rule.

    For CY 2018, we are proposing to designate one new CY 2018 CPT code 
for ASC covered surgical procedures as temporary office-based, as 
displayed in Table 36 below. After reviewing the clinical 
characteristics, utilization, and volume of related procedure codes, we 
determined that the procedure described by this new CPT code would be 
predominantly performed in physicians' offices. However, because we had 
no utilization data for the procedure specifically described by this 
new CPT code, we are proposing to make the office-based designation 
temporary rather than permanent, and we will reevaluate the procedure 
when data become available. The procedure for which the proposed 
office-based designation for CY 2018 is temporary is indicated by 
asterisks in Addendum AA to this proposed rule (which is available via 
the Internet on the CMS Web site).
    We are inviting public comments on these proposals.

 Table 36--Proposed CY 2018 Payment Indicators for New CY 2018 CPT Codes
for ASC Covered Surgical Procedures Designated as Temporary Office-Based
------------------------------------------------------------------------
  Proposed CY 2018 OPPS/ASC                            Proposed CY 2018
  proposed rule 5-Digit CMS         CY 2018 long          ASC payment
       placeholder code              descriptor          indicator **
------------------------------------------------------------------------
382X3........................  Diagnostic bone        P2/P3 *
                                marrow; biopsy(ies)
                                and aspiration(s).
------------------------------------------------------------------------
* If designation is temporary.
** Proposed payment indicators are based on a comparison of the proposed
  rates according to the ASC standard ratesetting methodology and the
  MPFS proposed rates. Current law specifies a 0.5 percent update to the
  MPFS payment rates for CY 2018. For a discussion of the MPFS rates, we
  refer readers to the CY 2018 MPFS proposed rule.

b. Proposed ASC Covered Surgical Procedures To Be Designated as Device-
Intensive
(1) Background
    As discussed in the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79739 through 79740), we implemented a payment methodology for 
calculating the ASC payment rates for covered surgical procedures that 
are designated as device-intensive. Under Sec.  416.171(b)(2) of the 
regulations, we define an ASC device-intensive procedure as a procedure 
with a HCPCS code-level device offset of greater than 40 percent when 
calculated according to the standard OPPS APC ratesetting methodology.
    According to this ASC payment methodology, we apply the device 
offset percentage based on the standard OPPS APC ratesetting 
methodology to the OPPS national unadjusted payment to determine the 
device cost included in the OPPS payment rate for a device-intensive 
ASC covered surgical procedure, which we then set as equal to the 
device portion of the national unadjusted ASC payment rate for the 
procedure. We calculate the service portion of the ASC payment for 
device-intensive procedures by applying the uniform ASC conversion 
factor to the service (non-device) portion of the OPPS relative payment 
weight for the device-intensive procedure. Finally, we sum the ASC 
device portion and ASC service portion to establish the full payment 
for the device-intensive procedure under the revised ASC payment 
system.
    We also finalized that device-intensive procedures will be subject 
to all of the payment policies applicable to procedures designated as 
an ASC device-intensive procedure under our established methodology, 
including our policies on device credits and discontinued procedures.
    In addition, in the CY 2017 OPPS/ASC final rule with comment 
period, we adopted a policy for new HCPCS codes describing procedures 
involving the implantation of medical devices that do not yet have 
associated claims data, to designate these procedures as device-
intensive 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 (81 FR 79739 through 79740). 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 involve the implantation of medical 
devices would be to ensure ASC access for new procedures until claims 
data become available. However, 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 involving the 
implantation of a medical device, the device-intensive designation will 
be applied to the code if the HCPCS code device offset is greater than 
40 percent, according to our policy of determining device-intensive 
status by calculating the HCPCS code-level device offset.
(2) Proposed Changes to List of ASC Covered Surgical Procedures 
Designated as Device-Intensive for CY 2018
    For CY 2018, we are proposing to update the ASC list of covered 
surgical procedures that are eligible for payment according to our 
device-intensive procedure payment methodology, reflecting the proposed 
individual HCPCS code device offset percentages based on CY 2016 OPPS 
claims and cost report data available for the proposed rule.
    The ASC covered surgical procedures that we are proposing to 
designate as device-intensive, and therefore subject to the device-
intensive procedure payment methodology for CY 2018, are assigned 
payment indicator ``J8'' and are included in Addendum AA to this 
proposed rule (which is available on the CMS Web site). The CPT code, 
the CPT code short descriptor, the proposed CY 2018 ASC payment 
indicator, and an indication of whether the full credit/partial credit 
(FB/FC) device adjustment policy would apply also are included in 
Addendum AA to this proposed rule.
    We are inviting public comments on the proposed list of ASC device-
intensive procedures.

[[Page 33661]]

c. Proposed Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    Our ASC payment policy for costly devices implanted in ASCs at no 
cost/full credit or partial credit, as set forth in Sec.  416.179 of 
our regulations, is consistent with the OPPS policy that was in effect 
until CY 2014. Specifically, the OPPS policy that was in effect through 
CY 2013 provided a reduction in 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 (77 FR 68356 
through 68358). The established ASC policy reduces payment to ASCs when 
a specified device is furnished without cost or with full credit or 
partial credit for the cost of the device for those ASC covered 
surgical procedures that are assigned to APCs under the OPPS to which 
this policy applies. We refer readers to the CY 2009 OPPS/ASC final 
rule with comment period for a full discussion of the ASC payment 
adjustment policy for no cost/full credit and partial credit devices 
(73 FR 68742 through 68744).
    As discussed in section IV.B. of the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75005 through 75006), we finalized our 
proposal to modify our former policy of reducing OPPS payment for 
specified APCs when a hospital furnishes a specified device without 
cost or with a full or partial credit. Formerly, under the OPPS, our 
policy was to reduce OPPS payment by 100 percent of the device offset 
amount when a hospital furnished a specified device without cost or 
with a full credit and by 50 percent of the device offset amount when 
the hospital received partial credit in the amount of 50 percent or 
more (but less than 100 percent) of the cost for the specified device. 
For CY 2014, we finalized our proposal to reduce OPPS payment for 
applicable APCs by the full or partial credit a provider receives for a 
replaced device, capped at the device offset amount.
    Although we finalized our proposal to modify the policy of reducing 
payments when a hospital furnishes a specified device without cost or 
with full or partial credit under the OPPS, in that final rule with 
comment period (78 FR 75076 through 75080), we finalized our proposal 
to maintain our ASC policy for reducing payments to ASCs for specified 
device-intensive procedures when the ASC furnishes a device without 
cost or with full or partial credit. Unlike the OPPS, there is 
currently no mechanism within the ASC claims processing system for ASCs 
to submit to CMS the actual amount received when furnishing a specified 
device at full or partial credit. Therefore, under the ASC payment 
system, we finalized our proposal for CY 2014 to continue to reduce ASC 
payments by 100 percent or 50 percent of the device offset amount when 
an ASC furnishes a device without cost or with full or partial credit, 
respectively.
    We are proposing to update the list of ASC covered device-intensive 
procedures, which would be subject to the no cost/full credit and 
partial credit device adjustment policy for CY 2018. Specifically, when 
a device-intensive procedure is subject to the no cost/full credit or 
partial credit device adjustment policy and is performed to implant a 
device that is furnished at no cost or with full credit from the 
manufacturer, the ASC would append the HCPCS ``FB'' modifier on the 
line in the claim with the procedure to implant the device. The 
contractor would reduce payment to the ASC by the device offset amount 
that we estimate represents the cost of the device when the necessary 
device is furnished without cost or with full credit to the ASC. We 
continue to believe that the reduction of ASC payment in these 
circumstances is necessary to pay appropriately for the covered 
surgical procedure furnished by the ASC.
    For partial credit, we are proposing to reduce the payment for 
implantation procedures that are subject to the no cost/full credit or 
partial credit device adjustment policy by one-half of the device 
offset amount that would be applied if a device was provided at no cost 
or with full credit, if the credit to the ASC is 50 percent or more 
(but less than 100 percent) of the cost of the new device. The ASC 
would append the HCPCS ``FC'' modifier to the HCPCS code for a device-
intensive surgical procedure that is subject to the no cost/full credit 
or partial credit device adjustment policy, when the facility receives 
a partial credit of 50 percent or more (but less than 100 percent) of 
the cost of a device. To report that the ASC received a partial credit 
of 50 percent or more (but less than 100 percent) of the cost of a new 
device, ASCs would have the option of either: (1) Submitting the claim 
for the device replacement procedure to their Medicare contractor after 
the procedure's performance but prior to manufacturer acknowledgment of 
credit for the device, and subsequently contacting the contractor 
regarding a claim adjustment once the credit determination is made; or 
(2) holding the claim for the device implantation procedure until a 
determination is made by the manufacturer on the partial credit and 
submitting the claim with the ``FC'' modifier appended to the 
implantation procedure HCPCS code if the partial credit is 50 percent 
or more (but less than 100 percent) of the cost of the replacement 
device. Beneficiary coinsurance would be based on the reduced payment 
amount. As finalized in the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66926), to ensure our policy covers any situation 
involving a device-intensive procedure where an ASC may receive a 
device at no cost/full credit or partial credit, we apply our FB/FC 
policy to all device-intensive procedures.
    We are inviting public comments on our proposals to adjust ASC 
payments for no cost/full credit and partial credit devices.
d. Proposed Additions to the List of ASC Covered Surgical Procedures
    We conducted a review of HCPCS codes that currently are paid under 
the OPPS, but not included on the ASC list of covered surgical 
procedures, to determine if changes in technology and/or medical 
practice affected the clinical appropriateness of these procedures for 
the ASC setting. Based on this review, we are proposing to update the 
list of ASC covered surgical procedures by adding three procedures to 
the list for CY 2018. We determined that these three procedures are 
separately paid under the OPPS, would not be expected to pose a 
significant risk to beneficiary safety when performed in an ASC, and 
would not be expected to require active medical monitoring and care of 
the beneficiary at midnight following the procedure. Therefore, we are 
proposing to include these three procedures on the list of ASC covered 
surgical procedures for CY 2018.
    The procedures that we are proposing to add to the ASC list of 
covered surgical procedures, including the HCPCS code long descriptors 
and the proposed CY 2018 payment indicators, are displayed in Table 37 
below.

[[Page 33662]]



    Table 37--Proposed Additions to the List of ASC Covered Surgical
                         Procedures for CY 2018
------------------------------------------------------------------------
                                                    Proposed CY 2018 ASC
   CY 2018 CPT code      CY 2018 long descriptor     payment indicator
------------------------------------------------------------------------
22856.................  Total disc arthroplasty    J8
                         (artificial disc),
                         anterior approach,
                         including discectomy
                         with end plate
                         preparation (includes
                         osteophytectomy for
                         nerve root or spinal
                         cord decompression and
                         microdissection); single
                         interspace, cervical.
22858.................  Total disc arthroplasty    N1
                         (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).
58572.................  Laparoscopy, surgical,     G2
                         with total hysterectomy,
                         for uterus greater than
                         250g.
------------------------------------------------------------------------

    We are inviting public comments on our proposals.
e. Comment Solicitation on Adding Additional Procedures to the ASC 
Covered Procedures List
    As we discussed in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68724), we adopted a policy to include, in our annual 
evaluation of the ASC list of covered surgical procedures, a review of 
the procedures that are being proposed for removal from the OPPS 
inpatient only list for possible inclusion on the ASC list of covered 
surgical procedures. We are proposing to remove the following two 
procedures described by CPT codes from the OPPS inpatient only list for 
CY 2018: CPT codes 27447 (Arthroplasty, knee, condyle and plateau; 
medical and lateral compartments with or without patella resurfacing 
(total knee arthroplasty)) and 55866 (Laparoscopy, surgical 
prostatectomy, retropubic radical, including nerve sparing, includes 
robotic assistance, when performed). We evaluated each of the two 
procedures we are proposing to remove from the OPPS IPO list for CY 
2018 according to the criteria for inclusion on the list of ASC covered 
surgical procedures, and considered whether they should be added to the 
list of ASC covered surgical procedures for CY 2018. Because our 
understanding is that these procedures typically require more than 24 
hours of active medical care following the procedure, we believe they 
should continue to be excluded from the list of ASC covered surgical 
procedures.
    In the CY 2017 OPPS/ASC proposed rule (81 FR 45679 through 45681), 
we solicited comments regarding whether the TKA procedure described by 
CPT code 27447 should be removed from the OPPS inpatient only list. 
During the comment period, some stakeholders requested that CMS also 
add the TKA procedure to the list of surgical procedures covered in an 
ASC setting. In the CY 2017 proposed rule, we only solicited public 
comments on removing the TKA procedure from the OPPS inpatient only 
list for CY 2017. However, in this CY 2018 proposed rule, we are 
proposing to remove the TKA procedure from the OPPS inpatient only list 
for CY 2018, as discussed in section IX. of this proposed rule. In 
light of the public comments we received on the CY 2017 proposed rule 
(81 FR 79697 through 79699) and our proposal to remove the TKA 
procedure from the OPPS IPO list for CY 2018, in this proposed rule, we 
are soliciting public comments on whether the TKA procedure should also 
be added to the ASC list of covered surgical procedures. We also are 
inviting public comments on our proposed continued exclusion of CPT 
code 55866 from the list of ASC covered surgical procedures.
    In considering whether or not the TKA procedure should be added to 
the ASC list of covered surgical procedures, we are requesting that 
commenters take into consideration the regulations at 42 CFR 416.2 and 
416.166. For example, commenters should assess whether this procedure 
would be expected to pose a significant risk to beneficiary safety when 
performed in an ASC, whether standard medical practice dictates that 
the beneficiary would typically be expected to require active medical 
monitoring and care at midnight following the procedure (``overnight 
stay''), and whether this procedure would fall under our general 
exclusions for covered surgical procedures at 42 CFR 416.166(c) (for 
example, would it generally result in extensive blood loss, require 
major or prolonged invasion of body cavities, directly involve major 
blood vessels, among others).
    In addition, in this CY 2018 proposed rule, we are soliciting 
comment on whether CPT codes 27125 (Hemiarthroplasty, hip, partial 
(e.g., femoral stem prosthesis, bipolar arthroplasty)) and 27130 
(Arthroplasty, acetabular and proximal femoral prosthetic replacement 
(total hip arthroplasty), with or without autograft or allograft) meet 
the criteria to be removed from the OPPS IPO list, as discussed in 
section IX. of this proposed rule. As noted in that section, we also 
are soliciting comment on whether these two procedures meet the 
criteria to be added to the ASC covered surgical procedure list.
2. Covered Ancillary Services
    Consistent with the established ASC payment system policy, we are 
proposing to update the ASC list of covered ancillary services to 
reflect the payment status for the services under the CY 2018 OPPS. 
Maintaining consistency with the OPPS may result in proposed changes to 
ASC payment indicators for some covered ancillary services because of 
changes that are being proposed under the OPPS for CY 2018. For 
example, if a covered ancillary service was separately paid under the 
ASC payment system in CY 2017, but is proposed for packaged status 
under the CY 2018 OPPS, to maintain consistency with the OPPS, we would 
also propose to package the ancillary service under the ASC payment 
system for CY 2018. We are proposing to continue this reconciliation of 
packaged status for subsequent calendar years. Comment indicator 
``CH'', which is discussed in section XII.F. of this proposed rule, is 
used in Addendum BB to this proposed rule (which is available via the 
Internet on the CMS Web site) to indicate covered ancillary services 
for which we are proposing a change in the ASC payment indicator to 
reflect a proposed change in the OPPS treatment of the service for CY 
2018.
    All ASC covered ancillary services and their proposed payment 
indicators for CY 2018 are included in Addendum BB to this proposed 
rule. We are inviting public comments on this proposal.

[[Page 33663]]

D. Proposed ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services

1. Proposed ASC Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are fully described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66828 through 66831). Under our 
established policy, we use the ASC standard ratesetting methodology of 
multiplying the ASC relative payment weight for the procedure by the 
ASC conversion factor for that same year to calculate the national 
unadjusted payment rates for procedures with payment indicators ``G2'' 
and ``A2''. Payment indicator ``A2'' was developed to identify 
procedures that were included on the list of ASC covered surgical 
procedures in CY 2007 and, therefore, were subject to transitional 
payment prior to CY 2011. Although the 4-year transitional period has 
ended and payment indicator ``A2'' is no longer required to identify 
surgical procedures subject to transitional payment, we retained 
payment indicator ``A2'' because it is used to identify procedures that 
are exempted from application of the office-based designation.
    The rate calculation established for device-intensive procedures 
(payment indicator ``J8'') is structured so that the packaged device 
payment amount is the same as under the OPPS, and only the service 
portion of the rate is subject to the ASC standard ratesetting 
methodology. In the CY 2017 OPPS/ASC final rule with comment period (81 
FR 79732 through 79753), we updated the CY 2016 ASC payment rates for 
ASC covered surgical procedures with payment indicators of ``A2,'' 
``G2,'' and ``J8'' using CY 2015 data, consistent with the CY 2017 OPPS 
update. We also updated payment rates for device-intensive procedures 
to incorporate the CY 2017 OPPS device offset percentages calculated 
under the standard APC ratesetting methodology as discussed earlier in 
this section.
    Payment rates for office-based procedures (payment indicators 
``P2'', ``P3'', and ``R2'') are the lower of the MPFS nonfacility PE 
RVU-based amount (we refer readers to the CY 2018 MPFS proposed rule) 
or the amount calculated using the ASC standard ratesetting methodology 
for the procedure. In the CY 2017 OPPS/ASC final rule with comment 
period, we updated the payment amounts for office-based procedures 
(payment indicators ``P2'', ``P3'', and ``R2'') using the most recent 
available MPFS and OPPS data. We compared the estimated CY 2017 rate 
for each of the office-based procedures, calculated according to the 
ASC standard ratesetting methodology, to the MPFS nonfacility PE RVU-
based amount to determine which was lower and, therefore, would be the 
CY 2017 payment rate for the procedure under our final policy for the 
revised ASC payment system (Sec.  416.171(d)).
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
75081), we finalized our proposal to calculate the CY 2014 payment 
rates for ASC covered surgical procedures according to our established 
methodologies, with the exception of device removal procedures. For CY 
2014, we finalized a policy to conditionally package payment for device 
removal codes under the OPPS. Under the OPPS, a conditionally packaged 
code (status indicators ``Q1'' and ``Q2'') describes a HCPCS code where 
the payment is packaged when it is provided with a significant 
procedure but is separately paid when the service appears on the claim 
without a significant procedure. Because ASC services always include a 
covered surgical procedure, HCPCS codes that are conditionally packaged 
under the OPPS are always packaged (payment indicator ``N1'') under the 
ASC payment system. Under the OPPS, device removal procedures are 
conditionally packaged and, therefore, would be packaged under the ASC 
payment system. There would be no Medicare payment made when a device 
removal procedure is performed in an ASC without another surgical 
procedure included on the claim; therefore, no Medicare payment would 
be made if a device was removed but not replaced. To address this 
concern, for the device removal procedures that are conditionally 
packaged in the OPPS (status indicator ``Q2''), we assigned the current 
ASC payment indicators associated with these procedures and continued 
to provide separate payment since CY 2014.
b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for 
CY 2018
    We are proposing to update ASC payment rates for CY 2018 and 
subsequent years using the established rate calculation methodologies 
under Sec.  416.171 and using our definition of device-intensive 
procedures, as discussed in section XII.C.1.b. of this proposed rule. 
Because the proposed OPPS relative payment weights are based on 
geometric mean costs, the ASC system would use geometric means to 
determine proposed relative payment weights under the ASC standard 
methodology. We are proposing to continue to use the amount calculated 
under the ASC standard ratesetting methodology for procedures assigned 
payment indicators ``A2'' and ``G2''.
    We are proposing to calculate payment rates for office-based 
procedures (payment indicators ``P2'', ``P3'', and ``R2'') and device-
intensive procedures (payment indicator ``J8'') according to our 
established policies and, for device-intensive procedures, using our 
modified definition of device-intensive procedures, as discussed in 
section XII.C.1.b. of this proposed rule. Therefore, we are proposing 
to update the payment amount for the service portion of the device-
intensive procedures using the ASC standard ratesetting methodology and 
the payment amount for the device portion based on the proposed CY 2018 
OPPS device offset percentages that have been calculated using the 
standard OPPS APC ratesetting methodology. Payment for office-based 
procedures would be at the lesser of the proposed CY 2018 MPFS 
nonfacility PE RVU-based amount or the proposed CY 2018 ASC payment 
amount calculated according to the ASC standard ratesetting 
methodology.
    As we did for CYs 2014 through 2017, for CY 2018, we are proposing 
to continue our policy for device removal procedures such that device 
removal procedures that are conditionally packaged in the OPPS (status 
indicators ``Q1'' and ``Q2'') would be assigned the current ASC payment 
indicators associated with these procedures and would continue to be 
paid separately under the ASC payment system.
    We are inviting public comments on these proposals.
2. Proposed Payment for Covered Ancillary Services
a. Background
    Our payment policies under the ASC payment system for covered 
ancillary services vary according to the particular type of service and 
its payment policy under the OPPS. Our overall policy provides separate 
ASC payment for certain ancillary items and services integrally related 
to the provision of ASC covered surgical procedures that are paid 
separately under the OPPS and provides packaged ASC payment for other 
ancillary items and services that are packaged or conditionally 
packaged (status indicators ``N'', ``Q1'', and ``Q2'') under the OPPS. 
In the CY 2013 OPPS/ASC rulemaking (77 FR 45169 and 77 FR 68457 through 
68458), we further

[[Page 33664]]

clarified our policy regarding the payment indicator assignment of 
codes that are conditionally packaged in the OPPS (status indicators 
``Q1'' and ``Q2''). Under the OPPS, a conditionally packaged code 
describes a HCPCS code where the payment is packaged when it is 
provided with a significant procedure but is separately paid when the 
service appears on the claim without a significant procedure. Because 
ASC services always include a surgical procedure, HCPCS codes that are 
conditionally packaged under the OPPS are always packaged (payment 
indictor ``N1'') under the ASC payment system (except for device 
removal codes as discussed in section IV. of this proposed rule). Thus, 
our policy generally aligns ASC payment bundles with those under the 
OPPS (72 FR 42495). In all cases, in order for those ancillary services 
also to be paid, ancillary items and services must be provided integral 
to the performance of ASC covered surgical procedures for which the ASC 
bills Medicare.
    Our ASC payment policies provide separate payment for drugs and 
biologicals that are separately paid under the OPPS at the OPPS rates. 
We generally pay for separately payable radiology services at the lower 
of the MPFS nonfacility PE RVU-based (or technical component) amount or 
the rate calculated according to the ASC standard ratesetting 
methodology (72 FR 42497). However, as finalized in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 72050), payment indicators 
for all nuclear medicine procedures (defined as CPT codes in the range 
of 78000 through 78999) that are designated as radiology services that 
are paid separately when provided integral to a surgical procedure on 
the ASC list are set to ``Z2'' so that payment is made based on the ASC 
standard ratesetting methodology rather than the MPFS nonfacility PE 
RVU amount (``Z3''), regardless of which is lower.
    Similarly, we also finalized our policy to set the payment 
indicator to ``Z2'' for radiology services that use contrast agents so 
that payment for these procedures will be based on the OPPS relative 
payment weight using the ASC standard ratesetting methodology and, 
therefore, will include the cost for the contrast agent (42 CFR 
416.171(d)(2)).
    ASC payment policy for brachytherapy sources mirrors the payment 
policy under the OPPS. ASCs are paid for brachytherapy sources provided 
integral to ASC covered surgical procedures at prospective rates 
adopted under the OPPS or, if OPPS rates are unavailable, at 
contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs 
have been paid for brachytherapy sources provided integral to ASC 
covered surgical procedures at prospective rates adopted under the 
OPPS.
    Our ASC policies also provide separate payment for: (1) Certain 
items and services that CMS designates as contractor-priced, including, 
but not limited to, the procurement of corneal tissue; and (2) certain 
implantable items that have pass-through payment status under the OPPS. 
These categories do not have prospectively established ASC payment 
rates according to ASC payment system policies (72 FR 42502 and 42508 
through 42509; 42 CFR 416.164(b)). Under the ASC payment system, we 
have designated corneal tissue acquisition and hepatitis B vaccines as 
contractor-priced. Corneal tissue acquisition is contractor-priced 
based on the invoiced costs for acquiring the corneal tissue for 
transplantation. Hepatitis B vaccines are contractor-priced based on 
invoiced costs for the vaccine.
    Devices that are eligible for pass-through payment under the OPPS 
are separately paid under the ASC payment system and are contractor-
priced. Under the revised ASC payment system (72 FR 42502), payment for 
the surgical procedure associated with the pass-through device is made 
according to our standard methodology for the ASC payment system, based 
on only the service (nondevice) portion of the procedure's OPPS 
relative payment weight if the APC weight for the procedure includes 
other packaged device costs. We also refer to this methodology as 
applying a ``device offset'' to the ASC payment for the associated 
surgical procedure. This ensures that duplicate payment is not provided 
for any portion of an implanted device with OPPS pass-through payment 
status.
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66933 
through 66934), we finalized that, beginning in CY 2015, certain 
diagnostic tests within the medicine range of CPT codes for which 
separate payment is allowed under the OPPS are covered ancillary 
services when they are integral to an ASC covered surgical procedure. 
We finalized that diagnostic tests within the medicine range of CPT 
codes include all Category I CPT codes in the medicine range 
established by CPT, from 90000 to 99999, and Category III CPT codes and 
Level II HCPCS codes that describe diagnostic tests that crosswalk or 
are clinically similar to procedures in the medicine range established 
by CPT. In the CY 2015 OPPS/ASC final rule with comment period, we also 
finalized our policy to pay for these tests at the lower of the MPFS 
nonfacility PE RVU-based (or technical component) amount or the rate 
calculated according to the ASC standard ratesetting methodology (79 FR 
66933 through 66934). We finalized that the diagnostic tests for which 
the payment is based on the ASC standard ratesetting methodology be 
assigned to payment indicator ``Z2'' and revised the definition of 
payment indicator ``Z2'' to include reference to diagnostic services 
and those for which the payment is based on the MPFS nonfacility PE 
RVU-based amount be assigned payment indicator ``Z3,'' and revised the 
definition of payment indicator ``Z3'' to include reference to 
diagnostic services.
b. Proposed Payment for Covered Ancillary Services for CY 2018
    For CY 2018 and subsequent years, we are proposing to update the 
ASC payment rates and to make changes to ASC payment indicators as 
necessary to maintain consistency between the OPPS and ASC payment 
system regarding the packaged or separately payable status of services 
and the proposed CY 2018 OPPS and ASC payment rates and subsequent year 
payment rates. We also are proposing to continue to set the CY 2018 ASC 
payment rates and subsequent year payment rates for brachytherapy 
sources and separately payable drugs and biologicals equal to the OPPS 
payment rates for CY 2018 and subsequent year payment rates.
    Covered ancillary services and their proposed payment indicators 
for CY 2018 are listed in Addendum BB to this proposed rule (which is 
available via the Internet on the CMS Web site). For those covered 
ancillary services where the payment rate is the lower of the proposed 
rates under the ASC standard ratesetting methodology and the MPFS 
proposed rates, the proposed payment indicators and rates set forth in 
this proposed rule are based on a comparison using the proposed MPFS 
rates effective January 1, 2018. For a discussion of the MPFS rates, we 
refer readers to the CY 2018 MPFS proposed rule that is available on 
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Application Cycle
    Our process for reviewing applications to establish new classes of 
NTIOLs is as follows:

