FR Doc 03-20280

[Federal Register: August 12, 2003 (Volume 68, Number 155)]
[Proposed Rules]
[Page 47965-48248]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12au03-21]

[[Page 47965]]

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Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 410 and 419

Medicare Program; Changes to the Hospital Outpatient Prospective
Payment System and Calendar Year 2004 Payment Rates; Proposed Rule

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410 and 419

[CMS-1471-P]
RIN 0938-AL19

Medicare Program; Changes to the Hospital Outpatient Prospective
Payment System and Calendar Year 2004 Payment Rates

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 to implement applicable statutory
requirements and changes arising from our continuing experience with
this system. In addition, it would describe proposed changes to the
amounts and factors used to determine the payment rates for Medicare
hospital outpatient services paid under the prospective payment system.
These changes would be applicable to services furnished on or after
January 1, 2004.

DATES: We will consider comments if we receive them at the appropriate
address, as provided below, no later than 5 p.m. on October 6, 2003.

ADDRESSES: In commenting, please refer to file code CMS-1471-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission or e-mail.
Mail written comments (one original and two copies) to the
following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1471-P, P.O. Box 8018, Baltimore, MD
21244-8018.
Please allow sufficient time for mailed comments to be timely
received in the event of delivery delays.
If you prefer, you may deliver (by hand or courier) your written
comments (one original and two copies) to one of the following
addresses:
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or Room C5-14-03, 7500 Security Boulevard,
Baltimore, MD