[[Page 33665]]

     Applicants submit their NTIOL requests for review to CMS 
by the annual deadline. For a request to be considered complete, we 
require submission of the information that is found in the guidance 
document entitled ``Application Process and Information Requirements 
for Requests for a New Class of New Technology Intraocular Lenses 
(NTIOLs) or Inclusion of an IOL in an Existing NTIOL Class'' posted on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html.
     We announce annually, in the proposed rule updating the 
ASC and OPPS payment rates for the following calendar year, a list of 
all requests to establish new NTIOL classes accepted for review during 
the calendar year in which the proposal is published. In accordance 
with section 141(b)(3) of Public Law 103-432 and our regulations at 42 
CFR 416.185(b), the deadline for receipt of public comments is 30 days 
following publication of the list of requests in the proposed rule.
     In the final rule updating the ASC and OPPS payment rates 
for the following calendar year, we--
    ++ Provide a list of determinations made as a result of our review 
of all new NTIOL class requests and public comments;
    ++ When a new NTIOL class is created, identify the predominant 
characteristic of NTIOLs in that class that sets them apart from other 
IOLs (including those previously approved as members of other expired 
or active NTIOL classes) and that is associated with an improved 
clinical outcome.
    ++ Set the date of implementation of a payment adjustment in the 
case of approval of an IOL as a member of a new NTIOL class 
prospectively as of 30 days after publication of the ASC payment update 
final rule, consistent with the statutory requirement.
    ++ Announce the deadline for submitting requests for review of an 
application for a new NTIOL class for the following calendar year.
2. Requests to Establish New NTIOL Classes for CY 2018
    We did not receive any requests for review to establish a new NTIOL 
class for CY 2018 by March 1, 2017, the due date published in the CY 
2017 OPPS/ASC final rule with comment period (81 FR 79748).
3. Payment Adjustment
    The current payment adjustment for a 5-year period from the 
implementation date of a new NTIOL class is $50 per lens. Since 
implementation of the process for adjustment of payment amounts for 
NTIOLs in 1999, we have not revised the payment adjustment amount, and 
we are not proposing to revise the payment adjustment amount for CY 
2018.

F. Proposed ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we created final comment indicators for the 
ASC payment system in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66855). We created Addendum DD1 to define ASC payment 
indicators that we use in Addenda AA and BB to provide payment 
information regarding covered surgical procedures and covered ancillary 
services, respectively, under the revised ASC payment system. The ASC 
payment indicators in Addendum DD1 are intended to capture policy-
relevant characteristics of HCPCS codes that may receive packaged or 
separate payment in ASCs, such as whether they were on the ASC list of 
covered services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment 
methodology; and their classification as separately payable ancillary 
services, including radiology services, brachytherapy sources, OPPS 
pass-through devices, corneal tissue acquisition services, drugs or 
biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators used in Addenda AA and BB to the proposed 
rules and final rules with comment period serve to identify, for the 
revised ASC payment system, the status of a specific HCPCS code and its 
payment indicator with respect to the timeframe when comments will be 
accepted. The comment indicator ``NP'' is used in the OPPS/ASC proposed 
rule to indicate new codes for the next calendar year for which the 
interim payment indicator assigned is subject to comment. The comment 
indicator ``NP'' also is assigned to existing codes with substantial 
revisions to their descriptors such that we consider them to be 
describing new services, as discussed in the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60622). In the CY 2017 OPPS/ASC final 
rule with comment period, we responded to public comments and finalized 
the ASC treatment of all codes that were labeled with comment indicator 
``NP'' in Addenda AA and BB to the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70497).
    The ``CH'' comment indicator is used in Addenda AA and BB to the 
proposed rule (which are available via the Internet on the CMS Web 
site) to indicate that the payment indicator assignment has changed for 
an active HCPCS code in the current year and the next calendar year; an 
active HCPCS code is newly recognized as payable in ASCs; or an active 
HCPCS code is discontinued at the end of the current calendar year. The 
``CH'' comment indicators that are published in the final rule with 
comment period are provided to alert readers that a change has been 
made from one calendar year to the next, but do not indicate that the 
change is subject to comment.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79748 
through 79749), for CY 2017 and subsequent years, we finalized our 
policy to continue using the current comment indicators of ``NP'' and 
``CH''.
2. Proposed ASC Payment and Comment Indicators
    For CY 2018, there are proposed new and revised Category I and III 
CPT codes as well as new and revised Level II HCPCS codes. Therefore, 
proposed Category I and III CPT codes that are new and revised for CY 
2017 and any new and existing Level II HCPCS codes with substantial 
revisions to the code descriptors for CY 2018 compared to the CY 2017 
descriptors that are included in ASC Addenda AA and BB to this proposed 
rule are labeled with proposed new comment indicator ``NP'' to indicate 
that these CPT and Level II HCPCS codes are open for comment as part of 
this proposed rule. Proposed new comment indicator ``NP'' means a new 
code for the next calendar year or an existing code with substantial 
revision to its code descriptor in the next calendar year as compared 
to current calendar year; comments will be accepted on the proposed ASC 
payment indicator for the new code.
    We will respond to public comments on ASC payment and comment 
indicators and finalize their ASC assignment in the CY 2018 OPPS/ASC 
final rule with comment period. We refer readers to Addenda DD1 and DD2 
to this proposed rule (which are available via the Internet on the CMS 
Web site) for the complete list of ASC payment and comment indicators 
proposed for the CY 2018 update.

[[Page 33666]]

G. Calculation of the Proposed ASC Conversion Factor and the Proposed 
ASC Payment Rates
1. Background
    In the August 2, 2007 final rule (72 FR 42493), we established our 
policy to base ASC relative payment weights and payment rates under the 
revised ASC payment system on APC groups and the OPPS relative payment 
weights. Consistent with that policy and the requirement at section 
1833(i)(2)(D)(ii) of the Act that the revised payment system be 
implemented so that it would be budget neutral, the initial ASC 
conversion factor (CY 2008) was calculated so that estimated total 
Medicare payments under the revised ASC payment system in the first 
year would be budget neutral to estimated total Medicare payments under 
the prior (CY 2007) ASC payment system (the ASC conversion factor is 
multiplied by the relative payment weights calculated for many ASC 
services in order to establish payment rates). That is, application of 
the ASC conversion factor was designed to result in aggregate Medicare 
expenditures under the revised ASC payment system in CY 2008 being 
equal to aggregate Medicare expenditures that would have occurred in CY 
2008 in the absence of the revised system, taking into consideration 
the cap on ASC payments in CY 2007 as required under section 
1833(i)(2)(E) of the Act (72 FR 42522). We adopted a policy to make the 
system budget neutral in subsequent calendar years (72 FR 42532 through 
42533; 42 CFR 416.171(e)).
    We note that we consider the term ``expenditures'' in the context 
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of 
the Act to mean expenditures from the Medicare Part B Trust Fund. We do 
not consider expenditures to include beneficiary coinsurance and 
copayments. This distinction was important for the CY 2008 ASC budget 
neutrality model that considered payments across the OPPS, ASC, and 
MPFS payment systems. However, because coinsurance is almost always 20 
percent for ASC services, this interpretation of expenditures has 
minimal impact for subsequent budget neutrality adjustments calculated 
within the revised ASC payment system.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 
through 66858), we set out a step-by-step illustration of the final 
budget neutrality adjustment calculation based on the methodology 
finalized in the August 2, 2007 final rule (72 FR 42521 through 42531) 
and as applied to updated data available for the CY 2008 OPPS/ASC final 
rule with comment period. The application of that methodology to the 
data available for the CY 2008 OPPS/ASC final rule with comment period 
resulted in a budget neutrality adjustment of 0.65.
    For CY 2008, we adopted the OPPS relative payment weights as the 
ASC relative payment weights for most services and, consistent with the 
final policy, we calculated the CY 2008 ASC payment rates by 
multiplying the ASC relative payment weights by the final CY 2008 ASC 
conversion factor of $41.401. For covered office-based surgical 
procedures, covered ancillary radiology services (excluding covered 
ancillary radiology services involving certain nuclear medicine 
procedures or involving the use of contrast agents, as discussed in 
section XII.D.2. of this proposed rule), and certain diagnostic tests 
within the medicine range that are covered ancillary services, the 
established policy is to set the payment rate at the lower of the MPFS 
unadjusted nonfacility PE RVU-based amount or the amount calculated 
using the ASC standard ratesetting methodology. Further, as discussed 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66841 
through 66843), we also adopted alternative ratesetting methodologies 
for specific types of services (for example, device-intensive 
procedures).
    As discussed in the August 2, 2007 final rule (72 FR 42517 through 
42518) and as codified at Sec.  416.172(c) of the regulations, the 
revised ASC payment system accounts for geographic wage variation when 
calculating individual ASC payments by applying the pre-floor and pre-
reclassified IPPS hospital wage indexes to the labor-related share, 
which is 50 percent of the ASC payment amount based on a GAO report of 
ASC costs using 2004 survey data. Beginning in CY 2008, CMS accounted 
for geographic wage variation in labor cost when calculating individual 
ASC payments by applying the pre-floor and pre-reclassified hospital 
wage index values that CMS calculates for payment under the IPPS, using 
updated Core Based Statistical Areas (CBSAs) issued by OMB in June 
2003.
    The reclassification provision in section 1886(d)(10) of the Act is 
specific to hospitals. We believe that using the most recently 
available pre-floor and pre-reclassified IPPS hospital wage indexes 
results in the most appropriate adjustment to the labor portion of ASC 
costs. We continue to believe that the unadjusted hospital wage 
indexes, which are updated yearly and are used by many other Medicare 
payment systems, appropriately account for geographic variation in 
labor costs for ASCs. Therefore, the wage index for an ASC is the pre-
floor and pre-reclassified hospital wage index under the IPPS of the 
CBSA that maps to the CBSA where the ASC is located.
    On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which 
provides the delineations of all Metropolitan Statistical Areas, 
Metropolitan Divisions, Micropolitan Statistical Areas, Combined 
Statistical Areas, and New England City and Town Areas in the United 
States and Puerto Rico based on the standards published on June 28, 
2010 in the Federal Register (75 FR 37246 through 37252) and 2010 
Census Bureau data. (A copy of this bulletin may be obtained at: 
https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2013/b13-01.pdf.) In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 
through 49963), we implemented the use of the CBSA delineations issued 
by OMB in OMB Bulletin 13-01 for the IPPS hospital wage index beginning 
in FY 2015. In the CY 2015 OPPS/ASC final rule with comment period (79 
FR 66937), we finalized a 1-year transition policy that we applied in 
CY 2015 for all ASCs that experienced any decrease in their actual wage 
index exclusively due to the implementation of the new OMB 
delineations. This transition does not apply in CY 2018.
    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

[[Page 33667]]

Town Areas.'' A copy of this bulletin may be obtained on the Web site 
at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2015/15-01.pdf.
    OMB Bulletin No. 15-01 made changes that are relevant to the IPPS 
and ASC wage index. We refer readers to the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79750) for a discussion of these changes and 
our implementation of these revisions.
    For CY 2018, the proposed CY 2018 ASC wage indexes fully reflect 
the OMB labor market area delineations (including the revisions to the 
OMB labor market delineations discussed above, as set forth in OMB 
Bulletin No. 15-01).
    We note that, in certain instances, there might be urban or rural 
areas for which there is no IPPS hospital that has wage index data that 
could be used to set the wage index for that area. For these areas, our 
policy has been to use the average of the wage indexes for CBSAs (or 
metropolitan divisions as applicable) that are contiguous to the area 
that has no wage index (where ``contiguous'' is defined as sharing a 
border). For example, for CY 2014, we applied a proxy wage index based 
on this methodology to ASCs located in CBSA 25980 (Hinesville-Fort 
Stewart, GA) and CBSA 08 (Rural Delaware).
    When all of the areas contiguous to the urban CBSA of interest are 
rural and there is no IPPS hospital that has wage index data that could 
be used to set the wage index for that area, we determine the ASC wage 
index by calculating the average of all wage indexes for urban areas in 
the State (75 FR 72058 through 72059). (In other situations, where 
there are no IPPS hospitals located in a relevant labor market area, we 
continue our current policy of calculating an urban or rural area's 
wage index by calculating the average of the wage indexes for CBSAs (or 
metropolitan divisions where applicable) that are contiguous to the 
area with no wage index.)
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2018 and Future 
Years
    We update the ASC relative payment weights each year using the 
national OPPS relative payment weights (and MPFS nonfacility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly 
scale the ASC relative payment weights for each update year to make 
them budget neutral (72 FR 42533). Consistent with our established 
policy, we are proposing to scale the CY 2018 relative payment weights 
for ASCs according to the following method. Holding ASC utilization, 
the ASC conversion factor, and the mix of services constant from CY 
2016, we are proposing to compare the total payment using the CY 2017 
ASC relative payment weights with the total payment using the CY 2018 
ASC relative payment weights to take into account the changes in the 
OPPS relative payment weights between CY 2017 and CY 2018. We are 
proposing to use the ratio of CY 2017 to CY 2018 total payments (the 
weight scalar) to scale the ASC relative payment weights for CY 2018. 
The proposed CY 2018 ASC weight scalar is 0.8995 and scaling would 
apply to the ASC relative payment weights of the covered surgical 
procedures, covered ancillary radiology services, and certain 
diagnostic tests within the medicine range of CPT codes which are 
covered ancillary services for which the ASC payment rates are based on 
OPPS relative payment weights.
    Scaling would not apply in the case of ASC payment for separately 
payable covered ancillary services that have a predetermined national 
payment amount (that is, their national ASC payment amounts are not 
based on OPPS relative payment weights), such as drugs and biologicals 
that are separately paid or services that are contractor-priced or paid 
at reasonable cost in ASCs. Any service with a predetermined national 
payment amount would be included in the ASC budget neutrality 
comparison, but scaling of the ASC relative payment weights would not 
apply to those services. The ASC payment weights for those services 
without predetermined national payment amounts (that is, those services 
with national payment amounts that would be based on OPPS relative 
payment weights) would be scaled to eliminate any difference in the 
total payment between the current year and the update year.
    For any given year's ratesetting, we typically use the most recent 
full calendar year of claims data to model budget neutrality 
adjustments. At the time of this proposed rule, we have available 98 
percent of CY 2016 ASC claims data.
    To create an analytic file to support calculation of the weight 
scalar and budget neutrality adjustment for the wage index (discussed 
below), we summarized available CY 2016 ASC claims by ASC and by HCPCS 
code. We used the National Provider Identifier for the purpose of 
identifying unique ASCs within the CY 2016 claims data. We used the 
supplier zip code reported on the claim to associate State, county, and 
CBSA with each ASC. This file, available to the public as a supporting 
data file for the proposed rule, is posted on the CMS Web site at: 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ASCPaymentSystem.html.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider level changes, most notably a change in the wage index 
values for the upcoming year, to the conversion factor. Consistent with 
our final ASC payment policy, for the CY 2017 ASC payment system and 
subsequent years, in the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79751 through 79753), we finalized our policy to 
calculate and apply a budget neutrality adjustment to the ASC 
conversion factor for supplier level changes in wage index values for 
the upcoming year, just as the OPPS wage index budget neutrality 
adjustment is calculated and applied to the OPPS conversion factor. For 
CY 2018, we calculated this proposed adjustment for the ASC payment 
system by using the most recent CY 2016 claims data available and 
estimating the difference in total payment that would be created by 
introducing the proposed CY 2018 ASC wage indexes. Specifically, 
holding CY 2016 ASC utilization and service-mix and the proposed CY 
2018 national payment rates after application of the weight scalar 
constant, we calculated the total adjusted payment using the CY 2017 
ASC wage indexes (which would fully reflect the new OMB delineations) 
and the total adjusted payment using the proposed CY 2018 ASC wage 
indexes. We used the 50-percent labor-related share for both total 
adjusted payment calculations. We then compared the total adjusted 
payment calculated with the CY 2017 ASC wage indexes to the total 
adjusted payment calculated with the proposed CY 2018 ASC wage indexes 
and applied the resulting ratio of 1.0004 (the proposed CY 2018 ASC 
wage index budget neutrality adjustment) to the CY 2017 ASC conversion 
factor to calculate the proposed CY 2018 ASC conversion factor.
    Section 1833(i)(2)(C)(i) of the Act requires that, if the Secretary 
has not updated amounts established under the revised ASC payment 
system in a calendar year, the payment amounts shall be increased by 
the percentage increase in the Consumer Price Index for all urban 
consumers (CPI-U), U.S. city average, as estimated by the Secretary for 
the 12-month period

[[Page 33668]]

ending with the midpoint of the year involved. Therefore, the statute 
does not mandate the adoption of any particular update mechanism, but 
it requires the payment amounts to be increased by the CPI-U in the 
absence of any update. Because the Secretary updates the ASC payment 
amounts annually, we adopted a policy, which we codified at 42 CFR 
416.171(a)(2)(ii), to update the ASC conversion factor using the CPI-U 
for CY 2010 and subsequent calendar years. Therefore, the annual update 
to the ASC payment system is the CPI-U (referred to as the CPI-U update 
factor).
    Section 3401(k) of the Affordable Care Act amended section 
1833(i)(2)(D) of the Act by adding a new clause (v) which requires that 
any annual update under the ASC payment system for the year, after 
application of clause (iv), shall be reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act, 
effective with the calendar year beginning January 1, 2011. The statute 
defines the productivity adjustment to be 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''). 
Clause (iv) of section 1833(i)(2)(D) of the Act authorizes the 
Secretary to provide for a reduction in any annual update for failure 
to report on quality measures. Clause (v) of section 1833(i)(2)(D) of 
the Act states that application of the MFP adjustment to the ASC 
payment system may result in the update to the ASC payment system being 
less than zero for a year and may result in payment rates under the ASC 
payment system for a year being less than such payment rates for the 
preceding year.
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74516), we finalized a policy that ASCs begin submitting data on 
quality measures for services beginning on October 1, 2012 for the CY 
2014 payment determination under the ASC Quality Reporting (ASCQR) 
Program. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68499 through 68500), we finalized a methodology to calculate reduced 
national unadjusted payment rates using the ASCQR Program reduced 
update conversion factor that would apply to ASCs that fail to meet 
their quality reporting requirements for the CY 2014 payment 
determination and subsequent years. The application of the 2.0 
percentage point reduction to the annual update factor, which currently 
is the CPI-U, may result in the update to the ASC payment system being 
less than zero for a year for ASCs that fail to meet the ASCQR Program 
requirements. We amended Sec. Sec.  416.160(a)(1) and 416.171 to 
reflect these policies.
    In accordance with section 1833(i)(2)(C)(i) of the Act, before 
applying the MFP adjustment, the Secretary first determines the 
``percentage increase'' in the CPI-U, which we interpret cannot be a 
negative percentage. Thus, in the instance where the percentage change 
in the CPI-U for a year is negative, we would hold the CPI-U update 
factor for the ASC payment system to zero. For the CY 2014 payment 
determination and subsequent years, under section 1833(i)(2)(D)(iv) of 
the Act, we would reduce the annual update by 2.0 percentage points for 
an ASC that fails to submit quality information under the rules 
established by the Secretary in accordance with section 1833(i)(7) of 
the Act. Section 1833(i)(2)(D)(v) of the Act, as added by section 
3401(k) of the Affordable Care Act, requires that the Secretary reduce 
the annual update factor, after application of any quality reporting 
reduction, by the MFP adjustment, and states that application of the 
MFP adjustment to the annual update factor after application of any 
quality reporting reduction may result in the update being less than 
zero for a year. If the application of the MFP adjustment to the annual 
update factor after application of any quality reporting reduction 
would result in an MFP-adjusted update factor that is less than zero, 
the resulting update to the ASC payment rates would be negative and 
payments would decrease relative to the prior year. We refer readers to 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 72062 
through 72064) for examples of how the MFP adjustment is applied to the 
ASC payment system.
    For this proposed rule, based on IHS Global Insight's (IGI's) 2017 
first quarter forecast with historical data through the fourth quarter 
of 2016, for the 12-month period ending with the midpoint of CY 2018, 
the CPI-U update was projected to be 2.3 percent. Also, based on IGI's 
2017 first quarter forecast, the MFP adjustment for the period ending 
with the midpoint of CY 2018 was projected to be 0.4 percent. We 
finalized the methodology for calculating the MFP adjustment in the CY 
2011 MPFS final rule with comment period (75 FR 73394 through 73396) 
and revised it in the CY 2012 MPFS final rule with comment period (76 
FR 73300 through 73301) and the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70500 through 70501).
    For CY 2018, we are proposing to reduce the CPI-U update of 2.3 
percent by the MFP adjustment of 0.4 percentage point, resulting in an 
MFP-adjusted CPI-U update factor of 1.9 percent for ASCs meeting the 
quality reporting requirements. Therefore, we are proposing to apply a 
1.9 percent MFP-adjusted CPI-U update factor to the CY 2017 ASC 
conversion factor for ASCs meeting the quality reporting requirements. 
The ASCQR Program affected payment rates beginning in CY 2014 and, 
under this program, there is a 2.0 percentage point reduction to the 
CPI-U for ASCs that fail to meet the ASCQR Program requirements. We are 
proposing to reduce the CPI-U update of 2.3 percent by 2.0 percentage 
points for ASCs that do not meet the quality reporting requirements and 
then apply the 0.4 percentage point MFP adjustment. Therefore, we are 
proposing to apply a -0.1 percent MFP-adjusted CPI-U update factor to 
the CY 2017 ASC conversion factor for ASCs not meeting the quality 
reporting requirements. We also are proposing that if more recent data 
are subsequently available (for example, a more recent estimate of the 
CY 2018 CPI-U update and MFP adjustment), we would use such data, if 
appropriate, to determine the CY 2018 ASC update for the final rule 
with comment period.
    For CY 2018, we are proposing to adjust the CY 2017 ASC conversion 
factor ($45.003) by the proposed wage index budget neutrality factor of 
1.0004 in addition to the MFP-adjusted CPI-U update factor of 1.9 
percent discussed above, which results in a proposed CY 2018 ASC 
conversion factor of $45.876 for ASCs meeting the quality reporting 
requirements. For ASCs not meeting the quality reporting requirements, 
we are proposing to adjust the CY 2017 ASC conversion factor ($45.003) 
by the proposed wage index budget neutrality factor of 1.0004 in 
addition to the quality reporting/MFP-adjusted CPI-U update factor of -
0.1 percent discussed above, which results in a proposed CY 2018 ASC 
conversion factor of $44.976.
    We are inviting public comments on these proposals.
4. Comment Solicitation on ASC Payment Reform
a. Historical Perspective
    In 1982, Medicare implemented the ASC benefit to provide payment to 
ASCs to perform certain covered surgical procedures.\24\ ASCs were 
recognized by Medicare as a less costly

[[Page 33669]]

alternative to hospital inpatient care given differences in patient 
acuity and specialization of services which promotes efficient and 
cost-effective delivery of care. Medicare's initial payment rates to 
ASCs were based on ASC historical cost and charge data from 1979 and 
1980 collected from approximately 40 ASCs and used to establish four 
facility payment rate groups (55 FR 4527).
---------------------------------------------------------------------------

    \24\ Omnibus Reconciliation Act of 1980 (ORA), Pub. L. 96-499, 
934(b), 94 Stat. 2599, 2637 (codified, as amended, at 42 U.S.C. 
1395l(i)).
---------------------------------------------------------------------------

    The ASC facility payment rate was set as a standard overhead amount 
based on CMS' (known then as the Health Care Financing Administration 
(HCFA)) estimate of a fair fee, taking into account the costs incurred 
by ASCs generally in providing facility services in connection with the 
performance of a specific procedure. The Report of the Conference 
Committee accompanying section 934 of the Omnibus Budget Reconciliation 
Act of 1980 (P.L. 96-499), which enacted the ASC benefit in December 
1980, states, ``This overhead factor is expected to be calculated on a 
prospective basis * * * utilizing sample survey and similar techniques 
to establish reasonable estimated overhead allowances for each of the 
listed procedures which take account of volume (within reasonable 
limits)'' (H.R. Rep. No 7479, 96th Cong., 2nd Sess. 134 (1980)).
    In 1987, we updated the ASC facility payment rates for the first 
time since 1982. The updated rates were based on the projected increase 
in the CPI-U from September 1982 to January 1988. CMS (then, HCFA) 
rebased payments to ASCs in 1990, relying on a survey of 1986 ASC cost, 
charge, and utilization data. The ASC payments were updated annually 
based on the 1986 cost data until implementation of the revised ASC 
payment system in 2008.
    Congress directed the GAO to conduct a study comparing the relative 
costs of procedures furnished in ASCs to those furnished in HOPDs paid 
under the OPPS, including examining the accuracy of the APC codes with 
respect to surgical procedures furnished in ASCs. On November 30, 2006, 
the GAO published the statutorily mandated report entitled, ``Medicare: 
Payment for Ambulatory Surgical Centers Should Be Based on the Hospital 
Outpatient Payment System'' (GAO-07-86).\25\ As directed by section 
626(d) of Pub. L. 108-173, the report included recommendations on the 
following issues:
---------------------------------------------------------------------------

    \25\ http://www.gao.gov/assets/260/253992.pdf.
---------------------------------------------------------------------------

    1. Appropriateness of using groups of covered services and relative 
weights established for the OPPS as the basis of payment for ASCs.
    2. If the OPPS relative weights are appropriate for this purpose, 
whether the ASC payments should be based on a uniform percentage of the 
payment rates or weights under the OPPS, or should vary, or the weights 
should be revised based on specific procedures or types of services.
    3. Whether a geographic adjustment should be used for ASC payment 
and, if so, the labor and nonlabor shares of such payment.
    We refer readers to the CY 2008 OPPS/ASC final rule with comment 
period (71 FR 42474) for a detailed summary of the GAO's methodology, 
results, and recommendations. Notably, based on the findings from the 
study, the GAO recommended that CMS implement a payment system for 
procedures performed in ASCs based on the OPPS, taking into account the 
lower relative costs of procedures performed in ASCs compared to HOPDs 
in determining ASC payment rates.
    We considered the report's methodology, findings, and 
recommendations implementing the current ASC payment system, effective 
in 2008 (71 FR 42474). Consistent with statutory requirements and the 
GAO's recommendations, we finalized policies to implement a revised ASC 
payment system based on the OPPS resource costs and relativity of 
service offerings.
    The payment system for ASC facility services was designed as a 
prospective payment system to pay all procedures included in an APC a 
standard rate. Under a prospective payment system, payment is set to 
reflect the average cost to furnish a service. That is, some cases may 
be more costly than the average while others may be less costly. This 
type of payment system inherently provides incentives for each facility 
to be more efficient.
    MedPAC conducts an annual review of the ASC payment system and 
submits its findings and recommendations in a report to Congress. As 
part of this review, MedPAC examines indicators such as beneficiaries' 
access to care, capacity and supply of providers, and volume of 
services, in part to assess the adequacy of Medicare payments to ASCs. 
Based on its analysis of indicators of payment adequacy, in its March 
2017 Report to Congress, MedPAC found that the number of Medicare-
certified ASCs had increased, beneficiaries' use of ASCs had increased, 
and access to capital has been adequate. As a result, for CY 2018, 
MedPAC stated that payments to ASCs are adequate and recommended that 
no payment update should be given for 2018 (that is, the update factor 
would be 0 percent). In addition, MedPAC recommended that Congress 
require ASCs to report cost data to enable the Commission to examine 
the growth of ASCs' costs over time and analyze Medicare payments 
relative to the costs of efficient providers, which would help inform 
decisions about the ASC update. Also, while MedPAC is concerned that 
the CPI-U may not reflect ASCs' cost structure, until cost information 
is available from ASCs, MedPAC cannot determine whether an alternative 
update factor would be more appropriate.\26\
---------------------------------------------------------------------------

    \26\ MedPAC. March 2017 Report to Congress. Chapter 5 
``Ambulatory Surgical Center Services''. http://www.medpac.gov/docs/default-source/reports/mar17_medpac_ch5.pdf?sfvrsn=0.
---------------------------------------------------------------------------

b. Solicitation of Comments
    We are broadly interested in feedback, including recommendations 
and ideas for ASC payment system reform. We recognize that ASCs provide 
a critically important access point to beneficiaries who may be too ill 
or have the need for too complicated a procedure to be treated in the 
physician office setting, but for whom hospital care is either not 
medically necessary or undesirable. The current ASC payment system was 
implemented in 2008 and major revisions have not been made since that 
time. Average ASC payment rates have declined relative to OPPS payments 
rates over the past 10 years, from 65 percent of average OPPS rates in 
CY 2008 to 56 percent (as proposed) of average OPPS rates in CY 2018. 
However, in the absence of ASC-specific cost data, it is difficult, if 
not impossible, to determine whether ASC facility payment rates are in 
line with ASC facility resource costs and the impact on beneficiary 
access to care.
    With respect to the update factor that is applied to ASC payments, 
section 1833(i)(2)(C)(i) of the Act requires that, if the Secretary has 
not updated the payment amounts established under the revised ASC 
payment system in a calendar year, the payment amounts shall be 
increased by the percentage increase in the Consumer Price Index for 
all urban consumers (CPI-U), (U.S. city average), as estimated by the 
Secretary for the 12-month period ending with the midpoint of the year 
involved. Therefore, the statute does not mandate the adoption of any 
particular update mechanism, except in the absence of any update, when 
it requires the payment amounts to be increased by the increase in the 
CPI-U.
    CMS adopted a policy, codified at 42 CFR 416.171(a)(2)(ii), to 
update the ASC conversion factor using the CPI-U for CY 2010 and 
subsequent calendar years.

[[Page 33670]]

Therefore, the annual update to the ASC payment system is the CPI-U 
(referred to as the CPI-U update factor). This update factor is 
adjusted by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act, as required by section 
1833(i)(2)(D)(v) of the Act. In this proposed rule, we are soliciting 
comment on the ASC payment system update factor and are interested in 
data from ASCs that would help determine whether the ASC payment system 
should continue to be updated by the CPI-U, or by an alternative update 
factor, such as the hospital market basket, the Medicare Economic 
Index, a blend of update factors or other mechanism. The hospital 
market basket update is typically higher than the CPI-U, while the 
Medicare Economic Index is typically lower. Because the rate update is 
not applied in a budget neutral manner, applying a higher update factor 
would be a cost to the Medicare program while applying a lower update 
factor would result in savings to the Medicare program. As mentioned 
above, in the absence of an alternative update, the Act requires 
payments to ASCs to be increased in an amount equal to the percentage 
increase in the CPI-U.
    With respect to the ASC update, in its March 2017 Report to 
Congress, MedPAC stated that ASCs have a much higher share of expenses 
for supplies and drugs than do hospitals or physician offices, a much 
smaller share of employee compensation costs than hospitals, and a 
smaller share of all other costs (such as rent) than physician offices. 
We are seeking public comment on information related to ASC costs for 
items such as supplies, drugs, employee compensation, rent and other 
inputs as compared to those of hospitals or physician offices, 
including qualitative and quantitative data from ASCs. Information on 
the cost structure of ASCs will help to identify an appropriate 
alternative update factor.
    In addition, we are seeking public comment on whether the Secretary 
should collect cost data from ASCs to use in determining ASC payment 
rates. To the extent commenters recommend that ASC cost data should be 
used in the determination of ASC payment rates, we are seeking comment 
on what specific method of cost collection commenters recommend (such 
as cost reports or a survey). We recognize that the submission of costs 
may be an administrative burden to ASCs, and we are interested in 
comments that detail how we could mitigate the burden of reporting 
costs on ASCs while also collecting enough data to reliably use such 
data in the determination of ASC costs. We note that the ability to 
calculate ASC-specific costs may obviate the need for tying the ASC 
payment system to that of the OPPS. In addition, collecting cost data 
from ASCs could inform whether an alternative input price index would 
be an appropriate proxy for ASC costs or whether an ASC-specific market 
basket should be developed.
    With respect to the ability to adopt payment policies that exist 
under the OPPS into the ASC payment system, as discussed in prior 
rulemaking, due to differences in the systems used to process claims 
for hospitals and ASCs, we were not able to implement certain OPPS 
payment policies in the ASC payment system, such as comprehensive APCs, 
conditional packaging, and the ``FD'' value modifier for device credits 
(79 FR 66923). ASC facilities report services on a professional claim 
(or CMS-1500) rather than an institutional claim (or UB-04) used by 
hospitals. The ASC claim form is processed in the Medicare Claims 
System (MCS), the same system used to process claims submitted by 
physicians and other clinicians, while hospital claims are processed 
through the Fiscal Intermediary Shared System (FISS). In part because 
of differences in the claim form and the claims processing systems, it 
is not always possible to adopt OPPS payment policies into the ASC 
payment system. The resulting divergence in payment policies between 
the two systems may contribute to unintended disparities in payment 
rates for the same services. We are interested in stakeholder comments 
on whether billing on an institutional claim form rather than a 
professional claim form would address some of the issues affecting ASC 
payment reform.
    As noted earlier in this section, we are broadly interested in 
feedback from stakeholders and other interested parties on potential 
reforms to the current ASC payment system, including, but not limited 
to (1) the rate update factor applied to ASC payments, (2) whether and 
how ASCs should submit costs, (3) whether ASCs should bill on the 
institutional claim form rather than the professional claim form, and 
(4) other ideas to improve payment accuracy for ASCs.
5. Display of CY 2018 ASC Payment Rates
    Addenda AA and BB to this proposed rule (which are available on the 
CMS Web site) display the proposed updated ASC payment rates for CY 
2018 for covered surgical procedures and covered ancillary services, 
respectively. For those covered surgical procedures and covered 
ancillary services where the payment rate is the lower of the final 
rates under the ASC standard ratesetting methodology and the MPFS 
proposed rates, the proposed payment indicators and rates set forth in 
this proposed rule are based on a comparison using the proposed MPFS 
rates that would be effective January 1, 2018. For a discussion of the 
MPFS rates, we refer readers to the CY 2018 MPFS proposed rule.
    The proposed payment rates included in these addenda reflect the 
full ASC payment update and not the reduced payment update used to 
calculate payment rates for ASCs not meeting the quality reporting 
requirements under the ASCQR Program. These addenda contain several 
types of information related to the proposed CY 2018 payment rates. 
Specifically, in Addendum AA, a ``Y'' in the column titled ``To be 
Subject to Multiple Procedure Discounting'' indicates that the surgical 
procedure would be subject to the multiple procedure payment reduction 
policy. As discussed in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66829 through 66830), most covered surgical procedures 
are subject to a 50-percent reduction in the ASC payment for the lower-
paying procedure when more than one procedure is performed in a single 
operative session.
    Display of the comment indicator ``CH'' in the column titled 
``Comment Indicator'' indicates a change in payment policy for the item 
or service, including identifying discontinued HCPCS codes, designating 
items or services newly payable under the ASC payment system, and 
identifying items or services with changes in the ASC payment indicator 
for CY 2018. Display of the comment indicator ``NI'' in the column 
titled ``Comment Indicator'' indicates that the code is new (or 
substantially revised) and that comments will be accepted on the 
interim payment indicator for the new code. Display of the comment 
indicator ``NP'' in the column titled ``Comment Indicator'' indicates 
that the code is new (or substantially revised) and that comments will 
be accepted on the ASC payment indicator for the new code.
    The values displayed in the column titled ``Proposed CY 2018 
Payment Weight'' are the proposed relative payment weights for each of 
the listed services for CY 2018. The proposed relative payment weights 
for all covered surgical procedures and covered ancillary services 
where the ASC payment rates are based on OPPS relative payment weights 
were scaled for budget neutrality. Therefore, scaling

[[Page 33671]]

was not applied to the device portion of the device-intensive 
procedures, services that are paid at the MPFS nonfacility PE RVU-based 
amount, separately payable covered ancillary services that have a 
predetermined national payment amount, such as drugs and biologicals 
and brachytherapy sources that are separately paid under the OPPS, or 
services that are contractor-priced or paid at reasonable cost in ASCs.
    To derive the proposed CY 2018 payment rate displayed in the 
``Proposed CY 2018 Payment Rate'' column, each ASC payment weight in 
the ``Proposed CY 2018 Payment Weight'' column was multiplied by the 
proposed CY 2018 conversion factor of $45.876. The proposed conversion 
factor includes a budget neutrality adjustment for changes in the wage 
index values and the annual update factor as reduced by the 
productivity adjustment (as discussed in section XII.G.2.b. of this 
proposed rule).
    In Addendum BB, there are no relative payment weights displayed in 
the ``Proposed CY 2018 Payment Weight'' column for items and services 
with predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``Proposed CY 2018 Payment'' column displays 
the proposed CY 2018 national unadjusted ASC payment rates for all 
items and services. The proposed CY 2018 ASC payment rates listed in 
Addendum BB for separately payable drugs and biologicals are based on 
ASP data used for payment in physicians' offices in April 2017.
    Addendum EE provides the HCPCS codes and short descriptors for 
surgical procedures that are proposed to be excluded from payment in 
ASCs for CY 2018. We are inviting public comments on these proposals.

XIII. Requirements for the Hospital Outpatient Quality Reporting (OQR) 
Program

A. Background

1. Overview
    CMS seeks to promote higher quality and more efficient healthcare 
for Medicare beneficiaries. Consistent with these goals, CMS has 
implemented quality reporting programs for multiple care settings 
including the quality reporting program for hospital outpatient care, 
known as the Hospital Outpatient Quality Reporting (OQR) Program, 
formerly known as the Hospital Outpatient Quality Data Reporting 
Program (HOP QDRP). The Hospital OQR Program is generally aligned with 
the quality reporting program for hospital inpatient services known as 
the Hospital Inpatient Quality Reporting (IQR) Program (formerly known 
as the Reporting Hospital Quality Data for Annual Payment Update 
(RHQDAPU) Program).
    In addition to the Hospital IQR and Hospital OQR Programs, CMS has 
implemented quality reporting programs for other care settings that 
provide financial incentives for the reporting of quality data to CMS. 
These additional programs include reporting for care furnished by:
     Physicians and other eligible professionals, under the 
Physician Quality Reporting System (PQRS, formerly referred to as the 
Physician Quality Reporting Program Initiative (PQRI)). We note that 
2018 is the last year of the PQRS payment adjustment. Beginning in 
2019, eligible clinicians may be subject to upward or downward payment 
adjustments under the Merit-based Incentive Payment System (MIPS) or be 
able to earn a positive payment incentives through participation in 
certain advanced alternative payment models (APMs) under the Quality 
Payment Program (QPP) (81 FR 77008);
     Inpatient rehabilitation facilities, under the Inpatient 
Rehabilitation Facility Quality Reporting Program (IRF QRP);
     Long-term care hospitals, under the Long-Term Care 
Hospital Quality Reporting Program (LTCH QRP);
     PPS-exempt cancer hospitals, under the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program;
     Ambulatory surgical centers, under the Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program;
     Inpatient psychiatric facilities, under the Inpatient 
Psychiatric Facility Quality Reporting (IPFQR) Program;
     Home health agencies, under the Home Health Quality 
Reporting Program (HH QRP); and
     Hospices, under the Hospice Quality Reporting Program 
(HQRP).
    In addition, CMS has implemented several value-based purchasing 
programs that link payment to performance, including the Hospital 
Value-Based Purchasing (VBP) Program; the Hospital-Acquired Condition 
(HAC) Reduction Program; and the End-Stage Renal Disease (ESRD) Quality 
Incentive Program (QIP); and the Quality Payment Program (QPP).
    In implementing the Hospital OQR Program and other quality 
reporting programs, we have focused on measures that have high impact 
and support national priorities for improved quality and efficiency of 
care for Medicare beneficiaries as reflected in the National Quality 
Strategy (NQS) and the CMS Quality Strategy for conditions with 
reported wide cost and treatment variations despite established 
clinical treatment guidelines. To the extent possible under various 
authorizing statutes, our ultimate goal is to align the clinical 
quality measure requirements of the various quality reporting programs. 
As appropriate, we will consider the adoption of measures with 
electronic specifications to enable the collection of this information 
for our quality programs.
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68467 through 68469) for a discussion on the principles 
underlying consideration for future measures that we intend to use in 
implementing this and other quality reporting programs. In this 
proposed rule, we are not proposing any changes to these policies.
2. Statutory History of the Hospital OQR Program
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72064 through 72065) for a detailed discussion of the 
statutory history of the Hospital OQR Program.
3. Regulatory History of the Hospital OQR Program
    We refer readers to the CY 2008 through 2017 OPPS/ASC final rules 
with comment period (72 FR 66860 through 66875; 73 FR 68758 through 
68779; 74 FR 60629 through 60656; 75 FR 72064 through 72110; 76 FR 
74451 through 74492; 77 FR 68467 through 68492; 78 FR 75090 through 
75120; 79 FR 66940 through 66966; 80 FR 70502 through 70526; and 81 FR 
79753 through 79797). We have also codified certain requirements under 
the Hospital OQR Program at 42 CFR 419.46. In this proposed rule, we 
are proposing editorial changes to 42 CFR 419.46, replacing the terms 
``Web'' and ``Web site'' with the terms ``web'' and ``Web site,'' 
respectively.

B. Hospital OQR Program Quality Measures

1. Considerations in the Selection of Hospital OQR Program Quality 
Measures
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74458 through 74460) for a detailed discussion of the 
priorities we consider for the Hospital OQR Program quality measure 
selection. In this proposed rule, we are not proposing any changes to 
our measure selection policy.

[[Page 33672]]

2. Accounting for Social Risk Factors in the Hospital OQR Program
    We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes including reducing health disparities, and 
we want to ensure that all beneficiaries, including those with social 
risk factors, receive high quality care. In addition, we seek to ensure 
that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) \27\ and the 
National Academies of Sciences, Engineering, and Medicine on the issue 
of measuring and accounting for social risk factors in CMS' value-based 
purchasing and quality reporting programs, and considering options on 
how to address the issue in these programs. On December 21, 2016, ASPE 
submitted a Report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors of Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value-based purchasing programs.\28\ The report also included 
considerations for strategies to account for social risk factors in 
these programs. In a January 10, 2017 report released by the National 
Academies of Sciences, Engineering, and Medicine, that body provided 
various potential methods for measuring and accounting for social risk 
factors, including stratified public reporting.\29\
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    \27\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs. 
Available at: https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \28\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs. 
Available at: https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \29\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    As noted in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which new measures, measures 
undergoing maintenance review, and measures endorsed with the condition 
that they enter the trial period can be assessed to determine whether 
risk adjustment for selected social risk factors is appropriate for 
these measures. This trial entails temporarily allowing inclusion of 
social risk factors in the risk-adjustment approach for these measures. 
At the conclusion of the trial, NQF will issue recommendations on the 
future inclusion of social risk factors in risk adjustment for these 
quality measures, and we will closely review its findings.
    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF trial on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we have previously communicated, we are concerned 
about holding providers to different standards for the outcomes of 
their patients with social risk factors because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes 
for disadvantaged populations. Keeping this concern in mind, we are 
seeking public comment on whether we should account for social risk 
factors in the Hospital OQR Program, and if so, what method or 
combination of methods would be most appropriate for accounting for 
social risk factors. Examples of methods include: Confidential 
reporting to providers of measure rates stratified by social risk 
factors; public reporting of stratified measure rates; and potential 
risk adjustment of a particular measure as appropriate based on data 
and evidence.
    In addition, we are seeking public comment on which social risk 
factors might be most appropriate for reporting stratified measure 
scores and/or potential risk adjustment of a particular measure. 
Examples of social risk factors include, but are not limited to, dual 
eligibility/low-income subsidy, race and ethnicity, and geographic area 
of residence. We are seeking comments on which of these factors, 
including current data sources where this information would be 
available, could be used alone or in combination, and whether other 
data should be collected to better capture the effects of social risk. 
We will take commenters' input into consideration as we continue to 
assess the appropriateness and feasibility of accounting for social 
risk factors in the Hospital OQR Program.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), so we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.
3. Retention of Hospital OQR Program Measures Adopted in Previous 
Payment Determinations
    We previously adopted a policy to retain measures from the previous 
year's Hospital OQR Program measure set for subsequent years' measure 
sets in the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68471). Quality measures adopted in a previous year's rulemaking are 
retained in the Hospital OQR Program for use in subsequent years unless 
otherwise specified. We refer readers to that rule for more 
information. In this proposed rule, we are not proposing any changes to 
our retention policy for previously adopted measures.
4. Removal of Quality Measures From the Hospital OQR Program Measure 
Set
a. Considerations in Removing Quality Measures From the Hospital OQR 
Program
    In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43863), for the 
Hospital IQR Program, we finalized a process for immediate retirement, 
which we later termed ``removal,'' of Hospital IQR Program measures 
based on evidence that the continued use of the measure as specified 
raised patient safety concerns. We adopted the same immediate measure 
retirement policy for the Hospital OQR Program in the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60634 through 60635). We refer 
readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68472 through 68473) for a discussion of our reasons for changing the 
term ``retirement'' to ``removal'' in the Hospital OQR Program. In this 
proposed rule, we are not proposing any changes to our policy to 
immediately remove measures as a result of patient safety concerns.
    In the CY 2013 OPPS/ASC final rule with comment period, we 
finalized a set of criteria for determining whether to

[[Page 33673]]

remove measures from the Hospital OQR Program. We refer readers to the 
CY 2013 OPPS/ASC final rule with comment period (77 FR 68472 through 
68473) for a discussion of our policy on removal of quality measures 
from the Hospital OQR Program. The benefits of removing a measure from 
the Hospital OQR Program will be assessed on a case-by-case basis (79 
FR 66941 through 66942). We note that, under this case-by-case 
approach, a measure will not be removed solely on the basis of meeting 
any specific criterion. We refer readers to the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68472 through 68473) for our list of 
factors considered in removing measures from the Hospital OQR Program. 
In this proposed rule, we are not proposing any changes to our measure 
removal policy.
b. Criteria for Removal of ``Topped-Out'' Measures
    We refer readers to the CY 2015 OPPS/ASC final rule with comment 
period where we finalized our proposal to refine the criteria for 
determining when a measure is ``topped-out'' (79 FR 66942). In this 
proposed rule, we are not proposing any changes to our ``topped-out'' 
criteria policy.
c. Measures Proposed for Removal From the Hospital OQR Program
    In this proposed rule, we are proposing to remove a total of six 
measures. Specifically, beginning with the CY 2020 payment 
determination, we are proposing to remove: (1) OP-21: Median Time to 
Pain Management for Long Bone Fracture; and (2) OP-26: Hospital 
Outpatient Volume Data on Selected Outpatient Surgical Procedures. In 
addition, beginning with the CY 2021 payment determination, we are 
proposing to remove: (1) OP-1: Median Time to Fibrinolysis; (2) OP-4: 
Aspirin at Arrival; (3) OP-20: Door to Diagnostic Evaluation by a 
Qualified Medical Professional; and (4) OP-25: Safe Surgery Checklist. 
By removing these six measures, our intent is to alleviate the 
maintenance costs and administrative burden to hospitals associated 
with retaining them. These proposals are discussed in detail below.
(1) Proposed Removal of OP-21: Median Time to Pain Management for Long 
Bone Fracture Beginning With the CY 2020 Payment Determination
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72088), where we adopted the OP-21: Median Time to Pain 
Management for Long Bone Fracture measure. This process of care measure 
assesses the median time from emergency department arrival to time of 
initial oral, nasal, or parenteral pain medication (opioid and non-
opioid) administration for emergency department patients with a 
principal diagnosis of long bone fracture (LBF).
    We have previously finalized a policy to note that the benefits of 
removing a measure from the Hospital OQR Program will be assessed on a 
case-by-case basis (79 FR 66941 through 66942). Accordingly, although 
it does not exactly meet one of the specific measure removal criteria 
finalized for the Hospital OQR Program (77 FR 68472 through 68473), it 
has the potential to lead to negative unintended consequences (removal 
factor #7). Therefore, we are proposing to remove OP-21: Median Time to 
Pain Management for Long Bone Fracture for the CY 2020 payment 
determination and subsequent years due to the concerns described in 
more detail below.
    Given the growing body of evidence on the risks of opioid misuse, 
CMS has developed a strategy to impact the national opioid misuse 
epidemic by combating non-medical use of prescription opioids, opioid 
use disorder, and overdose through the promotion of safe and 
appropriate opioid utilization, improved access to treatment for opioid 
use disorders, and evidence-based practices for acute and chronic pain 
management.\30\
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    \30\ CMS Opioid Misuse Strategy 2016. Retrieved from: https://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/Prescription-Drug-Information-for-Partners-Items/CMS-Opioid-Misuse-Strategy-2016.html.
---------------------------------------------------------------------------

    Due to the potential for a misinterpretation of the intent of the 
measure, we are concerned that OP-21: Median Time to Pain Management 
for Long Bone Fracture may create undue pressure for hospital staff to 
prescribe more opioids. We note that the measure only assesses the time 
to initial, acute administration of pain medication in a specific acute 
clinical situation, and does not promote long-term pain medication 
prescriptions. In fact, this measure assesses an element of appropriate 
pain management, specifically the time to pain medication 
administration in the case of long bone fracture. In addition, the 
measure assesses the use of both opioid and non-opioid pain 
medications. While we acknowledge that pain control is an important 
issue for patients and clinical care, and the measure does not call for 
increased opioid prescriptions, many factors outside the control of CMS 
quality program requirements may contribute to the perception of a link 
between the measure and opioid prescribing practices. Although we are 
not aware of any scientific studies that support an association between 
this measure and opioid prescribing practices, out of an abundance of 
caution, we are proposing to remove the measure in order to remove any 
potential ambiguity and to avoid misinterpretation of the intent of the 
measure. We also note that in the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79856), we removed the Pain Management dimension 
of the HCAHPS Survey in the Patient- and Caregiver-Centered Experience 
of Care/Care Coordination domain beginning with the FY 2018 program 
year for the Hospital VBP Program for similar reasons. In addition, in 
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 20035 through 20039), we 
proposed new pain management questions to replace the current ones in 
the HCAHPS Survey measure for the Hospital IQR Program.
    We are inviting public comment on our proposal to remove the OP-21: 
Median Time to Pain Management for Long Bone Fracture measure for the 
CY 2020 payment determination and subsequent years as discussed above.
(2) Proposed Removal of OP-26: Hospital Outpatient Volume Data on 
Selected Outpatient Surgical Procedures Beginning With the CY 2020 
Payment Determination
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74468), where we adopted OP-26: Hospital Outpatient 
Volume Data on Selected Outpatient Surgical Procedures beginning with 
the CY 2014 payment determination. This measure, which is submitted via 
a web-based tool, collects surgical procedure volume data on eight 
categories of procedures frequently performed in the outpatient 
hospital setting.
    We believe there is a lack of evidence to support this measure's 
link to improved clinical quality. The measure requires hospitals to 
report on the volumes of surgical procedures performed at the 
facility.\31\ This information, number of surgical procedures, does not 
offer insight into the facilities' overall performance or quality 
improvement in regards to surgical procedures. Accordingly, this 
measure meets the following measure removal criterion: performance or 
improvement on a measure does not result in better patient outcomes (79 
FR 66941). We believe the burden of this

[[Page 33674]]

measure, which is submitted via a web-based tool, outweighs the value, 
and therefore, we are proposing to remove OP-26: Hospital Outpatient 
Volume Data on Selected Outpatient Surgical Procedures for the CY 2020 
payment determination and subsequent years. We also refer readers to 
section XIV.B.3.b.(3) of this proposed rule, where the ASCQR Program is 
proposing to remove a similar measure.
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    \31\ OP-26 Measure Information Form. Retrieved from: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FSpecsManualTemplate&cid=1228775748170.
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    We are inviting public comment on our proposal to removal the OP-
26: Hospital Outpatient Volume Data on Selected Outpatient Surgical 
Procedures measure for the CY 2020 payment determination and subsequent 
years as discussed above.
(3) Proposed Removal of OP-1: Median Time to Fibrinolysis Beginning 
With the CY 2021 Payment Determination
    We refer readers to the CY 2008 OPPS/ASC final rule with comment 
period (referred to as ``ED-AMI-2--Median Time to Fibrinolysis'' in 72 
FR 66862 through 66865) where we adopted OP-1: Median Time to 
Fibrinolysis beginning with services furnished in CY 2009. This chart-
abstracted measure assesses the median time from ED arrival to 
administration of fibrinolytic therapy in ED patients with ST-segment 
elevation on the ECG performed closest to ED arrival and prior to 
transfer.
    We believe that this measure meets the following measure removal 
criterion--the availability of a measure that is more strongly 
associated with desired patient outcomes for the particular topic (79 
FR 66941). We note that the currently adopted OP-2: Fibrinolytic 
Therapy Received Within 30 Minutes of ED Arrival (72 FR 66862 through 
66865) has been designed with a threshold that is based on a clinical 
standard, allows us to measure this topic area, and provides meaningful 
and clinically relevant data on the receipt of fibrinolytic therapy. 
National guidelines recommend that fibrinolytic therapy be given within 
30 minutes of hospital arrival in patients with ST-segment elevation 
myocardial infarction.\32\ As a result, because OP-1 measures only the 
median time from door to needle and does not note whether or not that 
value exceeds the clinical best practice of 30 minutes, we do not 
believe that reporting of OP-1 improves quality of care or patient 
outcomes. In addition, we believe that continuing to collect OP-1 would 
be redundant with OP-2. As a result, we are proposing to remove OP-1: 
Median Time to Fibrinolysis for the CY 2021 payment determination and 
subsequent years. We note that although OP-1: Median Time to 
Fibrinolysis is a chart-abstracted measure, we do not expect removing 
this measure would reduce burden, as the data collected for this 
measure is required to calculate another program measure in the AMI 
measure set (OP-2: Fibrinolytic Therapy Received Within 30 Minutes of 
ED Arrival) and will therefore continue to be collected even if the 
proposal to remove OP-1 is finalized as proposed.
---------------------------------------------------------------------------

    \32\ Antman EM, Hand M, Armstrong PW, Bates ER, Green LA, 
Halasyamani LK, et al. 2007 focused update of the ACC/AHA 2004 
Guidelines for the Management of Patients With ST-Elevation 
Myocardial Infarction: a report of the American College of 
Cardiology/American Heart Association Task Force on Practice 
Guidelines (Writing Group to Review New Evidence and Update the ACC/
AHA 2004 Guidelines for the Management of Patients With ST-Elevation 
Myocardial Infarction). J Am Coll Cardiol. 2008; 51:210-47.
---------------------------------------------------------------------------

    We are inviting public comment on our proposal to remove OP-1: 
Median Time to Fibrinolysis for the CY 2021 payment determination and 
subsequent years as discussed above.
(4) Proposed Removal of OP-4: Aspirin at Arrival Beginning With the CY 
2021 Payment Determination
    We refer readers to the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66862 through 66865) where we adopted OP-4: Aspirin at 
Arrival beginning with services furnished in CY 2009. This chart-
abstracted measure assesses the rate of patients with chest pain or 
possible heart attack who received aspirin within 24 hours of arrival 
or before transferring from the emergency department.
    We previously finalized two criteria for determining when a measure 
is ``topped out'' under the Hospital OQR Program: (1) When there is 
statistically indistinguishable performance at the 75th and 90th 
percentiles of national facility performance; and (2) when the 
measure's truncated coefficient of variation (COV) is less than or 
equal to 0.10 (79 FR 66942). Based on our analysis of Hospital OQR 
Program measure data, we have determined that performance on this 
measure is so high and unvarying that meaningful distinctions in 
improvement cannot be made; specifically, our analyses show that there 
is statistically indistinguishable performance at the 75th and 90th 
percentiles of national facility performance for this measure. These 
analyses are captured in the table below.

                                            OP-4 Topped Out Analysis
----------------------------------------------------------------------------------------------------------------
                                                     Number of         75th            90th
                   Encounters                        hospitals      percentile      percentile     Truncated COV
----------------------------------------------------------------------------------------------------------------
CY 2014.........................................           1,706          100.00          100.00           0.030
CY 2015.........................................           1,749          100.00          100.00           0.035
CY 2016.........................................           1,803          100.00          100.00           0.042
----------------------------------------------------------------------------------------------------------------

    As displayed in the table above, there is no distinguishable 
difference in hospital performance between the 75th and 90th 
percentiles under the OP-4 measure, and the truncated coefficient of 
variation has been below 0.10 since 2014. Therefore, this OP-4 measure 
meets both ``topped out'' measure criteria for the ASCQR Program.
    Thus, we believe the burden of reporting this chart-abstracted 
measure is not justified by the value of retaining it in the program 
and are proposing to remove OP-4: Aspirin at Arrival from the program 
for the CY 2021 payment determination and subsequent years.
    We are inviting public comment on our proposal to remove the OP-4: 
Aspirin at Arrival measure for the CY 2021 payment determination and 
subsequent years as discussed above.
(5) Proposed Removal of OP-20: Door to Diagnostic Evaluation by a 
Qualified Medical Professional Beginning With the CY 2021 Payment 
Determination
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72087-72088) where we adopted OP-20: Door to Diagnostic 
Evaluation by a Qualified Medical Professional for the CY 2013 payment 
determination. This chart-abstracted measure assesses the time from ED

[[Page 33675]]

arrival to provider contact for Emergency Department patients.
    During regular measure maintenance, specific concerns about OP-20 
were raised by a Technical Expert Panel (TEP), which was made up of 
experts representing a variety of stakeholders and was convened by a 
CMS contractor. These concerns include: (1) Limited evidence linking 
the measure to improved patient outcomes; (2) validity concerns related 
to wait times and the accuracy of door-to-door time stamps; and (3) 
potential for skewed measure performance due to disease severity and 
institution-specific confounders. After our own analysis, we agree with 
the TEP's analysis and believe that this measure meets the following 
measure removal criterion: Performance or improvement on a measure does 
not result in better patient outcomes. As a result, we believe the 
burden of continuing to include this chart-abstracted measure in the 
program outweighs the benefits; and thus, we are proposing to remove 
OP-20: Door to Diagnostic Evaluation by a Qualified Medical 
Professional for the CY 2021 payment determination and subsequent 
years.
    We are inviting public comment on our proposal to remove OP-20: 
Door to Diagnostic Evaluation by a Qualified Medical Professional for 
the CY 2021 payment determination and subsequent years as discussed 
above.
(6) Proposed Removal of OP-25: Safe Surgery Checklist Use Beginning 
With the CY 2021 Payment Determination
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74464-74466), where we adopted OP-25: Safe Surgery 
Checklist Use beginning with the CY 2014 payment determination. This 
structural measure of hospital process assesses whether a hospital 
employed a safe surgery checklist that covered each of the three 
critical perioperative periods (prior to administering anesthesia, 
prior to skin incision, and prior to patient leaving the operating 
room) for the entire data collection period. Based on our review of 
reported data under the measure, this measure meets our first criterion 
for measure removal that measure performance is so high and unvarying 
that meaningful distinctions and improvements in performance can no 
longer be made.
    The Hospital OQR Program previously finalized two criteria for 
determining when a measure is ``topped out:'' (1) when there is 
statistically indistinguishable performance at the 75th and 90th 
percentiles of national facility performance; and (2) when the 
measure's truncated coefficient of variation is less than or equal to 
0.10 (79 FR 66942). Our estimations indicate that performance on this 
measure is trending towards topped out status. This analysis is 
captured in the table below.

                                           OP-25 Performance Analysis
----------------------------------------------------------------------------------------------------------------
                                     Number of                         75th            90th
           Encounters                hospitals         Rate         percentile      percentile     Truncated COV
----------------------------------------------------------------------------------------------------------------
CY 2012.........................           3,227           0.910         100.000         100.000           0.314
CY 2013.........................           3,184           0.949         100.000         100.000           0.232
CY 2014.........................           3,177           0.963         100.000         100.000           0.196
CY 2015.........................           3,166           0.970         100.000         100.000           0.176
----------------------------------------------------------------------------------------------------------------

    Based on the analysis above, the national rate of ``Yes'' response 
for the OP-25 measure is nearly 1.0, or 100 percent, nationwide, and 
has remained at this level for the last two years. In addition, the 
truncated coefficient of variation has decreased such that it is 
trending towards 0.10 and there is no distinguishable difference in 
hospital performance between the 75th and 90th percentiles. We have 
previously stated the benefits of removing a measure from the Hospital 
OQR Program will be assessed on a case-by-case basis (79 FR 66941 
through 66942). We believe that removal of this measure from the 
Hospital OQR Program measure set is appropriate, as there is little 
room for improvement. We believe that the safe surgical checklist is 
widely used and that hospitals will continue its use. In addition, 
removal of this measure would alleviate the administrative burden to 
hospitals associated with reporting on this measure. As such, we 
believe the reporting burden of this measure outweigh the benefits of 
keeping the measure in the Hospital OQR Program.
    Therefore, we are proposing to remove OP-25: Safe Surgery Checklist 
Use for the CY 2021 payment determination and subsequent years. We 
refer readers to section XIV.B.3.b.(2) of this proposed rule, where the 
ASCQR Program is also proposing to remove a similar measure.
    We are inviting public comment on our proposal to remove the OP-25: 
Safe Surgery Checklist Use measure for the CY 2021 payment 
determination and subsequent years as discussed above.
5. Proposal to Delay OP-37a-e: Outpatient and Ambulatory Surgery 
Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) 
Survey-Based Measures Beginning With the CY 2020 Payment Determination
    We refer readers to the CY 2017 OPPS/ASC final rule with comment 
period where we adopted OP-37a-e (81 FR 79771-79784), and finalized 
data collection and data submission timelines (81 FR 79792 through 
79794). These measures assess patients' experience with care following 
a procedure or surgery in a hospital outpatient department by rating 
patient experience as a means for empowering patients and improving the 
quality of their care.
    In this proposed rule, we are proposing to delay implementation of 
the Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare 
Providers and Systems (OAS CAHPS) Survey Based Measures OP-37a-e 
beginning with the CY 2020 payment determination (2018 data collection) 
and subsequent years. Since our adoption of these measures, we have 
come to believe that we lack important operational and implementation 
data. Specifically, we want to ensure that the survey measures 
appropriately account for patient response rates, both aggregate and by 
survey administration method; reaffirm the reliability of national OAS 
CAHPS survey data; and appropriately account for the burden associated 
with administering the survey in the outpatient setting of care. We 
note that commenters expressed concern over the burden associated with 
the survey in the CY 2017 OPPS/ASC final rule with comment period (81 
FR 79777). We believe that the national implementation of the survey, 
which began in January 2016 and will conclude in December 2017, would 
provide valuable information moving forward. We plan to conduct 
analyses of the national implementation data to undertake any necessary 
modifications to the survey tool and/or CMS systems. We believe it is 
important to allow time

[[Page 33676]]

for any modifications before requiring the survey under the Hospital 
OQR Program. However, we continue to believe that these measures 
address an area of care that is not adequately addressed in our current 
measure set and will be useful to assess aspects of care where the 
patient is the best or only source of information. Further, we continue 
to believe these measures will enable objective and meaningful 
comparisons between hospital outpatient departments. Therefore, we are 
proposing to delay implementation of OP-37a-e beginning with the CY 
2020 payment determination (2018 data collection) until further action 
in future rulemaking. We also refer readers to section XIV.B.4. of this 
proposed rule where we are making a similar proposal in the ASCQR 
Program.
    We are inviting public comment on our proposal to delay the OAS 
CAHPS survey measures beginning with the CY 2020 payment determination 
(2018 data collection) as discussed above.
6. Previously Adopted Hospital OQR Program Measure Set for the CY 2020 
Payment Determination and Subsequent Years
    We refer readers to the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79784) for the previously finalized measure set for the 
Hospital OQR Program CY 2020 payment determination and subsequent 
years. These measures also are listed below.

  Previously Finalized Hospital OQR Program Measure Set for the CY 2020
               Payment Determination and Subsequent Years
------------------------------------------------------------------------
           NQF No.                           Measure name
------------------------------------------------------------------------
0287........................  OP-1: Median Time to Fibrinolysis.[dagger]
0288........................  OP-2: Fibrinolytic Therapy Received Within
                               30 Minutes of ED Arrival.
0290........................  OP-3: Median Time to Transfer to Another
                               Facility for Acute Coronary Intervention.
0286........................  OP-4: Aspirin at Arrival.[dagger]
0289........................  OP-5: Median Time to ECG.[dagger]
0514........................  OP-8: MRI Lumbar Spine for Low Back Pain.
None........................  OP-9: Mammography Follow-up Rates.
None........................  OP-10: Abdomen CT--Use of Contrast
                               Material.
0513........................  OP-11: Thorax CT--Use of Contrast
                               Material.
None........................  OP-12: The Ability for Providers with HIT
                               to Receive Laboratory Data Electronically
                               Directly into their ONC-Certified EHR
                               System as Discrete Searchable Data.
0669........................  OP-13: Cardiac Imaging for Preoperative
                               Risk Assessment for Non-Cardiac, Low-Risk
                               Surgery.
None........................  OP-14: Simultaneous Use of Brain Computed
                               Tomography (CT) and Sinus Computed
                               Tomography (CT).
0491........................  OP-17: Tracking Clinical Results between
                               Visits.[dagger]
0496........................  OP-18: Median Time from ED Arrival to ED
                               Departure for Discharged ED Patients.
None........................  OP-20: Door to Diagnostic Evaluation by a
                               Qualified Medical Professional.
0662........................  OP-21: Median Time to Pain Management for
                               Long Bone Fracture.
0499........................  OP-22: Left Without Being Seen.[dagger]
0661........................  OP-23: Head CT or MRI Scan Results for
                               Acute Ischemic Stroke or Hemorrhagic
                               Stroke who Received Head CT or MRI Scan
                               Interpretation Within 45 minutes of ED
                               Arrival.
None........................  OP-25: Safe Surgery Checklist Use.
None........................  OP-26: Hospital Outpatient Volume on
                               Selected Outpatient Surgical Procedures.*
0431........................  OP-27: Influenza Vaccination Coverage
                               among Healthcare Personnel.
0658........................  OP-29: Appropriate Follow-Up Interval for
                               Normal Colonoscopy in Average Risk
                               Patients.**
0659........................  OP-30: Colonoscopy Interval for Patients
                               with a History of Adenomatous Polyps--
                               Avoidance of Inappropriate Use.**
1536........................  OP-31: Cataracts: Improvement in Patient's
                               Visual Function within 90 Days Following
                               Cataract Surgery.***
2539........................  OP-32: Facility 7-Day Risk-Standardized
                               Hospital Visit Rate after Outpatient
                               Colonoscopy.
1822........................  OP-33: External Beam Radiotherapy for Bone
                               Metastases.
None........................  OP-35: Admissions and Emergency Department
                               (ED) Visits for Patients Receiving
                               Outpatient Chemotherapy.
2687........................  OP-36: Hospital Visits after Hospital
                               Outpatient Surgery.
None........................  OP-37a: OAS CAHPS--About Facilities and
                               Staff.****
None........................  OP-37b: OAS CAHPS--Communication About
                               Procedure.****
None........................  OP-37c: OAS CAHPS--Preparation for
                               Discharge and Recovery.****
None........................  OP-37d: OAS CAHPS--Overall Rating of
                               Facility.****
None........................  OP-37e: OAS CAHPS--Recommendation of
                               Facility.****
------------------------------------------------------------------------
[dagger] We note that NQF endorsement for this measure was removed.
* OP-26: Procedure categories and corresponding HCPCS codes are located
  at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244 9981244.
** We note that measure name was revised to reflect NQF title.
*** Measure voluntarily collected as set forth in section XIII.D.3.b. of
  the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
  through 66947).
**** Proposed to delay measure reporting beginning with CY 2018
  reporting and for subsequent years as discussed in section XIII.B.5.
  of this proposed rule.

7. Summary of the Hospital OQR Program Measure Set Proposed for the CY 
2020 and CY 2021 Payment Determinations and Subsequent Years
    In this proposed rule, we are not proposing any new measures for 
the Hospital OQR Program. However, we are proposing to remove a number 
of measures for both the CY 2020 and 2021 payment determinations in 
section XIII.B.4.c. of this proposed rule, above, and we are proposing 
to delay OP-37a-e beginning with the CY 2020 payment determination 
(2018 data collection) in section XIII.B.5. of this proposed rule. The 
tables below outline the Hospital OQR Program measure set we are 
proposing in this proposed rule for the CY 2020 and CY 2021 payment 
determination and subsequent years, respectively. Both of these charts 
reflect the measure set as if our proposals to remove measures and to 
delay reporting of OP-37a-e beginning with CY 2018 reporting and for 
subsequent years are finalized as proposed.

[[Page 33677]]



    Hospital OQR Program Measure Set Proposed for the CY 2020 Payment
                              Determination
------------------------------------------------------------------------
           NQF No.                           Measure name
------------------------------------------------------------------------
0287........................  OP-1: Median Time to Fibrinolysis.[dagger]
0288........................  OP-2: Fibrinolytic Therapy Received Within
                               30 Minutes of ED Arrival.
0290........................  OP-3: Median Time to Transfer to Another
                               Facility for Acute Coronary Intervention.
0286........................  OP-4: Aspirin at Arrival.[dagger]
0289........................  OP-5: Median Time to ECG.[dagger]
0514........................  OP-8: MRI Lumbar Spine for Low Back Pain.
None........................  OP-9: Mammography Follow-up Rates.
None........................  OP-10: Abdomen CT--Use of Contrast
                               Material.
0513........................  OP-11: Thorax CT--Use of Contrast
                               Material.
None........................  OP-12: The Ability for Providers with HIT
                               to Receive Laboratory Data Electronically
                               Directly into their ONC-Certified EHR
                               System as Discrete Searchable Data.
0669........................  OP-13: Cardiac Imaging for Preoperative
                               Risk Assessment for Non-Cardiac, Low-Risk
                               Surgery.
None........................  OP-14: Simultaneous Use of Brain Computed
                               Tomography (CT) and Sinus Computed
                               Tomography (CT).
0491........................  OP-17: Tracking Clinical Results between
                               Visits.[dagger]
0496........................  OP-18: Median Time from ED Arrival to ED
                               Departure for Discharged ED Patients.
None........................  OP-20: Door to Diagnostic Evaluation by a
                               Qualified Medical Professional.
0499........................  OP-22: Left Without Being Seen.[dagger]
0661........................  OP-23: Head CT or MRI Scan Results for
                               Acute Ischemic Stroke or Hemorrhagic
                               Stroke who Received Head CT or MRI Scan
                               Interpretation Within 45 minutes of ED
                               Arrival.
None........................  OP-25: Safe Surgery Checklist Use.
0431........................  OP-27: Influenza Vaccination Coverage
                               among Healthcare Personnel.
0658........................  OP-29: Appropriate Follow-Up Interval for
                               Normal Colonoscopy in Average Risk
                               Patients.*
0659........................  OP-30: Colonoscopy Interval for Patients
                               with a History of Adenomatous Polyps--
                               Avoidance of Inappropriate Use.*
1536........................  OP-31: Cataracts: Improvement in Patient's
                               Visual Function within 90 Days Following
                               Cataract Surgery.**
2539........................  OP-32: Facility 7-Day Risk-Standardized
                               Hospital Visit Rate after Outpatient
                               Colonoscopy.
1822........................  OP-33: External Beam Radiotherapy for Bone
                               Metastases.
None........................  OP-35: Admissions and Emergency Department
                               (ED) Visits for Patients Receiving
                               Outpatient Chemotherapy.
2687........................  OP-36: Hospital Visits after Hospital
                               Outpatient Surgery.
None........................  OP-37a: OAS CAHPS--About Facilities and
                               Staff.***
None........................  OP-37b: OAS CAHPS--Communication About
                               Procedure.***
None........................  OP-37c: OAS CAHPS--Preparation for
                               Discharge and Recovery.***
None........................  OP-37d: OAS CAHPS--Overall Rating of
                               Facility.***
None........................  OP-37e: OAS CAHPS--Recommendation of
                               Facility.***
------------------------------------------------------------------------
[dagger] We note that NQF endorsement for this measure was removed.
[deg] OP-26: Procedure categories and corresponding HCPCS codes are
  located at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244 9981244.
* We note that measure name was revised to reflect NQF title.
** Measure voluntarily collected as set forth in section XIII.D.3.b. of
  the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
  through 66947).
*** Proposed to delay measure reporting beginning with CY 2018 reporting
  and for subsequent years as discussed in section XIII.B.5. of this
  proposed rule.

    In addition, the table below outlines the Hospital OQR Program 
measure set we are proposing in this proposed rule for the CY 2021 
payment determination and subsequent years.

    Hospital OQR Program Measure Set Proposed for the CY 2021 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
           NQF No.                           Measure name
------------------------------------------------------------------------
0288........................  OP-2: Fibrinolytic Therapy Received Within
                               30 Minutes of ED Arrival.
0290........................  OP-3: Median Time to Transfer to Another
                               Facility for Acute Coronary Intervention.
0289........................  OP-5: Median Time to ECG.[dagger]
0514........................  OP-8: MRI Lumbar Spine for Low Back Pain.
None........................  OP-9: Mammography Follow-up Rates.
None........................  OP-10: Abdomen CT--Use of Contrast
                               Material.
0513........................  OP-11: Thorax CT--Use of Contrast
                               Material.
None........................  OP-12: The Ability for Providers with HIT
                               to Receive Laboratory Data Electronically
                               Directly into their ONC-Certified EHR
                               System as Discrete Searchable Data.
0669........................  OP-13: Cardiac Imaging for Preoperative
                               Risk Assessment for Non-Cardiac, Low-Risk
                               Surgery.
None........................  OP-14: Simultaneous Use of Brain Computed
                               Tomography (CT) and Sinus Computed
                               Tomography (CT).
0491........................  OP-17: Tracking Clinical Results between
                               Visits.[dagger]
0496........................  OP-18: Median Time from ED Arrival to ED
                               Departure for Discharged ED Patients.
0499........................  OP-22: Left Without Being Seen.[dagger]
0661........................  OP-23: Head CT or MRI Scan Results for
                               Acute Ischemic Stroke or Hemorrhagic
                               Stroke who Received Head CT or MRI Scan
                               Interpretation Within 45 minutes of ED
                               Arrival.
0431........................  OP-27: Influenza Vaccination Coverage
                               among Healthcare Personnel.
0658........................  OP-29: Appropriate Follow-Up Interval for
                               Normal Colonoscopy in Average Risk
                               Patients.*
0659........................  OP-30: Colonoscopy Interval for Patients
                               with a History of Adenomatous Polyps--
                               Avoidance of Inappropriate Use.*

[[Page 33678]]

 
1536........................  OP-31: Cataracts: Improvement in Patient's
                               Visual Function within 90 Days Following
                               Cataract Surgery.**
2539........................  OP-32: Facility 7-Day Risk-Standardized
                               Hospital Visit Rate after Outpatient
                               Colonoscopy.
1822........................  OP-33: External Beam Radiotherapy for Bone
                               Metastases.
None........................  OP-35: Admissions and Emergency Department
                               (ED) Visits for Patients Receiving
                               Outpatient Chemotherapy.
2687........................  OP-36: Hospital Visits after Hospital
                               Outpatient Surgery.
None........................  OP-37a: OAS CAHPS--About Facilities and
                               Staff.***
None........................  OP-37b: OAS CAHPS--Communication About
                               Procedure.***
None........................  OP-37c: OAS CAHPS--Preparation for
                               Discharge and Recovery.***
None........................  OP-37d: OAS CAHPS--Overall Rating of
                               Facility.***
None........................  OP-37e: OAS CAHPS--Recommendation of
                               Facility.***
------------------------------------------------------------------------
[dagger] We note that NQF endorsement for this measure was removed.
[deg] OP-26: Procedure categories and corresponding HCPCS codes are
  located at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1196289981244 9981244.
* We note that measure name was revised to reflect NQF title.
** Measure voluntarily collected as set forth in section XIII.D.3.b. of
  the CY 2015 OPPS/ASC final rule with comment period (79 FR 66946
  through 66947).
*** Proposed to delay measure reporting beginning with CY 2018 reporting
  and for subsequent years as discussed in section XIII.B.5. of this
  proposed rule.

8. Hospital OQR Program Measures and Topics for Future Consideration
    In this proposed rule, we are seeking public comment on: (1) Future 
measure topics; and (2) future development of OP-2: Fibrinolytic 
Therapy Received Within 30 Minutes of ED Arrival as an electronic 
clinical quality measure (eCQM). These are discussed in detail below.
a. Future Measure Topics
    We seek to develop a comprehensive set of quality measures to be 
available for widespread use for informed decision-making and quality 
improvement in the hospital outpatient setting. The current measure set 
for the Hospital OQR Program includes measures that assess process of 
care, imaging efficiency patterns, care transitions, ED throughput 
efficiency, Health Information Technology (health IT) use, care 
coordination, and patient safety. Measures are of various types, 
including those of process, structure, outcome, and efficiency. Through 
future rulemaking, we intend to propose new measures that help us 
further our goal of achieving better health care and improved health 
for Medicare beneficiaries who receive health care in hospital 
outpatient settings, while aligning quality measures across the 
Medicare program.
    We are moving towards the use of outcome measures and away from the 
use of clinical process measures across our Medicare quality reporting 
and value-based purchasing programs. We are inviting public comments on 
possible measure topics for future consideration in the Hospital OQR 
Program. We specifically request comment on any outcome measures that 
would be useful to add to the Hospital OQR Program as well as any 
clinical process measures that should be eliminated from the Hospital 
OQR Program.
b. Possible Future Adoption of the Electronic Version of OP-2: 
Fibrinolytic Therapy Received Within 30 Minutes of Emergency Department 
Arrival
    We have previously stated that automated electronic extraction and 
reporting of clinical quality data, including measure results 
calculated automatically by appropriately certified health IT, could 
significantly reduce the administrative burden on hospitals under the 
Hospital OQR Program (81 FR 79785). In the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79786), some commenters supported CMS' goal 
to incorporate electronic clinical quality measures (eCQMs) in the 
Hospital OQR Program.
    OP-2: Fibrinolytic Therapy Received Within 30 Minutes of Emergency 
Department Arrival was finalized in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66865), where it was designated as ED-AMI-3. 
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68761), 
the measure was re-labeled as OP-2 for the CY 2010 payment 
determination and subsequent years. OP-2 measures the number of AMI 
patients receiving fibrinolytic therapy during the ED visit with a time 
from hospital arrival to fibrinolysis of 30 minutes or less.
    We are considering developing OP-2: Fibrinolytic Therapy Received 
Within 30 Minutes of Emergency Department Arrival \33\ as an eCQM and 
proposing the eCQM in future rulemaking. We note that since OP-2 is not 
yet developed as an eCQM, electronic measure specifications are not 
available at this time. We are considering OP-2 in particular because 
we believe it is the most feasible out of all the existing Hospital OQR 
Program measures.
---------------------------------------------------------------------------

    \33\ eCQI Resource Center: https://ecqi.healthit.gov/eh/ecqms-2016-reporting-period/fibrinolytic-therapy-received-within-30-minutes-hospital-arrival.
---------------------------------------------------------------------------

    We are inviting public comment on the possible future development 
and future adoption of an eCQM version of OP-2: Fibrinolytic Therapy 
Received Within 30 Minutes of Emergency Department Arrival.
9. Maintenance of Technical Specifications for Quality Measures
    CMS maintains technical specifications for previously adopted 
Hospital OQR Program measures. These specifications are updated as we 
modify the Hospital OQR Program measure set. The manuals that contain 
specifications for the previously adopted measures can be found on the 
QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1196289981244.
    For a history of our policies regarding maintenance of technical 
specifications for quality measures, we refer readers to the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60631), the CY 2011 
OPPS/ASC final rule with comment period (75 FR 72069), and the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68469 through 68470). In 
this proposed rule, we are not proposing any changes to our technical 
specifications policies.

[[Page 33679]]

10. Public Display of Quality Measures
a. Background
    We refer readers to the CY 2014 and CY 2017 OPPS/ASC final rules 
with comment period (78 FR 75092 and 81 FR 79791, respectively) for our 
previously finalized policies regarding public display of quality 
measures.
    In this proposed rule, we are proposing to update public reporting 
for the OP-18 measure.
b. Public Reporting of OP-18c: Median Time From Emergency Department 
Arrival to Emergency Department Departure for Discharged Emergency 
Department Patients--Psychiatric/Mental Health Patients
    OP-18 was finalized for reporting for the CY 2013 payment 
determination and subsequent years in the CY 2011 OPPS/ASC final rule 
with comment period (75 FR 72086). This measure addresses ED efficiency 
in the form of the median time from ED arrival to time of departure 
from the ED for patients discharged from the ED (also known as ED 
throughput). Reducing the time patients spend in the ED can improve the 
quality of care. As discussed in the measure specifications and Measure 
Information Form (MIF), 34 35 OP-18 measure data is 
stratified into four separate calculations: (1) OP-18a is defined as 
the overall rate; (2) OP-18b is defined as the reporting measure; (3) 
OP-18c is defined as assessing Psychiatric/Mental Health Patients; and 
(4) OP-18d is defined as assessing Transfer Patients.
---------------------------------------------------------------------------

    \34\ A Measure Information Form provides detail on the rationale 
for a measure as well as the relevant numerator statements, 
denominator statements and measure calculations.
    \35\ Hospital OQR Program ED Throughput Measures Information 
Form: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FSpecsManualTemplate&cid=1228775748170.
---------------------------------------------------------------------------

    Section 1833(t)(17)(E) of the Act, requires that the Secretary 
establish procedures to make data collected under the Hospital OQR 
Program available to the public and that such procedures must ensure 
that a hospital has the opportunity to review the data that are to be 
made public, with respect to the hospital prior to such data being made 
public. Currently, and as detailed in the OP-18 MIF, the OP-18 measure 
publicly reports data only for the calculations designated as OP-18b: 
Median Time from Emergency Department Arrival to Emergency Department 
Departure for Discharged Emergency Department Patients--Reporting 
Measure, which excludes psychiatric/mental health patients and transfer 
patients.\36\
---------------------------------------------------------------------------

    \36\ Hospital OQR Program ED Throughput Measures Information 
Form: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FSpecsManualTemplate&cid=1228775748170.
---------------------------------------------------------------------------

    The ICD-10 diagnostic codes for OP-18c include numerous substance 
abuse codes for inclusion in this subset, along with numerous non-
substance abuse codes. We believe it is important to publicly report 
data for OP-18c (Median Time from Emergency Department Arrival to 
Emergency Department Departure for Discharged Emergency Department 
Patients--Psychiatric/Mental Health Patients) to address a behavioral 
health gap in the publicly reported Hospital OQR Program measure set. 
Therefore, in this proposed rule, we are proposing to also publicly 
report OP-18c and begin public reporting as early as July of 2018 using 
data from patient encounters during the third quarter of 2017. In 
addition, we would make corresponding updates to our MIF to reflect 
these proposals,\37\ such as: (1) Renaming OP-18b from ``Median Time 
from Emergency Department Arrival to Emergency Department Departure for 
Discharged Emergency Department Patients--Reporting Measure'' to ``OP-
18b: Median Time from Emergency Department Arrival to Emergency 
Department Departure for Discharged Emergency Department Patients--
Excluding Psychiatric/Mental Health Patients and Transfer Patients;'' 
and (2) modifying the form to reflect that OP-18c would also be 
publicly reported. Administrative changes made to the MIF would not 
affect hospital reporting requirements or burden. The data required for 
public reporting are already collected and submitted by participating 
outpatient hospital departments and that our proposal to publicly 
report OP-18c does not create additional burden. We note that hospitals 
would be able to preview this data in accordance with our previously 
established 30-day preview period procedures (81 FR 79791).
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    In developing this proposal, we also considered proposing to 
publicly report around July 2019 (not 2018 as proposed) using data from 
patient encounters occurring during the first quarter of 2018. However, 
we decided against this timeline, because under this reporting option, 
we would not be able to publicly report behavioral health data until as 
early as July of 2019, creating a delay in our efforts to address the 
behavioral health data gap in the publicly reported measure set.
    We are inviting public comment on our proposal to publicly report 
OP-18c: Median Time from Emergency Department Arrival to Emergency 
Department Departure for Discharged Emergency Department Patients--
Psychiatric/Mental Health Patients beginning with third quarter 2017 
data as discussed above.

C. Administrative Requirements

1. QualityNet Account and Security Administrator
    The previously finalized QualityNet security administrator 
requirements, including setting up a QualityNet account and the 
associated timelines, are described in the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75108 through 75109). In that final rule 
with comment period, we codified these procedural requirements at 42 
CFR 419.46(a).
2. Requirements Regarding Participation Status
a. Background
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75108 through 75109) and the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70519) for requirements for participation 
and withdrawal from the Hospital OQR Program. We also codified these 
procedural requirements at 42 CFR 419.46(a) and 42 CFR 419.46(b). In 
this proposed rule, we are proposing changes to the NOP submission 
deadline, as described below.
b. Proposed Changes to the NOP Submission Deadline
    We finalized in the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 75108 through 75109) that participation in the Hospital OQR 
Program requires that hospitals must: (1) Register on the QualityNet 
Web site before beginning to report data; (2) identify and register a 
QualityNet security administrator; and (3) complete and submit an 
online participation form available at the QualityNet.org Web site if 
this form has not been previously completed, if a hospital has 
previously withdrawn, or if the hospital acquires a new CMS 
Certification Number (CCN). In addition, in the CY 2014 OPPS/ASC final 
rule with comment period (78 FR 75108 through 75109) we finalized the 
requirement that hospitals must submit the NOP according to the 
following deadlines:

[[Page 33680]]

     If a hospital has a Medicare acceptance date before 
January 1 of the year prior to the affected annual payment update, the 
hospital must complete and submit to CMS a completed Hospital OQR 
Program Notice of Participation Form by July 31 of the calendar year 
prior to the affected annual payment update.
     If a hospital has a Medicare acceptance date on or after 
January 1 of the year prior to the affected annual payment update, the 
hospital must submit a completed participation form no later than 180 
days from the date identified as its Medicare acceptance date.
    These requirements are also codified at 42 CFR 419.46(a).
    In this proposed rule, beginning with the CY 2020 payment 
determination, we are proposing to: (1) Revise the NOP submission 
deadline described above, and (2) make corresponding revisions at 42 
CFR 419.46(a). Specifically, we are proposing to change the NOP 
submission deadlines such that hospitals are required to submit the NOP 
any time prior to registering on the QualityNet Web site, rather than 
by the deadlines specified above. For example, under this proposal, and 
in accordance with the data submission deadlines described in section 
XIII.D.1. of this proposed rule, below and finalized in the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70519 through 70520), a 
hospital submitting data for Q1 2019 encounters would be required to 
submit the NOP only prior to registering on the QualityNet Web site, 
which must be done prior to the data submission deadline of August 1, 
2019 (80 FR 70519 through 70520).
    We believe this proposed timeline is appropriate, because 
registration with the QualityNet Web site is necessary to submit data. 
We believe that extending the NOP submission deadline will better 
enable hospitals to meet the Hospital OQR Program participation 
requirements.
    As discussed above, we also are proposing to make conforming 
revisions at 42 CFR 419.46(a).
    We are inviting public comment on our proposals as discussed above.

D. Form, Manner, and Timing of Data Submitted for the Hospital OQR 
Program

1. Hospital OQR Program Annual Payment Determinations
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75110 
through 75111) and the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70519 through 70520), we specified our data submission 
deadlines. We also codified our submission requirements at 42 CFR 
419.46(c).
    We refer readers to the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70519 through 70520), where we finalized our proposal to 
shift the quarters upon which the Hospital OQR Program payment 
determinations are based, beginning with the CY 2018 payment 
determination. The finalized deadlines for the CY 2020 payment 
determination and subsequent years are illustrated in the tables below.

           CY 2020 Payment Determination and Subsequent Years
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                                                           Clinical data
                Patient encounter quarter                   submission
                                                             deadline
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Q2 2018 (April 1-June 30)...............................       11/1/2018
Q3 2018 (July 1-September 30)...........................        2/1/2019
Q4 2018 (October 1-December 31).........................        5/1/2019
Q1 2019 (January 1-March 31)............................        8/1/2019
------------------------------------------------------------------------

    In this proposed rule, for the CY 2020 payment determination and 
subsequent years, we are proposing to revise the data submission 
requirements for hospitals that did not participate in the previous 
year's Hospital OQR Program. Specifically, we are proposing to revise 
the first quarter for which newly participating hospitals are required 
to submit data (see details below). We are not proposing changes to the 
previously finalized data submission deadlines for each quarter.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68482), we finalized the following data submission requirements for 
hospitals that did not participate in the previous year's Hospital OQR 
Program:
     If a hospital has a Medicare acceptance date before 
January 1 of the year prior to the affected annual payment update, the 
hospital must submit data beginning with encounters occurring during 
the first calendar quarter of the year prior to the affected annual 
payment update;
     If a hospital has a Medicare acceptance date on or after 
January 1 of the year prior to the affected annual payment update, the 
hospital must submit data for encounters beginning with the first full 
quarter following submission of the completed Hospital OQR Program 
Notice of Participation Form; and
     Hospitals with a Medicare acceptance date before or after 
January 1 of the year prior to an affected annual payment update must 
follow data submission deadlines as posted on the QualityNet Web site.
    These policies are also codified at 42 CFR 419.46(c)(3). In this 
proposed rule, we are proposing to: (1) Align the timeline specifying 
the initial quarter for which hospitals must submit data for all 
hospitals that did not participate in the previous year's Hospital OQR 
Program, rather than specifying different timelines for hospitals with 
Medicare acceptance dates before versus after January 1 of the year 
prior to an affected annual payment update; and (2) make conforming 
revisions at 42 CFR 419.46(c)(3). Specifically, we are proposing that 
any hospital that did not participate in the previous year's Hospital 
OQR Program must submit data beginning with encounters occurring during 
the first calendar quarter of the year prior to the affected annual 
payment update. We note that hospitals must still follow data 
submission deadlines corresponding to the quarter for which they are 
reporting data as posted on the QualityNet Web site.
    We are inviting public comment on our proposals to align the 
initial data submission timeline for all hospitals that did not 
participate in the previous year's Hospital OQR Program and to make 
conforming revisions at 42 CFR 419.46(c)(3).
2. Requirements for Chart-Abstracted Measures Where Patient-Level Data 
Are Submitted Directly to CMS for the CY 2021 Payment Determination and 
Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68481 through 68484) for a discussion of the form, 
manner, and timing for data submission requirements of chart-abstracted 
measures for the CY 2014 payment determination and subsequent years.
    In this proposed rule, we are not proposing any changes to our 
policies regarding the submission of chart abstracted measure data 
where patient-level data are submitted directly to CMS.
    We note that, in section XIII.B.4.c. of this proposed rule, we are 
proposing to remove OP-21: Median Time to Pain Management for Long Bone 
Fracture for the CY 2020 payment determination and subsequent years and 
OP-1: Median Time to Fibrinolysis, OP-4: Aspirin at Arrival, and OP-20: 
Door to Diagnostic Evaluation by a Qualified Medical Professional for 
the CY 2021 payment determination and subsequent years. Therefore, if 
these proposals are finalized as proposed, the following previously 
finalized Hospital OQR

[[Page 33681]]

Program chart-abstracted measures will require patient-level data to be 
submitted for the CY 2021 payment determination and subsequent years:
     OP-2: Fibrinolytic Therapy Received Within 30 Minutes of 
ED Arrival (NQF #0288);
     OP-3: Median Time to Transfer to Another Facility for 
Acute Coronary Intervention (NQF #0290);
     OP-5: Median Time to ECG (NQF #0289);
     OP-18: Median Time from ED Arrival to ED Departure for 
Discharged ED Patients (NQF #0496);
     OP-23: Head CT Scan Results for Acute Ischemic Stroke or 
Hemorrhagic Stroke Patients who Received Head CT Scan Interpretation 
Within 45 Minutes of ED Arrival (NQF #0661).
3. Claims-Based Measure Data Requirements for the CY 2020 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75111 through 75112) for a discussion of the general 
claims-based measure data submission requirements for the CY 2015 
payment determination and subsequent years. In this proposed rule, we 
are not proposing any changes to our claims-based measures submission 
policies for the CY 2020 payment determination and subsequent years.
    There are a total of nine claims-based measures for the CY 2020 
payment determination and subsequent years:
     OP-8: MRI Lumbar Spine for Low Back Pain (NQF #0514);
     OP-9: Mammography Follow-Up Rates;
     OP-10: Abdomen CT--Use of Contrast Material;
     OP-11: Thorax CT--Use of Contrast Material (NQF #0513);
     OP-13: Cardiac Imaging for Preoperative Risk Assessment 
for Non-Cardiac, Low Risk Surgery (NQF #0669);
     OP-14: Simultaneous Use of Brain Computed Tomography (CT) 
and Sinus Computed Tomography (CT);
     OP-32: Facility 7-Day Risk-Standardized Hospital Visit 
Rate after Outpatient Colonoscopy (NQF #2539);
     OP-35: Admissions and Emergency Department Visits for 
Patients Receiving Outpatient Chemotherapy; and
     OP-36: Hospital Visits after Hospital Outpatient Surgery 
(NQF #2687).
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
    We refer readers to the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79792 through 79794) for a discussion of the previously 
finalized requirements related to survey administration and vendors for 
the OAS CAHPS Survey-based measures. However, we refer readers to 
section XIII.B.5. of this proposed rule, where we are proposing to 
delay implementation of the OP-37a-e OAS CAHPS Survey-based measures 
beginning with the CY 2020 payment determination (2018 data collection) 
until further action in future rulemaking.
    As noted in the CY 2017 OPPS/ASC final rule with comment period (81 
FR 79815) some commenters suggested shortening sections of the survey, 
such as the ``About You'' section. We continue to evaluate the utility 
of individual questions as we collect new data from the survey's 
voluntary national implementation, and will consider different options 
for shortening the OAS CAHPS Survey without the loss of important data 
in the future. Specifically, we continue to consider the removal of two 
demographic questions--the ``gender'' and ``age'' questions--from the 
OAS CAHPS Survey in a future update.
5. Data Submission Requirements for Previously Finalized Measures for 
Data Submitted via a Web-Based Tool for the CY 2020 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75112 through 75115) and the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70521) and the CMS QualityNet Web site 
(https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1205442125082) for a discussion of the requirements for measure data submitted 
via the CMS QualityNet Web site for the CY 2017 payment determination 
and subsequent years. In addition, we refer readers to the CY 2014 
OPPS/ASC final rule with comment period (78 FR 75097 through 75100) for 
a discussion of the requirements for measure data (specifically, the 
Influenza Vaccination Coverage Among Healthcare Personnel measure (NQF 
#0431)) submitted via the Centers for Disease Control and Prevention 
(CDC) NHSN Web site. In this proposed rule, we are not proposing any 
changes to our policies regarding the submission of measure data 
submitted via a web-based tool.
    We note that, in section XIII.B.4.c. of this proposed rule, we are 
proposing to remove OP-25: Safe Surgery Checklist Use (beginning with 
CY 2021), and OP-26: Hospital Outpatient Volume on Selected Outpatient 
Surgical Procedures (beginning with CY 2020). Therefore, if these 
proposals are finalized as proposed, the following web-based quality 
measures previously finalized and retained in the Hospital OQR Program 
will require data to be submitted via a web-based tool (CMS' QualityNet 
Web site or CDC's NHSN Web site) for the CY 2021 payment determination 
and subsequent years:
     OP-12: The Ability for Providers with HIT to Receive 
Laboratory Data Electronically Directly into their ONC-Certified EHR 
System as Discrete Searchable Data (via CMS' QualityNet Web site);
     OP-17: Tracking Clinical Results between Visits (NQF 
#0491) (via CMS' QualityNet Web site);
     OP-22: Left Without Being Seen (NQF #0499) (via CMS' 
QualityNet Web site);
     OP-27: Influenza Vaccination Coverage among Healthcare 
Personnel (via the CDC NHSN Web site) (NQF #0431);
     OP-29: Appropriate Follow-up Interval for Normal 
Colonoscopy in Average Risk Patients (NQF #0658) (via CMS' QualityNet 
Web site);
     OP-30: Colonoscopy Interval for Patients with a History of 
Adenomatous Polyps--Avoidance of Inappropriate Use (NQF #0659) (via 
CMS' QualityNet Web site);
     OP-31: Cataracts: Improvement in Patient's Visual Function 
within 90 Days Following Cataract Surgery (NQF #1536) (via CMS' 
QualityNet Web site); and
     OP-33: External Beam Radiotherapy (EBRT) for Bone 
Metastases (NQF #1822) (via CMS' QualityNet Web site).
6. Population and Sampling Data Requirements for the CY 2020 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72100 through 72103) and the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74482 through 74483) for discussions of our 
population and sampling requirements.
    In this proposed rule, we are not proposing any changes to our 
population and sampling requirements.

[[Page 33682]]

7. Hospital OQR Program Validation Requirements for Chart-Abstracted 
Measure Data Submitted Directly to CMS for the CY 2020 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68484 through 68487) and the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66964 through 66965) for a discussion of 
finalized policies regarding our validation requirements. We also refer 
readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68486 through 68487) for a discussion of finalized policies regarding 
our medical record validation procedure requirements. We codified these 
policies at 42 CFR 419.46(e). For the CY 2018 payment determination and 
subsequent years, validation is based on four quarters of data 
((validation quarter 1 (January 1-March 31), validation quarter 2 
(April 1-June 30), validation quarter 3 (July 1-September 30), and 
validation quarter 4 (October 1-December 31)) (80 FR 70524).
    In this proposed rule, we are: (1) Clarifying the hospital 
selection process previously finalized for validation; (2) proposing to 
codify the procedures for targeting hospitals at 42 CFR 419.46(e); and 
(3) proposing to formalize and update our educational review process. 
These are discussed in more detail below.
a. Clarification
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74485), we finalized a validation selection process in which we select 
a random sample of 450 hospitals for validation purposes, and select an 
additional 50 hospitals based on the following specific criteria:
     Hospital fails the validation requirement that applies to 
the previous year's payment determination; or
     Hospital has an outlier value for a measure based on the 
data it submits. We defined an ``outlier value'' for purposes of this 
targeting as a measure value that appears to deviate markedly from the 
measure values for other hospitals. Specifically, we would select 
hospitals for validation if their measure value for a measure is 
greater than 5 standard deviations from the mean, placing the expected 
occurrence of such a value outside of this range at 1 in 1,744,278.
    We note that the criteria for targeting 50 outlier hospitals, 
described above, does not specify whether high or low performing 
hospitals will be targeted. Therefore, in this proposed rule, we are 
clarifying that hospitals with outlier values indicating specifically 
poor scores on a measure (for example, a long median time to 
fibrinolysis) will be targeted for validation. In other words, an 
``outlier value'' is a measure value that is greater than 5 standard 
deviations from the mean of the measure values for other hospitals, and 
indicates a poor score.
b. Proposed Codification
    We note that the previously finalized procedures for targeting 
hospitals for validation, described in section XIII.D.7.a., above, and 
finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74485), are not yet codified at 42 CFR 419.46. In this proposed rule, 
we are proposing to codify the previously finalized procedures for 
targeting hospitals and well as the procedures regarding outlier 
hospitals as discussed and clarified above at 42 CFR 419.46(e)(3).
    We are inviting public comment on our proposal to codify our 
validation targeting criteria as discussed above.
c. Proposed Formalization and Modifications to the Educational Review 
Process for Chart-Abstracted Measures Validation
(1) Background
    We have described our processes for educational review on the 
QualityNet Web site.\38\ We note that historically this process 
functioned as an outreach and education opportunity we provided to 
hospitals, but based on our experience, stakeholder feedback, and more 
robust validation requirements, we believe that it would be beneficial 
to hospitals to propose formalizing and updating this process.
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    Under the current informal process, if results of an educational 
review indicate that CDAC or CMS has incorrectly scored a hospital 
after validation, those results are not changed, but are taken into 
consideration if the hospital submits a reconsideration request. 
Stakeholder feedback, provided via email, has indicated that while the 
educational review process is helpful to participating hospitals, it is 
limited in its impact, given that a hospital's validation result is not 
corrected even after an educational review determines that CMS reached 
an incorrect conclusion regarding a hospital's validation score for a 
given quarter. Based on this feedback, we are proposing to formalize 
and update the Hospital OQR Program's chart-abstracted measure 
validation educational review process. Our goal is to reduce the number 
of reconsideration requests by identifying and correcting errors before 
the final yearly validation score is derived. By identifying and 
correcting any mistakes early on, this process could help decrease the 
burden during the annual reconsideration process, both for hospitals 
and CMS.
    Therefore, in an effort to streamline this process, in this 
proposed rule, we are proposing to: (1) Formalize this process; and (2) 
specify that if the results of an educational review indicate that we 
incorrectly scored a hospital's medical records selected for 
validation, the corrected quarterly validation score would be used to 
compute the hospital's final validation score at the end of the 
calendar year. These proposals are discussed in more detail below.
(2) Proposed Educational Review Process for the CY 2020 Payment 
Determination and Subsequent Years
(a) Formalizing the Educational Review Process
    As stated above, our informal processes for educational review have 
been described on the QualityNet Web site.\39\ Under the informal 
process, hospitals that were selected and received a score for 
validation may request an educational review in order to better 
understand the results. Many times, hospitals request an educational 
review to examine any data element discrepancies, if they believe the 
score is incorrect, or when they have general questions about their 
score. Currently, hospitals receive validation results on a quarterly 
basis \40\ and can request informal educational reviews for each 
quarter. Under this informal process, a hospital has 30 calendar days 
from the date the validation results are posted on the QualityNet 
Secure Portal Web site to contact the CMS designated contractor, 
currently known as the Validation Support Contractor (VSC), to request 
an educational review.\41\ In response to a request, the VSC obtains 
and reviews medical records directly from the Clinical Data Abstraction 
Center (CDAC) and provides feedback. CMS, or its contractor, generally 
provides

[[Page 33683]]

educational review results and responses via a secure file transfer to 
the hospital.\42\
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    In this proposed rule, we are proposing to formalize this 
educational review process, as described above, for the CY 2020 payment 
determination and subsequent years--in other words, starting for 
validations of CY 2018 data affecting the CY 2020 payment determination 
and subsequent years.
    We are inviting public comment on our proposal to formalize the 
chart-abstracted measures validation educational review process for the 
CY 2020 payment determination and subsequent years as described above.
(b) Validation Score Review and Correction
    We previously finalized, in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72105 to 72106), that we calculate validation 
scores under the Hospital OQR Program using the upper bound of a one-
tailed confidence interval (CI) with a 75 percent threshold level with 
a binomial approach. Using that approach, at the end of each calendar 
year, CMS computes a CI using the results of all four quarters to 
determine the final validation score.\43\ If the upper bound of this 
confidence interval is 75 percent or higher, the hospital will pass the 
Hospital OQR Program validation requirement.\44\ In this proposed rule, 
we are proposing that if the results of a validation educational review 
determine that the original quarterly validation score was incorrect, 
the corrected score would be used to compute the final validation score 
and CI at the end of each calendar year.
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    In order to determine whether a quarterly validation score was 
correct, we are proposing to use a similar process as one previously 
finalized for reconsideration requests. Specifically, we are proposing 
that during an educational review request, evaluating a validation 
score would consist of and be limited to reviewing data elements that 
were labeled as mismatched (between the originally calculated measure 
score and the measure score calculated in validation) in the original 
validation results. We would also take into consideration written 
justifications provided by hospitals in the Educational Review request. 
For more information about the previously finalized reconsideration 
request procedures, we refer readers to the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68487 through 68489), the CY 2014 OPPS/ASC 
final rule with comment period (78 FR 75118 through 75119), the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70524), and the CY 2017 
OPPS/ASC final rule with comment period (81 FR 79795).
    For the CY 2020 payment determination and subsequent years, we are 
further proposing that if an educational review requested for any of 
the first 3 quarters of validation yields incorrect CMS validation 
results for chart-abstracted measures, according to the review process 
described and proposed above, we would use the corrected quarterly 
score, as recalculated during the educational review process, to 
compute the final CI at the end of the calendar year.\45\ We note that 
for the last quarter of validation, because of the need to calculate 
the confidence interval in a timely manner and the insufficient time 
available to conduct educational reviews prior to the annual payment 
update, the validation score review and correction would not be 
available. Instead, the existing reconsideration process would be used 
to dispute any unsatisfactory validation result. We refer readers to 
section XIII.D.9. of this proposed rule for a discussion about our 
reconsideration and appeals process.
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    The corrected scores would be applicable to the corresponding 
quarter, for the first 3 quarters of validation, for which a request 
was submitted. Under this proposal, after evaluating the validation 
score during the educational review process, if results show that there 
was indeed an error in the originally calculated score, we would take 
steps to correct it. However, so as not to dissuade participation in 
the educational review process, corrected scores identified through the 
educational review would only be used to recalculate the CI if they 
indicate that the hospital performed more favorably than previously 
determined. If the hospital performed less favorably, their score would 
not be updated to reflect the less favorable score.
    We note that under this proposal, the quarterly validation reports 
issued to hospitals would not be updated to reflect the corrected score 
due to the burden associated with reissuing corrected reports. However, 
the corrected score would be communicated to the hospital via secure 
file format as discussed above.
    We are inviting public comment on our proposal, as discussed above 
for the CY 2020 payment determination and subsequent years, to use 
corrected quarterly scores, as recalculated during the educational 
review process described and proposed in section XIII.D.7.c.(2)(a) of 
this proposed rule above, to compute the final confidence interval for 
the first 3 quarters of validation.
8. Extraordinary Circumstances Exception Process for the CY 2020 
Payment Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75119 through 75120), the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66966), the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70524), and 42 CFR 419.46(d) for a complete 
discussion of our extraordinary circumstances extension or exception 
process under the Hospital OQR Program.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79795), we finalized an update to our extraordinary circumstances 
exemption (ECE) policy to extend the ECE request deadline for both 
chart-abstracted and web-based measures from 45 days following an event 
causing hardship to 90 days following an event causing hardship, 
effective with ECEs requested on or after January 1, 2017.
    We note that many of our quality reporting and value-based 
purchasing programs share a common process for requesting an exception 
from program reporting due to an extraordinary circumstance not within 
a provider's control. The Hospital IQR, Hospital OQR, IPFQR, ASCQR, and 
PCHQR Programs, as well as the Hospital Acquired Condition Reduction 
Program and the Hospital Readmissions Reduction Program, share similar 
processes for ECE requests. We refer readers to policies for the 
Hospital IQR Program (76 FR 51651 through 51652, 78 FR 50836 through 
50837, 79 FR 50277, 81 FR 57181 through 57182, and 42 CFR 
412.140(c)(2)), the IPFQR Program (77 FR 53659 through 53660 and 79 FR 
45978), the ASCQR Program

[[Page 33684]]

(77 FR 53642 through 53643 and 78 FR 75140 through 75141), the PCHQR 
Program (78 FR 50848), the HAC Reduction Program (80 FR 49579 through 
49581), and the Hospital Readmissions Reduction Program (80 FR 49542 
through 49543) for program specific information about extraordinary 
circumstances exceptions requests.
    In reviewing the policies for these programs, we recognized that 
there are five areas in which these programs have variances regarding 
ECE requests. These are: (1) Allowing the facilities or hospitals to 
submit a form signed by the facility's or hospital's CEO versus CEO or 
designated personnel; (2) requiring the form be submitted within 30 
days following the date that the extraordinary circumstance occurred 
versus within 90 days following the date the extraordinary circumstance 
occurred; (3) inconsistency regarding specification of a timeline for 
us to provide our formal response notifying the facility or hospital of 
our decision; (4) inconsistency regarding specification of our 
authority to grant ECEs due to CMS data system issues; and (5) 
referring to the program as ``extraordinary extensions/exemptions'' 
versus as ``extraordinary circumstances exceptions.'' We believe 
addressing these five areas, as appropriate, can improve administrative 
efficiencies for affected facilities or hospitals.
    We note that, in the FY 2018 IPPS/LTCH PPS proposed rule, we 
examined our policies in these areas for the Hospital Readmissions 
Reduction Program, the HAC Reduction Program, the Hospital IQR Program, 
the PCHQR Program and the IPFQR Program (82 FR 19967, 19990, 20075, 
20085 and 20128) and proposed to address differences in these areas for 
those programs. In section XIV.D.6. of this proposed rule, we are also 
proposing revisions to our policies for the ASCQR Program.
    With the exception of the specification of a timeline for us to 
provide our formal response and the terminology used to describe these 
processes (items 3 and 5 above), the Hospital OQR Program is aligned 
with the existing and proposed policies for the other quality reporting 
programs discussed above. As a result, in this proposed rule, we are 
proposing to rename the process as the extraordinary circumstances 
exceptions (ECE) policy and make conforming changes to 42 CFR 
419.46(d).
a. ECE Policy Nomenclature
    We have observed that while all quality programs listed above have 
developed similar policies to provide exceptions from program 
requirements to facilities that have experienced extraordinary 
circumstances, such as natural disasters, these programs refer to these 
policies using inconsistent terminology. Some programs refer to these 
policies as ``extraordinary circumstances extensions/exemptions'' while 
others refer to the set of policies as ``extraordinary circumstances 
exceptions.'' Several programs (specifically, the Hospital VBP Program, 
HAC Reduction Program, and the Hospital Readmissions Reduction Program) 
are not able to grant extensions to required data reporting timelines 
due to their reliance on data external to their program, and thus the 
term, ``extraordinary circumstances extensions/exemptions'' is not 
applicable to all programs. However, all of the described programs are 
able to offer exceptions from their reporting requirements.
    As stated above, in order to align this policy across CMS quality 
programs, we are therefore proposing to: (1) Change the name of this 
policy from ``extraordinary circumstances extensions or exemptions'' to 
``extraordinary circumstances exceptions'' for the Hospital OQR 
Program, beginning January 1, 2018; and (2) revise 42 CFR 419.46(d) of 
our regulations to reflect this change. We note that changing the name 
of this policy does not change the availability for a hospital to 
request an extension under the Hospital OQR Program.
    We are inviting public comment on these proposals as discussed 
above.
b. Timeline for CMS Response to ECE Requests
    We also note that we believe it is important for facilities to 
receive timely feedback regarding the status of ECE requests. We strive 
to complete our review of each ECE request as quickly as possible. 
However, we recognize that the number of requests we receive, and the 
complexity of the information provided impacts the actual timeframe to 
make ECE determinations. To improve transparency of our process, we 
believe it is appropriate to specify that we will strive to complete 
our review of each request within 90 days of receipt.
9. Hospital OQR Program Reconsideration and Appeals Procedures for the 
CY 2020 Payment Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68487 through 68489), the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75118 through 75119), the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70524), and the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79795) for a discussion of our 
reconsideration and appeals procedures. We codified the process by 
which participating hospitals may submit requests for reconsideration 
at 42 CFR 419.46(f). We also codified language at Sec.  419.46(f)(3) 
regarding appeals with the Provider Reimbursement Review Board.
    We are not proposing any changes to our reconsideration and appeals 
procedures.

E. Proposed Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2018 Payment Determination

1. Background
    Section 1833(t)(17) of the Act, which applies to subsection (d) 
hospitals (as defined under section 1886(d)(1)(B) of the Act), states 
that hospitals that fail to report data required to be submitted on 
measures selected by the Secretary, in the form and manner, and at a 
time, specified by the Secretary will incur a 2.0 percentage point 
reduction to their Outpatient Department (OPD) fee schedule increase 
factor; that is, the annual payment update factor. Section 
1833(t)(17)(A)(ii) of the Act specifies that any reduction applies only 
to the payment year involved and will not be taken into account in 
computing the applicable OPD fee schedule increase factor for a 
subsequent year.
    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 in order to receive the full 
payment update factor and that fail to meet the Hospital OQR Program 
requirements. Hospitals that meet the reporting requirements receive 
the full OPPS payment update without the reduction. For a more detailed 
discussion of how this payment reduction was initially implemented, we 
refer readers to the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68769 through 68772).
    The national unadjusted payment rates for many services paid under 
the OPPS equal the product of the OPPS conversion factor and the scaled 
relative payment weight for the APC to which the service is assigned. 
The OPPS conversion factor, which is updated annually by the OPD fee 
schedule increase factor, is used to calculate the OPPS payment rate 
for services with the following status indicators (listed in Addendum B 
to this proposed rule, which is available via the Internet on

[[Page 33685]]

the CMS Web site): ``J1'', ``J2'', ``P'', ``Q1'', ``Q2'', ``Q3'', 
``R'', ``S'', ``T'', ``V'', or ``U''. In the CY 2017 OPPS/ASC final 
rule with comment period (81 FR 79796), we clarified that the reporting 
ratio does not apply to codes with status indicator ``Q4'' because 
services and procedures coded with status indicator ``Q4'' are either 
packaged or paid through the Clinical Laboratory Fee Schedule and are 
never paid separately through the OPPS. Payment for all services 
assigned to these status indicators will be subject to the reduction of 
the national unadjusted payment rates for hospitals that fail to meet 
Hospital OQR Program requirements, with the exception of services 
assigned to New Technology APCs with assigned status indicator ``S'' or 
```T''. We refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68770 through 68771) for a discussion of this 
policy.
    The OPD fee schedule increase factor is an input into the OPPS 
conversion factor, which is used to calculate OPPS payment rates. To 
reduce the OPD fee schedule increase factor for hospitals that fail to 
meet reporting requirements, we calculate two conversion factors--a 
full market basket conversion factor (that is, the full conversion 
factor), and a reduced market basket conversion factor (that is, the 
reduced conversion factor). We then calculate a reduction ratio by 
dividing the reduced conversion factor by the full conversion factor. 
We refer to this reduction ratio as the ``reporting ratio'' to indicate 
that it applies to payment for hospitals that fail to meet their 
reporting requirements. Applying this reporting ratio to the OPPS 
payment amounts results in reduced national unadjusted payment rates 
that are mathematically equivalent to the reduced national unadjusted 
payment rates that would result if we multiplied the scaled OPPS 
relative payment weights by the reduced conversion factor. For example, 
to determine the reduced national unadjusted payment rates that applied 
to hospitals that failed to meet their quality reporting requirements 
for the CY 2010 OPPS, we multiplied the final full national unadjusted 
payment rate found in Addendum B of the CY 2010 OPPS/ASC final rule 
with comment period by the CY 2010 OPPS final reporting ratio of 0.980 
(74 FR 60642).
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 
through 68772), we established a policy that the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
would each equal the product of the reporting ratio and the national 
unadjusted copayment or the minimum unadjusted copayment, as 
applicable, for the service. Under this policy, we apply the reporting 
ratio to both the minimum unadjusted copayment and national unadjusted 
copayment for services provided by hospitals that receive the payment 
reduction for failure to meet the Hospital OQR Program reporting 
requirements. This application of the reporting ratio to the national 
unadjusted and minimum unadjusted copayments is calculated according to 
Sec.  419.41 of our regulations, prior to any adjustment for a 
hospital's failure to meet the quality reporting standards according to 
Sec.  419.43(h). Beneficiaries and secondary payers thereby share in 
the reduction of payments to these hospitals.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68772), we established the policy that all other applicable adjustments 
to the OPPS national unadjusted payment rates apply when the OPD fee 
schedule increase factor is reduced for hospitals that fail to meet the 
requirements of the Hospital OQR Program. For example, the following 
standard adjustments apply to the reduced national unadjusted payment 
rates: The wage index adjustment; the multiple procedure adjustment; 
the interrupted procedure adjustment; the rural sole community hospital 
adjustment; and the adjustment for devices furnished with full or 
partial credit or without cost. Similarly, OPPS outlier payments made 
for high cost and complex procedures will continue to be made when 
outlier criteria are met. For hospitals that fail to meet the quality 
data reporting requirements, the hospitals' costs are compared to the 
reduced payments for purposes of outlier eligibility and payment 
calculation. We established this policy in the OPPS beginning in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60642). For a 
complete discussion of the OPPS outlier calculation and eligibility 
criteria, we refer readers to section II.G. of this proposed rule.
2. Proposed Reporting Ratio Application and Associated Adjustment 
Policy for CY 2018
    We are proposing to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a 
reporting ratio for those hospitals that fail to meet the Hospital OQR 
Program requirements for the full CY 2018 annual payment update factor. 
For the CY 2018 OPPS, the proposed reporting ratio is 0.980, calculated 
by dividing the proposed reduced conversion factor of 74.953 by the 
proposed full conversion factor of 76.483. We are proposing to continue 
to apply the reporting ratio to all services calculated using the OPPS 
conversion factor. For the CY 2018 OPPS, we are proposing to apply the 
reporting ratio, when applicable, to all HCPCS codes to which we have 
proposed status indicator assignments of ``J1'', ``J2'', ``P'', ``Q1'', 
``Q2'', ``Q3'', ``R'', ``S'', ``T'', ``V'', and ``U'' (other than new 
technology APCs to which we have proposed status indicator assignment 
of ``S'' and ``T''). As noted above, in the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79796), we clarified that the reporting 
ratio does not apply to codes with status indicator ``Q4'' because 
services and procedures coded with status indicator ``Q4'' are either 
packaged or paid through the Clinical Laboratory Fee Schedule and are 
never paid separately through the OPPS. We are proposing to continue to 
exclude services paid under New Technology APCs. We are proposing to 
continue to apply the reporting ratio to the national unadjusted 
payment rates and the minimum unadjusted and national unadjusted 
copayment rates of all applicable services for those hospitals that 
fail to meet the Hospital OQR Program reporting requirements. We also 
are proposing to continue to apply all other applicable standard 
adjustments to the OPPS national unadjusted payment rates for hospitals 
that fail to meet the requirements of the Hospital OQR Program. 
Similarly, we are proposing to continue to calculate OPPS outlier 
eligibility and outlier payment based on the reduced payment rates for 
those hospitals that fail to meet the reporting requirements.
    We are inviting public comments on these proposals.

XIV. Requirements for the Ambulatory Surgical Center Quality Reporting 
(ASCQR) Program

A. Background

1. Overview
    We refer readers to section XIII.A.1. of this proposed rule for a 
general overview of our quality reporting programs.
2. Statutory History of the ASCQR Program
    We refer readers to section XIV.K.1. of the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74492 through 74494) for a detailed 
discussion of the statutory history of the ASCQR Program.

[[Page 33686]]

3. Regulatory History of the ASCQR Program
    We seek to promote higher quality and more efficient health care 
for beneficiaries. This effort is supported by the adoption of widely-
agreed-upon quality measures. We have worked with relevant stakeholders 
to define measures of quality in almost every setting and currently 
measure some aspect of care for almost all Medicare beneficiaries. 
These measures assess structural aspects of care, clinical processes, 
patient experiences with care, and outcomes. We have implemented 
quality measure reporting programs for multiple settings of care. To 
measure the quality of ASC services, we implemented the ASCQR Program. 
We refer readers to section XV.A.3. of the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75122), section XIV. of the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66966 through 66987), section 
XIV. of the CY 2016 OPPS/ASC final rule with comment period (80 FR 
70526 through 70538) and section XIV. of the CY 2017 OPPS/ASC final 
rule with comment period (81 FR 79797 through 79826) for an overview of 
the regulatory history of the ASCQR Program.

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68493 through 68494) for a detailed discussion of the 
priorities we consider for ASCQR Program quality measure selection. We 
are not proposing any changes to this policy.
2. Accounting for Social Risk Factors in the ASCQR Program
    We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes including reducing health disparities, and 
we want to ensure that all beneficiaries, including those with social 
risk factors, receive high quality care. In addition, we seek to ensure 
that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) \46\ and the 
National Academies of Sciences, Engineering, and Medicine on the issue 
of measuring and accounting for social risk factors in CMS' value-based 
purchasing and quality reporting programs, and considering options on 
how to address the issue in these programs. On December 21, 2016, ASPE 
submitted a Report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors of Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value-based purchasing programs.\47\ The report also included 
considerations for strategies to account for social risk factors in 
these programs. In a January 10, 2017 report released by the National 
Academies of Sciences, Engineering, and Medicine, the body provided 
various potential methods for accounting for social risk factors, 
including stratified public reporting.\48\
---------------------------------------------------------------------------

    \46\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs. 21 
Dec. 2016. Available at: https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \47\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs. 
Available at: https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \48\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    As noted in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which new measures, measures 
undergoing maintenance review, and measures endorsed with the condition 
that they enter the trial period can be assessed to determine whether 
risk adjustment for selected social risk factors is appropriate for 
these measures. This trial entails temporarily allowing inclusion of 
social risk factors in the risk-adjustment approach for some 
performance measures. At the conclusion of the trial, NQF will issue 
recommendations on the future inclusion of social risk factors in risk 
adjustment for these quality measures, and we will closely review its 
findings.
    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF trial on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we have previously communicated, we are concerned 
about holding providers to different standards for the outcomes of 
their patients with social risk factors because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes 
for disadvantaged populations. Keeping this concern in mind, we are 
seeking public comment on whether we should account for social risk 
factors in the ASCQR Program, and if so, what method or combination of 
methods would be most appropriate for accounting for social risk 
factors. Examples of methods include: confidential reporting to 
providers of measure rates stratified by social risk factors; public 
reporting of stratified measure rates; and potential risk adjustment of 
a particular measure as appropriate based on data and evidence.
    In addition, we are seeking public comment on which social risk 
factors might be most appropriate for reporting stratified measure 
scores and/or potential risk adjustment of a particular measure. 
Examples of social risk factors include, but are not limited to, dual 
eligibility/low-income subsidy, race and ethnicity, and geographic area 
of residence. We are seeking comments on which of these factors, 
including current data sources where this information would be 
available, could be used alone or in combination, and whether other 
data should be collected to better capture the effects of social risk. 
We will take commenters' input into consideration as we continue to 
assess the appropriateness and feasibility of accounting for social 
risk factors in the ASCQR Program. We note that any such changes would 
be proposed through future notice and comment rulemaking.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), so we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.

[[Page 33687]]

3. Policies for Retention and Removal of Quality Measures From the 
ASCQR Program
a. Retention of Previously Adopted ASCQR Program Measures
    We previously adopted a policy that quality measures adopted for an 
ASCQR Program measure set for a previous payment determination year be 
retained in the ASCQR Program for measure sets for subsequent payment 
determination years, except when they are removed, suspended, or 
replaced as indicated (76 FR 74494 and 74504; 77 FR 68494 through 
68495; 78 FR 75122; and 79 FR 66967 through 66969). We are not 
proposing any changes to this policy.
b. Proposed Measure Removal
    We refer readers to the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66967 through 66969) and 42 CFR 416.320 for a detailed 
discussion of the process for removing adopted measures from the ASCQR 
Program. We are not proposing any changes to this process.
    In this proposed rule, we are proposing to remove a total of three 
measures for the CY 2019 payment determination and subsequent years: 
(1) ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing; (2) ASC-6: 
Safe Surgery Checklist Use; and (3) ASC-7: ASC Facility Volume Data on 
Selected Procedures. These proposals are discussed in more detail 
below.
(1) Proposed Removal of ASC-5: Prophylactic Intravenous (IV) Antibiotic 
Timing Beginning with the CY 2019 Payment Determination
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74499 through 74501) where we adopted ASC-5: Prophylactic 
Intravenous (IV) Antibiotic Timing measure (formerly NQF #0264) 
beginning with the CY 2014 payment determination and finalized the 
measure's data collection and data submission timelines (76 FR 74515 
through 74516). This measure assesses whether intravenous antibiotics 
given for prevention of surgical site infection were administered on 
time.
    Based on our analysis of ASCQR Program measure data for CY 2014 
through 2016 encounters, ASC performance on this measure is so high and 
unvarying that meaningful distinctions in improvement cannot be made; 
as a result, we believe this measure meets removal criterion number one 
under the ASCQR Program's finalized measure removal criteria. The ASCQR 
Program previously finalized two criteria for determining when a 
measure is ``topped out:'' (1) When there is statistically 
indistinguishable performance at the 75th and 90th percentiles of 
national facility performance; and (2) when the measure's truncated 
coefficient of variation (COV) is less than or equal to 0.10 (79 FR 
66968 through 66969). These analyses are captured in the table below.

                                            ASC-5 Topped Out Analysis
----------------------------------------------------------------------------------------------------------------
                                                                       75th            90th
                   Encounters                     Number of ASCs    percentile      percentile     Truncated COV
----------------------------------------------------------------------------------------------------------------
CY 2014.........................................           2,206         100.000         100.000         0.02633
CY 2015.........................................           2,196         100.000         100.000         0.03289
CY 2016.........................................           2,158         100.000         100.000         0.02619
----------------------------------------------------------------------------------------------------------------

    As displayed in the table above, there is no distinguishable 
difference in ASC performance between the 75th and 90th percentiles 
under the ASC-5 measure, and the truncated coefficient of variation has 
been below 0.10 since 2014. Therefore, this ASC-5 measure meets both 
``topped out'' measure criteria for the ASCQR Program.
    Furthermore, we note that the NQF endorsement was removed on 
February 13, 2015; in its discussion of whether to continue endorsement 
for ASC-5, the Surgery Standing Committee also noted that ASC 
performance on this measure was very high, with 99 percent of 
facilities meeting the timely antibiotic administration threshold in CY 
2013.\49\ We believe that removal of this measure from the ASCQR 
Program measure set is appropriate, as there is little room for 
improvement and removal would alleviate maintenance costs and 
administrative burden to ASCs. As such, we believe the burdens outweigh 
the benefits of keeping the measure in the ASCQR Program. Therefore, we 
are proposing to remove the ASC-5: Prophylactic Intravenous (IV) 
Antibiotic Timing measure for the CY 2019 payment determination and 
subsequent years. Furthermore, we note that a similar measure was 
removed from the Hospital OQR Program in the CY 2015 OPPS/ASC final 
rule with comment period (79 FR 66942 through 66944) due to topped-out 
status.
---------------------------------------------------------------------------

    \49\ NQF. ``NQF-Endorsed Measures for Surgical Procedures''. 
Technical Report. Available at: http://www.qualityforum.org/Publications/2015/02/NQF-Endorsed_Measures_for_Surgical_Procedures.aspx.
---------------------------------------------------------------------------

    We are inviting public comment on our proposal to remove the ASC-5: 
Prophylactic Intravenous (IV) Antibiotic Timing measure for the CY 2019 
payment determination and subsequent years as discussed above.
(2) Proposed Removal of ASC-6: Safe Surgery Checklist Use Beginning 
With the CY 2019 Payment Determination
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74505 through 74507 and 74509), where we adopted ASC-6: 
Safe Surgery Checklist Use beginning with the CY 2015 payment 
determination. This structural measure of facility process assesses 
whether an ASC employed a safe surgery checklist that covered each of 
the three critical perioperative periods (prior to administering 
anesthesia, prior to skin incision, and prior to patient leaving the 
operating room) for the entire data collection period.
    Based on our analysis of ASCQR Program measure data for CYs 2014 to 
2016 encounters, the ASC-6 measure meets our first criterion for 
measure removal that measure performance is so high and unvarying that 
meaningful distinctions and improvements in performance can no longer 
be made. The ASCQR Program previously finalized two criteria for 
determining when a measure is ``topped out:'' (1) when there is 
statistically indistinguishable performance at the 75th and 90th 
percentiles of national facility performance; and (2) when the 
measure's truncated coefficient of variation is less than or equal to 
0.10 (79 FR 66968 through 66969). These analyses are captured in the 
table below.

[[Page 33688]]



                                           ASC-6 Performance Analysis
----------------------------------------------------------------------------------------------------------------
                                                                       75th            90th
           Encounters             Number of ASCs       Rate         percentile      percentile     Truncated COV
----------------------------------------------------------------------------------------------------------------
CY 2012.........................           4,356           0.989         100.000         100.000           0.106
CY 2013 50......................             (*)             (*)             (*)             (*)             (*)
CY 2014.........................           4,328           0.997         100.000         100.000           0.050
CY 2015.........................           4,305           0.998         100.000         100.000           0.043
----------------------------------------------------------------------------------------------------------------

    Based on the analysis above the national rate of ``Yes'' response 
for the ASC-6 measure is nearly 1.0, or 100 percent, nationwide, and 
has remained at this level for the last 2 years. In addition, there is 
no distinguishable difference in ASC performance between the 75th and 
90th percentiles under measure, and the truncated coefficient of 
variation has been below 0.10 since 2014. We believe that removal of 
this measure from the ASCQR Program measure set is appropriate, as 
there is little room for improvement. In addition, removal of this 
measure would alleviate the maintenance costs and administrative burden 
to ASCs associated with retaining the measure. As such, we believe the 
burdens of this measure outweigh the benefits of keeping the measure in 
the Program.
---------------------------------------------------------------------------

    \50\ We note that no performance data was collected for CY 2013 
events for the web-based measures; therefore, we lack performance 
data for the ASC-6 measure for this year of the ASCQR Program. 
https://www.qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228890196351&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1attachment%3Bfilename%3DASC_wbnr_prsntn_121813_1ppg.pdf&blobcol=urldata&blobtable=MungoBlobs.
---------------------------------------------------------------------------

    Therefore, we are proposing to remove ASC-6 from the ASCQR Program 
measure set beginning with the CY 2019 payment determination. We also 
refer readers to section XIII.B.4.c.(6) of this proposed rule, where 
the Hospital OQR Program is also proposing to remove a similar measure.
    We are inviting public comment on our proposal to remove the ASC-6: 
Safe Surgery Checklist Use measure for the CY 2019 payment 
determination and subsequent years as discussed above.
(3) Proposed Removal of ASC-7: ASC Facility Volume Data on Selected 
Procedures Beginning With the CY 2019 Payment Determination
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74507 through 74509), where we adopted ASC-7: ASC 
Facility Volume Data on Selected Procedures beginning with the CY 2015 
payment determination. This structural measure of facility capacity 
collects surgical procedure volume data on six categories of procedures 
frequently performed in the ASC setting (76 FR 74507).
    We adopted the ASC-7 measure based on evidence that volume of 
surgical procedures, particularly of high-risk surgical procedures, is 
related to better patient outcomes, including decreased medical errors 
and mortality (76 FR 74507). We further stated our belief that publicly 
reporting volume data would provide patients with beneficial 
performance information to use in selecting a care provider. However, 
over time, we have adopted, and are proposing and intend to continue to 
adopt, more measures assessing ASCs' performance on specific procedure 
types. For example, in the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79801 through 79803), we adopted ASC-14: Unplanned 
Anterior Vitrectomy, a measure assessing patient outcomes following 
ophthalmologic procedures, and are proposing to adopt a second 
ophthalmology-specific measure, ASC-16: Toxic Anterior Segment 
Syndrome, in section XIV.B.6.a. of this proposed rule. We believe these 
procedure-type-specific measures will provide patients with more 
valuable ASC performance data than the ASC-7 measure in selecting an 
ASC for their care. For this reason, we believe the ASC-7 measure meets 
our second criterion for removal from the program; specifically, that 
there are other measures available that are more strongly associated 
with desired patient outcomes for the particular topic. In addition, 
removal of this measure would alleviate the maintenance costs and 
administrative burden to ASCs associated with retaining the measure. As 
such, we believe the burdens of this measure outweigh the benefits of 
keeping the measure in the ASCQRR Program. Therefore, we are proposing 
to remove ASC-7: ASC Facility Volume Data on Selected Procedures from 
the ASCQR Program beginning with the CY 2019 payment determination. We 
refer readers to section XIII.B.4.c.(2) of this proposed rule where we 
are proposing to remove a similar measure from the Hospital OQR 
Program.
    We are inviting public comment on our proposal to remove the ASC-7: 
ASC Facility Volume Data on Selected Procedures measure for the CY 2019 
payment determination and subsequent years as discussed above.
4. Proposal to Delay ASC-15a-e: Outpatient and Ambulatory Surgery 
Consumer Assessment of Healthcare Providers and Systems (OAS CAHPS) 
Survey-Based Measures Beginning With the CY 2020 Payment Determination
    We refer readers to the CY 2017 OPPS/ASC final rule with comment 
period where we adopted ASC-15a-e (81 FR 79803 through 79817), and 
finalized data collection and data submission timelines (81 FR 79822 
through 79824). These measures assess patients' experience with care 
following a procedure or surgery in an ASC by rating patient experience 
as a means for empowering patients and improving the quality of their 
care.
    In this proposed rule, we are proposing to delay implementation of 
the Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare 
Providers and Systems (OAS CAHPS) Survey-based Measures (ASC-15a-e) 
beginning with the CY 2020 payment determination (CY 2018 data 
collection) until further action in future rulemaking. Since our 
adoption of these measures, we have come to believe that we lack 
important operational and implementation data. Specifically, we want to 
ensure that the survey measures appropriately account for patient 
response rates, both aggregate and by survey administration method; 
reaffirm the reliability of national OAS CAHPS Survey data; and 
appropriately account for the burden associated with administering the 
survey in the outpatient setting of care. We note that commenters 
expressed concern over the burden associated with the survey in the CY 
2017 OPPS/ASC final rule with comment period (81 FR 79810). We believe 
that the national implementation of the survey, which began in January 
2016 and will conclude in December 2017, would provide valuable 
information moving forward. We plan to conduct analyses of the national 
implementation data to undertake any necessary modifications to the 
survey tool and/or CMS systems. We believe it is important to allow 
time

[[Page 33689]]

for any modifications before requiring the survey under the ASCQR 
Program. However, we continue to believe that these measures address an 
area of care that is not adequately addressed in our current measure 
set and will be useful to assess aspects of care where the patient is 
the best or only source of information.
    Further, we continue to believe these measures will enable 
objective and meaningful comparisons between ASCs. Therefore, we are 
proposing to delay implementation of ASC-15a-e beginning with the CY 
2020 payment determination (CY 2018 data collection) until further 
action in future rulemaking. We also refer readers to section XIII.B.5. 
of this proposed rule where we are making a similar proposal in the 
Hospital OQR Program.
    We are inviting public comment on our proposal to delay the OAS 
CAHPS Survey-based measures beginning with the CY 2020 payment 
determination as discussed above.
5. ASCQR Program Quality Measures Adopted in Previous Rulemaking
    For the CY 2020 payment determination and subsequent years, we have 
previously finalized the following measure set. We note that this chart 
includes the ASC-5, ASC-6, and ASC-7 measures, which are being proposed 
for removal as discussed above, as well as the ASC-15a-e. measures, 
which are being proposed for delay beginning with the CY 2020 payment 
determination and until further action as discussed above:

 ASCQR Program Measure Set Previously Finalized for the CY 2020 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
           ASC No.                   NQF No.            Measure name
------------------------------------------------------------------------
ASC-1........................  0263...............  Patient Burn.
ASC-2........................  0266...............  Patient Fall.
ASC-3........................  0267...............  Wrong Site, Wrong
                                                     Side, Wrong
                                                     Patient, Wrong
                                                     Procedure, Wrong
                                                     Implant.
ASC-4........................  0265 [dagger]......  All-Cause Hospital
                                                     Transfer/Admission.
ASC-5........................  0264 [dagger]......  Prophylactic
                                                     Intravenous (IV)
                                                     Antibiotic Timing.*
ASC-6........................  None...............  Safe Surgery
                                                     Checklist Use.*
ASC-7........................  None...............  ASC Facility Volume
                                                     Data on Selected
                                                     Procedures.*
ASC-8........................  0431...............  Influenza
                                                     Vaccination
                                                     Coverage Among
                                                     Healthcare
                                                     Personnel.
ASC-9........................  0658...............  Endoscopy/Polyp
                                                     Surveillance:
                                                     Appropriate Follow-
                                                     Up Interval for
                                                     Normal Colonoscopy
                                                     in Average Risk
                                                     Patients.
ASC-10.......................  0659...............  Endoscopy/Polyp
                                                     Surveillance:
                                                     Colonoscopy
                                                     Interval for
                                                     Patients with a
                                                     History of
                                                     Adenomatous Polyps-
                                                     Avoidance of
                                                     Inappropriate Use.
ASC-11.......................  1536...............  Cataracts:
                                                     Improvement in
                                                     Patient's Visual
                                                     Function within 90
                                                     Days Following
                                                     Cataract Surgery.**
ASC-12.......................  2539...............  Facility 7-Day Risk-
                                                     Standardized
                                                     Hospital Visit Rate
                                                     after Outpatient
                                                     Colonoscopy.
ASC-13.......................  None...............  Normothermia
                                                     Outcome.
ASC-14.......................  None...............  Unplanned Anterior
                                                     Vitrectomy.
ASC-15a......................  None...............  OAS CAHPS--About
                                                     Facilities and
                                                     Staff.***
ASC-15b......................  None...............  OAS CAHPS--
                                                     Communication About
                                                     Procedure.***
ASC-15c......................  None...............  OAS CAHPS--
                                                     Preparation for
                                                     Discharge and
                                                     Recovery.***
ASC-15d......................  None...............  OAS CAHPS--Overall
                                                     Rating of
                                                     Facility.***
ASC-15e......................  None...............  OAS CAHPS--
                                                     Recommendation of
                                                     Facility.***
------------------------------------------------------------------------
[dagger] We note that NQF endorsement for this measure was removed.
* Measure proposed for removal beginning with the CY 2019 payment
  determination, as discussed in section XIV.B.3.b. of this proposed
  rule.
** Measure voluntarily collected effective beginning with the CY 2017
  payment determination as set forth in section XIV.E.3.c. of the CY
  2015 OPPS/ASC final rule with comment period (79 FR 66984 through
  66985).
*** Measure proposed for delay in reporting beginning with the CY 2020
  payment determination (CY 2018 data collection) until further action
  in future rulemaking as discussed in section XIV.B.4. of this proposed
  rule.

6. Proposed New ASCQR Program Quality Measures for the CY 2021 and CY 
2022 Payment Determinations and Subsequent Years
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75124) for a detailed discussion of our approach to 
measure selection for the ASCQR Program. In this proposed rule, we are 
proposing to adopt a total of three new measures for the ASCQR Program: 
One measure collected via a CMS web-based tool for the CY 2021 payment 
determination and subsequent years (ASC-16: Toxic Anterior Segment 
Syndrome), and two measures collected via claims for the CY 2022 
payment determination and subsequent years (ASC-17: Hospital Visits 
after Orthopedic Ambulatory Surgical Center Procedures; and ASC-18: 
Hospital Visits after Urology Ambulatory Surgical Center Procedures). 
These measures are discussed in detail below.
a. Proposed Adoption of ASC-16: Toxic Anterior Segment Syndrome 
Beginning With the CY 2021 Payment Determination
(1) Background
    Toxic Anterior Segment Syndrome (TASS), an acute, noninfectious 
inflammation of the anterior segment of the eye, is a complication of 
anterior segment eye surgery that typically develops within 24 hours 
after surgery.\51\ The TASS measure assesses the number of ophthalmic 
anterior segment surgery patients diagnosed with TASS within two days 
of surgery. Although most cases of TASS can be treated, the 
inflammatory response associated with TASS can cause serious damage to 
intraocular tissues, resulting in vision loss.\52\ Prevention requires 
careful attention to solutions, medications, and ophthalmic devices and 
to cleaning and sterilization of surgical equipment because of the 
numerous potential etiologies.\53\ Despite

[[Page 33690]]

a recent focus on prevention, cases of TASS continue to occur, 
sometimes in clusters.\54\ With millions of anterior segment surgeries 
being performed in the United States each year, measurement and public 
reporting have the potential to serve as an additional tool to drive 
further preventive efforts.
---------------------------------------------------------------------------

    \51\ Centers for Disease Control and Prevention. Toxic Anterior 
Segment Syndrome after Cataract Surgery--Maine, 2006. MMWR Morb 
Mortal Wkly Rep. 2007 Jun 29;56(25):629-630.
    \52\ Breebaart AC, Nuyts RM, Pels E, Edelhauser HF, Verbraak FD. 
Toxic Endothelial Cell Destruction of the Cornea after Routine 
Extracapsular Cataract Surgery. Arch Ophthalmol 1990; 108:1121-1125.
    \53\ Hellinger WC, Bacalis LP, Erdhauser HF, Mamalis N, Milstein 
B, Masket S. ASCRS Ad Hoc Task Force on Cleaning and Sterilization 
of Intraocular Instruments: Recommended Practices for Cleaning and 
Sterilizing Intraocular Surgical Instruments. J Cataract Refract 
Surg. 2007 Jun;33(6):1095-1100.
    \54\ Moyle W, Yee RD, Burns JK, Biggins T. Two Consecutive 
Clusters of Toxic Anterior Segment Syndrome. Optom Vis Sci. 2013 
Jan;90(1):e11-23.
---------------------------------------------------------------------------

    TASS is of interest to the ASCQR Program because cataract surgery 
is an anterior segment surgery commonly performed at ASCs. In addition, 
the TASS measure addresses the MAP-identified priority measure area of 
procedure complications for the ASCQR Program.\55\
---------------------------------------------------------------------------

    \55\ National Quality Forum. ``MAP 2017 Considerations for 
Implementing Measures in Federal Programs: Hospitals.'' Report. 
2017. Available at: http://www.qualityforum.org/map/ under 
``Hospitals--Final Report.''
---------------------------------------------------------------------------

(2) Overview of Measure
    We believe it is important to monitor the rate of TASS in the ASC 
setting because ophthalmologic procedures such as anterior segment 
surgery are commonly performed in this setting of care. Therefore, we 
are proposing to adopt the ASC-16: Toxic Anterior Segment Syndrome 
measure, which is based on aggregate measure data collected by the ASC 
and submitted via a CMS online data submission tool (QualityNet), in 
the ASCQR Program for the CY 2021 payment determination and subsequent 
years. We expect the measure would promote improvement in patient care 
over time, because measurement coupled with transparency in publicly 
reporting of measure information would make patient outcomes following 
anterior segment procedures more visible to ASCs and patients and 
incentivize ASCs to incorporate quality improvement activities to 
reduce the incidence of TASS where necessary.
    Section 1890A of the Act requires the Secretary to establish a 
prerulemaking process with respect to the selection of certain 
categories of quality and efficiency measures. Under section 
1890A(a)(2) of the Act, the Secretary must make available to the public 
by December 1 of each year a list of quality and efficiency measures 
that the Secretary is considering for the Medicare program. The 
proposed ASC-16 measure was included on the 2015 MUC list \56\ and 
reviewed by the MAP. The MAP reviewed the measure (MUC15-1047) and 
conditionally supported it for the ASCQR Program pending NQF review and 
endorsement.\57\ The MAP noted the high value and urgency of this 
measure, given many new entrants to the ambulatory surgical center 
space, as well as the clustering outbreaks of TASS. The MAP also 
cautioned that the measure be reviewed and endorsed by NQF before 
adoption into the ASCQR Program, so that a specialized standing 
committee can evaluate the measure for scientific acceptability.\58\ A 
summary of the MAP recommendations can be found at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
---------------------------------------------------------------------------

    \56\ National Quality Forum. 2015 Measures Under Consideration 
List. National Quality Forum, Dec. 2016. Available at: http://www.qualityforum.org/2015_Measures_Under_Consideration.aspx, under 
``2015 Measures Under Consideration List (PDF).''
    \57\ National Quality Forum. 2016 Spreadsheet of Final 
Recommendations to HHS and CMS. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    \58\ National Quality Forum. 2016 Spreadsheet of Final 
Recommendations to HHS and CMS. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
---------------------------------------------------------------------------

    Sections 1833(i)(7)(B) and 1833(t)(17)(C)(i) of the Act, when read 
together, require the Secretary, except as the Secretary may otherwise 
provide, to develop measures appropriate for the measurement of the 
quality of care furnished by ASCs that reflect consensus among affected 
parties and, to the extent feasible and practicable, that include 
measures set forth by one or more national consensus building entities. 
However, we note that section 1833(i)(7)(B) of the Act does not require 
that each measure we adopt for the ASCQR Program be endorsed by a 
national consensus building entity, or by the NQF specifically. 
Further, under section 1833(i)(7)(B) of the Act, section 
1833(t)(17)(C)(i) of the Act applies to the ASCQR Program, except as 
the Secretary may otherwise provide. Under this provision, the 
Secretary has further authority to adopt non-endorsed measures. As 
stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74465 and 74505), we believe that consensus among affected parties can 
be reflected through means other than NQF endorsement, including 
consensus achieved during the measure development process, consensus 
shown through broad acceptance and use of measures, and consensus 
through public comment. We believe this proposed measure meets these 
statutory requirements.
    The proposed ASC-16 measure is not NQF-endorsed. However, this 
measure is maintained by the ASC Quality Collaboration,\59\ an entity 
recognized within the community as an expert in measure development for 
the ASC setting. We believe that this measure is appropriate for the 
measurement of quality care furnished by ASCs because ophthalmologic 
procedures are commonly performed in ASCs and, as discussed above, the 
inflammatory response associated with TASS can cause serious damage to 
patients' vision, but TASS is also preventable through careful 
attention to solutions, medications, ophthalmic devices, and to 
cleaning and sterilization of surgical equipment. While the Toxic 
Anterior Segment Syndrome measure is not NQF-endorsed, we believe this 
measure reflects consensus among affected parties, because the MAP, 
which represents stakeholder groups, reviewed and conditionally 
supported the measure \60\ for use in the ASCQR Program. The MAP agreed 
that this measure is high-value and urgent in the current healthcare 
marketplace and the number of new entrants to the surgical center 
place, as well as the clustering outbreaks of TASS.\61\ Furthermore, we 
believe that this measure is scientifically acceptable, because the 
measure steward has completed reliability testing and validity 
assessment of the measure.\62\ Specifically, a retrospective chart 
audit of the ASCs participating in measurement testing found no 
differences between the originally submitted and re-abstracted TASS 
rates, providing strong evidence the measure is reliable. The measure 
steward also conducted a formal consensus review to assess the 
measure's validity; the results of this assessment showed participants 
believe the measure appears to measure what it is intended to, and is 
defined in a way that will allow for consistent interpretation of the 
inclusion and exclusion criteria from ASC to ASC.
---------------------------------------------------------------------------

    \59\ ASC Quality Collaboration. ``ASC Quality Collaboration.'' 
Available at: http://www.ascquality.org/.
    \60\ National Quality Forum. 2016 Spreadsheet of Final 
Recommendations to HHS and CMS. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    \61\ National Quality Forum. 2016 Spreadsheet of Final 
Recommendations to HHS and CMS. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    \62\ AHRQ Measure Summary. Retrieved from: https://www.qualitymeasures.ahrq.gov/summaries/summary/49582/ambulatory-surgery-percentage-of-ophthalmic-anterior-segment-surgery-patients-diagnosed-with-toxic-anterior-segment-syndrome-tass-within-2-days-of-surgery.

---------------------------------------------------------------------------

[[Page 33691]]

(3) Data Sources
    This measure is based on aggregate measure data collected via 
chart-abstraction by the ASC and submitted via a CMS online data 
submission tool (that is, QualityNet).
    We are proposing that the data collection period for the proposed 
ASC-16 measure would be the calendar year two years prior to the 
applicable payment determination year. For example, for the CY 2021 
payment determination, the data collection period would be CY 2019. We 
also are proposing that ASCs submit these data to CMS during the time 
period of January 1 to May 15 in the year prior to the affected payment 
determination year. For example, for the CY 2021 payment determination, 
the submission period would be January 1, 2020 to May 15, 2020. We 
refer readers to section XIV.D.3.b. of this proposed rule for a more 
detailed discussion of the requirements for data submitted via a CMS 
online data submission tool.
(4) Measure Calculation
    The outcome measured in the proposed ASC-16 measure is the number 
of ophthalmic anterior segment surgery patients diagnosed with TASS 
within 2 days of surgery. The numerator for this measure is all 
anterior segment surgery patients diagnosed with TASS within 2 days of 
surgery. The denominator for this measure is all anterior segment 
surgery patients. The specifications for this measure for the ASC 
setting can be found at: http://ascquality.org/documents/ASC%20QC%20Implementation%20Guide%203.2%20October%202015.pdf.
(5) Cohort
    The measure includes all patients, regardless of age, undergoing 
anterior segment surgery at an ASC. Additional methodology and measure 
development details are available at: http://www.ascquality.org/qualitymeasures.cfm under ``ASC Quality Collaboration Measures 
Implementation Guide.''
(6) Risk Adjustment
    The proposed ASC-16 measure is not risk-adjusted; risk adjustment 
for patient characteristics is not appropriate for this measure.
    We are inviting public comment on our proposal to adopt the ASC-16: 
Toxic Anterior Segment Syndrome measure for the CY 2021 payment 
determination and subsequent years as discussed above. If the proposals 
in section XIV.B.3.b., XIB.b.4. and XIV.B.6.a. of this proposed rule 
are finalized, the measure set for the ASCQR Program CY 2021 payment 
determination and subsequent years would be as listed below. We note 
that the measures being proposed for removal in this proposed rule are 
not included in this chart.

 ASCQR Program Measure Set Previously Finalized and Proposed for the CY
             2021 Payment Determination and Subsequent Years
------------------------------------------------------------------------
           ASC No.                   NQF No.            Measure name
------------------------------------------------------------------------
ASC-1........................  0263...............  Patient Burn.
ASC-2........................  0266...............  Patient Fall.
ASC-3........................  0267...............  Wrong Site, Wrong
                                                     Side, Wrong
                                                     Patient, Wrong
                                                     Procedure, Wrong
                                                     Implant.
ASC-4........................  0265 [dagger]......  All-Cause Hospital
                                                     Transfer/Admission.
ASC-8........................  0431...............  Influenza
                                                     Vaccination
                                                     Coverage among
                                                     Healthcare
                                                     Personnel.
ASC-9........................  0658...............  Endoscopy/Polyp
                                                     Surveillance:
                                                     Appropriate Follow-
                                                     Up Interval for
                                                     Normal Colonoscopy
                                                     in Average Risk
                                                     Patients.
ASC-10.......................  0659...............  Endoscopy/Polyp
                                                     Surveillance:
                                                     Colonoscopy
                                                     Interval for
                                                     Patients with a
                                                     History of
                                                     Adenomatous Polyps-
                                                     Avoidance of
                                                     Inappropriate Use.
ASC-11.......................  1536...............  Cataracts:
                                                     Improvement in
                                                     Patient's Visual
                                                     Function within 90
                                                     Days Following
                                                     Cataract Surgery.*
ASC-12.......................  2539...............  Facility 7-Day Risk-
                                                     Standardized
                                                     Hospital Visit Rate
                                                     after Outpatient
                                                     Colonoscopy.
ASC-13.......................  None...............  Normothermia
                                                     Outcome.
ASC-14.......................  None...............  Unplanned Anterior
                                                     Vitrectomy.
ASC-15a......................  None...............  OAS CAHPS--About
                                                     Facilities and
                                                     Staff.**
ASC-15b......................  None...............  OAS CAHPS--
                                                     Communication About
                                                     Procedure.**
ASC-15c......................  None...............  OAS CAHPS--
                                                     Preparation for
                                                     Discharge and
                                                     Recovery.**
ASC-15d......................  None...............  OAS CAHPS--Overall
                                                     Rating of
                                                     Facility.**
ASC-15e......................  None...............  OAS CAHPS--
                                                     Recommendation of
                                                     Facility.**
ASC-16.......................  None...............  Toxic Anterior
                                                     Segment
                                                     Syndrome.***
------------------------------------------------------------------------
[dagger] We note that NQF endorsement for this measure was removed.
* Measure voluntarily collected effective beginning with the CY 2017
  payment determination as set forth in section XIV.E.3.c. of the CY
  2015 OPPS/ASC final rule with comment period (79 FR 66984 through
  66985).
** Measure proposed for delay in reporting beginning with the CY 2020
  payment determination (CY 2018 data collection) and until further
  action in future rulemaking, as discussed in section XIV.B.4. of this
  proposed rule.
*** New measure proposed for the CY 2021 payment determination and
  subsequent years.

b. Proposed Adoption of ASC-17: Hospital Visits After Orthopedic 
Ambulatory Surgical Center Procedures Beginning With the CY 2022 
Payment Determination
(1) Background
    Reporting the quality of care provided at ASCs is a key priority in 
the context of growth in the number of ASCs and the number of 
procedures performed in this setting. More than 60 percent of all 
medical or surgical procedures performed in 2006 were performed at 
ASCs; this represents a three-fold increase from the late 1990s.\63\ In 
2015, more than 3.4 million fee-for-service Medicare beneficiaries were 
treated at 5,475 Medicare-certified ASCs, and spending on ASC services 
by Medicare and its beneficiaries amounted to 4.1 billion dollars.\64\ 
The patient population served at ASCs has increased not only in volume, 
but also in age and complexity, which can be partially

[[Page 33692]]

attributed to improvements in anesthetic care and innovations in 
minimally invasive surgical techniques.65 66 As such, ASCs 
have become the preferred setting for the provision of low-risk 
surgical and medical procedures in the United States, as many patients 
experience shorter wait times, prefer to avoid hospitalization, and are 
able to return to work more quickly.\67\ As the number of orthopedic 
procedures performed in ASCs increases, it is increasingly important to 
report the quality of care for patients undergoing these procedures. 
According to Medicare claims data, approximately seven percent of 
surgeries performed in ASCs in 2007 were orthopedic in nature, which 
reflects a 77-percent increase in orthopedic procedures performed at 
ASCs from 2000 to 2007.\68\
---------------------------------------------------------------------------

    \63\ Cullen KA, Hall MJ, Golosinskiy A, Statistics NFcH. 
Ambulatory Surgery in the United States, 2006. Nat Health Stat Rept; 
2009.
    \64\ Medicare Payment Advisory Commission (MedPAC). Report to 
Congress: Medicare Payment Policy. March 2017; available at: http://www.medpac.gov/docs/default-source/reports/mar17_entirereport.pdf?sfvrsn=0.
    \65\ Bettelli G. High Risk Patients in Day Surgery. Minerva 
Anestesiologica. 2009;75(5):259-268. See also Fuchs K. Minimally 
Invasive Surgery. Endoscopy. 2002;34(2):154-159.
    \66\ Fuchs K. Minimally invasive surgery. Endoscopy. 
2002;34(2):154159.
    \67\ Cullen KA, Hall MJ, Golosinskiy A, Statistics NFcH. 
Ambulatory Surgery in the United States, 2006. Nat Health Stat Rept; 
2009.
    \68\ Goyal KS, Jain S, Buterbaugh GA, et al. The Safety of Hang 
and Upper-Extremity Surgical Procedures at a Freestanding Ambulatory 
Surgical Center. The Journal of Bone and Joint Surgery. 2016;90:600-
604.
---------------------------------------------------------------------------

    We believe measuring and reporting seven-day unplanned hospital 
visits following orthopedic ASC procedures will incentivize ASCs to 
improve care and care transitions. Patients that have hospital visits 
that occur at or after discharge from the ASC and may not be readily 
visible to clinicians because such patients often present to 
alternative facilities, such as emergency departments where patient 
information is not linked back to the ASC. Furthermore, many of the 
reasons for hospital visits following surgery at an ASC are 
preventable; patients often present to the hospital for complications 
of medical care, including infection, post-operative bleeding, urinary 
retention, nausea and vomiting, and pain. One study found that of 
10,032 patients who underwent orthopedic surgery in an ASC between 1993 
and 2012, 121 (1.2 percent) needed attention in the emergency 
department in the first 24 hours after discharge due to pain or 
bleeding, while others were admitted later for issues related to pain 
and swelling.\69\ Therefore, we believe tracking and reporting these 
events would facilitate efforts to lower the rate of preventable 
adverse events and to improve the quality of care following orthopedic 
surgeries performed at an ASC.
---------------------------------------------------------------------------

    \69\ Mart[iacute]n-Ferrero MA, Faour-Mart[iacute]n O. Ambulatory 
surgery in orthopedics: experience of over 10,000 patients. Journal 
of Orthopaedic Surgery. 2014;19:332-338.
---------------------------------------------------------------------------

(2) Overview of Measure
    Based on the increasing prevalence of orthopedic surgery in the ASC 
setting, we believe it is important to minimize adverse patient 
outcomes associated with these orthopedic ASC surgeries. Therefore, we 
are proposing to adopt the ASC-17: Hospital Visits after Orthopedic 
Ambulatory Surgical Center Procedures measure in the ASCQR Program for 
the CY 2022 payment determination and subsequent years. We expect the 
measure would promote improvement in patient care over time, because 
measurement coupled with transparency in publicly reporting measure 
information would make the rate of unplanned hospital visits (emergency 
department visits, observation stays, and unplanned inpatient 
admissions) following orthopedic surgery at ASCs more visible to both 
ASCs and patients and would incentivize ASCs to incorporate quality 
improvement activities to reduce these unplanned hospital visits. The 
measure also addresses the CMS National Quality Strategy domains of 
making care safer by reducing harm caused in the delivery of care and 
promoting effective communication and coordination of care.
    Section 1890A of the Act requires the Secretary to establish a 
prerulemaking process with respect to the selection of certain 
categories of quality and efficiency measures. Under section 
1890A(a)(2) of the Act, the Secretary must make available to the public 
by December 1 of each year a list of quality and efficiency measures 
that the Secretary is considering for the Medicare program. The ASC-17 
measure we are proposing was included on a publicly available document 
entitled ``List of Measures under Consideration for December 1, 2016.'' 
\70\ The MAP reviewed this measure (MUC16-152) and recommended this 
measure be refined and resubmitted prior to adoption, stating that 
testing results should demonstrate reliability and validity at the 
facility level in the ambulatory surgical setting.\71\ MAP also 
recommended that this measure be submitted to NQF for review and 
endorsement.\72\ At the time of the MAP's review, this measure was 
still undergoing field testing.
---------------------------------------------------------------------------

    \70\ National Quality Forum. List of Measures under 
Consideration for December 1, 2016. National Quality Forum, Dec. 
2016. Available at: http://www.qualityforum.org/map/.
    \71\ National Quality Forum. 2016-2017 Spreadsheet of Final 
Recommendations to HHS and CMS. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    \72\ National Quality Forum. 2016-2017 Spreadsheet of Final 
Recommendations to HHS and CMS. Available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
---------------------------------------------------------------------------

    Since the MAP's review and recommendation of `Refine and Resubmit' 
in 2016, we have completed testing for this measure and continued to 
refine this proposed measure in response to the MAP's recommendations. 
Results of continued development activities, including stakeholder 
feedback from the public comment period and pilot test findings will be 
presented to the MAP during the MAP feedback loop meeting in fall 2017. 
The proposed measure is consistent with the information submitted to 
the MAP, and the original MAP submission and our continued refinements 
support its scientific acceptability for use in quality reporting 
programs. Facility-level testing showed variation in unplanned hospital 
visits among ASCs after adjusting for case-mix differences, which 
suggests variation in quality of care and opportunities for quality 
improvement; and reliability testing showed fair measure score 
reliability.\73\ As expected, the reliability increased for ASCs with 
more patients; ASCs with at least 250 cases showed moderate 
reliability, consistent with other publicly reported Medicare claims-
based, risk-adjusted outcome measures.\74\ The validity testing results 
demonstrated that the measure scores are valid and useful measures of 
ASC orthopedic surgical quality of care and will provide ASCs with 
information that can be used to improve their quality of care. Detailed 
testing results are available in the technical report for this measure, 
located at: https://www.cms.gov/medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \73\ Landis JR, Koch GG. The Measurement of Observer Agreement 
for Categorical Data. Biometrics. 1977;33(1):159-174.
    \74\ Yale New Haven Health Services Corporation--Center for 
Outcomes Research and Evaluation (CORE) Measure Technical Report: 
Hospital Visits after Orthopedic Ambulatory Surgical Center 
Procedures (Version 1.0). May 2017. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Version-10_Hospital-Visits_Orthopedic-ASC-Procedures_Measure-Technical-Report_052017.pdf.
---------------------------------------------------------------------------

    Sections 1833(i)(7)(B) and 1833(t)(17)(C)(i) of the Act, when read 
together, require the Secretary, except as the Secretary may otherwise 
provide, to develop measures appropriate for the measurement of the 
quality of care

[[Page 33693]]

furnished by ASCs that reflect consensus among affected parties and, to 
the extent feasible and practicable, that include measures set forth by 
one or more national consensus building entities. However, we note that 
section 1833(i)(7)(B) of the Act does not require that each measure we 
adopt for the ASCQR Program be endorsed by a national consensus 
building entity, or by the NQF specifically. Further, under section 
1833(i)(7)(B) of the Act, section 1833(t)(17)(C)(i) of the Act applies 
to the ASCQR Program, except as the Secretary may otherwise provide. 
Under this provision, the Secretary has further authority to adopt non-
NQF-endorsed measures. As stated in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74465 and 74505), we believe that consensus 
among affected parties can be reflected through means other than NQF 
endorsement, including consensus achieved during the measure 
development process, consensus shown through broad acceptance and use 
of measures, and consensus through public comment. We believe this 
proposed measure meets these statutory requirements.
    The proposed ASC-17 measure is not currently NQF-endorsed. However, 
we intend to submit this measure for review and endorsement by NQF once 
an appropriate NQF project has a call for measures. We believe that 
this measure is appropriate for the measurement of quality care 
furnished by ASCs, because surgeries are becoming increasingly common 
in ASCs and, as discussed above, can signify unanticipated admissions 
after care provided in ASCs. Such visits are an unexpected and 
potentially preventable outcome for patients with a low anticipated 
perioperative risk. We also believe this proposed measure reflects 
consensus among affected parties, because it was developed with 
stakeholder input from a Technical Expert Panel convened by a CMS 
contractor as well as from the measure development public comment 
period.\75\ During the MAP and measure development processes, public 
commenters supported the measure's focus on assessing patient outcomes 
after orthopedic surgery performed in ASC setting of care, and agreed 
that the measure would be meaningful and improve quality of care. In 
addition, the ASC-17 measure addresses the MAP-identified priority 
measure area of surgical complications for the ASCQR Program.\76\ 
Therefore, we believe it is appropriate to incorporate this measure 
into the ASCQR Program measure set because collecting and publicly 
reporting these data will improve transparency, inform patients and 
providers, and foster quality improvement efforts.
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    \75\ National Quality Forum. ``MAP 2017 Considerations for 
Implementing Measures in Federal Programs: Hospitals.'' Report. 
2017. Available at: http://www.qualityforum.org/map/ under 
``Hospitals--Final Report.''
    \76\ National Quality Forum. ``MAP 2017 Considerations for 
Implementing Measures in Federal Programs: Hospitals.'' Report. 
2017. Available at: http://www.qualityforum.org/map/ under 
``Hospitals--Final Report.''
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(3) Data Sources
    This measure is claims-based and uses Part A and Part B Medicare 
administrative claims and Medicare enrollment data to calculate the 
measure.
    We are proposing that the data collection period for the proposed 
ASC-17 measure would be the two calendar years ending two years prior 
to the applicable payment determination year. For example, for the CY 
2022 payment determination, the data collection period would be CY 2019 
to 2020. Because the measure data are collected via claims, ASCs will 
not need to submit any additional data directly to CMS. We refer 
readers to section XIV.D.4. of this proposed rule for a more detailed 
discussion of the requirements for data submitted via claims.
(4) Measure Calculation
    The measure outcome is all-cause, unplanned hospital visits within 
seven days of an orthopedic procedure performed at an ASC. For the 
purposes of this measure, ``hospital visits'' include emergency 
department visits, observation stays, and unplanned inpatient 
admissions. When there are two or more qualifying surgical procedures 
within a 7-day period, the measure considers all procedures as index 
procedures; however, the timeframe for outcome assessment is defined as 
the interval between procedures (including the day of the next 
procedure) and then 7 days after the last procedure.
    The facility-level score is a risk-standardized hospital visit 
rate, calculated by multiplying the ratio of the predicted to the 
expected number of post-surgical hospital visits among the given ASC's 
patients by the national observed hospital visit rate for all ASCs. For 
each ASC, the numerator of the ratio is the number of hospital visits 
predicted for the ASC's patients accounting for its observed rate, the 
number of the orthopedic surgeries performed at the ASC, the case-mix, 
and the surgical complexity mix. The denominator of the ratio is the 
expected number of hospital visits given the ASC's case-mix and 
surgical complexity mix. A ratio of less than one indicates the ASC 
facility's patients were estimated as having fewer post-surgical visits 
than expected compared to ASCs with similar surgical complexity and 
patients; and a ratio of greater than one indicates the ASC facility's 
patients were estimated as having more visits than expected. The 
national observed hospital visit rate is the national unadjusted 
proportion of patients who had a hospital visit following an orthopedic 
ASC surgery. For more information on measure calculations, we refer 
readers to: https://www.cms.gov/medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(5) Cohort
    The patient cohort for the proposed ASC-17 measure includes all 
Medicare beneficiaries ages 65 and older undergoing outpatient 
orthopedic surgery at an ASC who have 12 prior months of Medicare fee-
for-service Parts A and B enrollment. The target group of procedures 
includes those that: (1) Are routinely performed at ASCs; (2) involve 
some increased risk of post-surgery hospital visits; and (3) are 
routinely performed by orthopedists.
    Procedures included in the measure cohort are on Medicare's list of 
covered ambulatory surgical center (ASC) procedures.\77\ Medicare 
developed this list to identify surgeries that have a low to moderate 
risk profile. Surgeries on the ASC list of covered procedures do not 
involve or require major or prolonged invasion of body cavities, 
extensive blood loss, major blood vessels, or care that is either 
emergent or life threatening. Medicare annually reviews and updates 
this list, and includes a transparent public comment submission and 
review process for addition and/or removal of procedures codes.\78\ The 
current list is accessible in the Downloads section at: https://www.cms.gov/medicare/medicare-fee-for-service-payment/ascpayment/11_addenda_updates.html.
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    \77\ Centers for Medicare and Medicaid Services. ``Ambulatory 
Surgical Center (ASC) Payment: Addenda Updates''. Available at: 
https://www.cms.gov/medicare/medicare-fee-for-service-payment/ascpayment/11_addenda_updates.html.
    \78\ Centers for Medicare and Medicaid Services. ``Ambulatory 
Surgical Center (ASC) Payment: Addenda Updates''. Available at: 
https://www.cms.gov/medicare/medicare-fee-for-service-payment/ascpayment/11_addenda_updates.html.
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    In addition, to focus the measure only on the subset of surgeries 
on Medicare's list of covered ASC procedures that impose a meaningful 
risk of post-

[[Page 33694]]

orthopedic ASC surgery hospital visits, the measure includes only 
``major'' and ``minor'' procedures, as indicated by the Medicare 
Physician Fee Schedule global surgery indicator (GSI) values of 090 and 
010, respectively. This list of GSI values is publicly available at: 
https://www.cms.gov/Medicare/Medicare-fee-for-service-payment/physicianfeesched/pfs-federal-regulation-notices-items/cms-1590-fc.html 
(download Addendum B). Moreover, to identify the subset of ASC 
procedures typically performed by orthopedists, we used the Clinical 
Classifications Software (CCS) developed by the Agency for Healthcare 
Research and Quality (AHRQ) and include in this measure procedures from 
AHRQ's ``operations on the musculoskeletal system'' group of 
procedures.\79\ For more cohort details, we refer readers to the 
measure technical report located at: https://www.cms.gov/medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
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    \79\ Healthcare Cost and Utilization Project. Clinical 
Classifications Software for Services and Procedures. Available at: 
https://www.hcup-us.ahrq.gov/toolssoftware/ccs_svcsproc/ccssvcproc.jsp.
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    The measure excludes patients who survived at least 7 days 
following orthopedic surgery at an ASC, but were not continuously 
enrolled in Medicare fee-for-service Parts A and B in the 7 days after 
surgery. These patients are excluded to ensure all patients captured 
under this measure have full data available for outcome assessment. 
There are no additional inclusion or exclusion criteria for the 
proposed ASC-17 measure. Additional methodology and measure development 
details are available at: https://www.cms.gov/medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(6) Risk Adjustment
    The statistical risk-adjustment model includes 29 clinically 
relevant risk-adjustment variables that are strongly associated with 
risk of hospital visits within seven days following ASC orthopedic 
surgery. The measure risk adjusts for age, 27 comorbidities, and a 
variable for work Relative Value Units (RVUs) to adjust for surgical 
complexity.\80\ Additional risk adjustment details are available in the 
technical report at: https://www.cms.gov/medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
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    \80\ S. Coberly. The Basics; Relative Value Units (RVUs). 
National Health Policy Forum. January 12, 2015. Available at: http://www.nhpf.org/library/the-basics/Basics_RVUs_01-12-15.pdf.
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(7) Public Reporting
    As stated above, facility-level testing showed variation in 
unplanned hospital visits among ASCs after adjusting for case-mix 
differences, which suggests variation in quality of care and 
opportunities for quality improvement.\81\ Reliability testing showed 
fair measure score reliability.\82\ As expected, the reliability 
increased for ASCs with more patients; ASCs with at least 250 cases 
showed moderate reliability, consistent with other publicly reported 
Medicare claims-based, risk-adjusted outcome measures. If this measure 
is adopted, we are proposing to publicly report results only for 
facilities with sufficient case numbers to meet moderate reliability 
standards.\83\ CMS will determine the case size cutoff for meeting 
moderate reliability standards using the interclass correlation (ICC) 
during the measure dry run (discussed below) by testing the reliability 
of the scores at different case sizes in the dry run data. However, we 
would also provide confidential performance data directly to smaller 
facilities, which do not meet the criteria for sufficient case numbers 
for reliability considerations, that would benefit from seeing their 
measure results and individual patient-level outcomes. These data are 
currently largely unknown to ASCs and providers. The validity testing 
results demonstrated that the measure scores are valid and useful 
measures of ASC orthopedic surgical quality of care and will provide 
ASCs with information that can be used to improve their quality of 
care. Detailed testing results are available in the technical report 
for this measure, located at: https://www.cms.gov/medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
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    \81\ Yale New Haven Health Services Corporation. Hospital Visits 
after Orthopedic Ambulatory Surgical Center Procedures (Version 
1.0). May 2017. Available at: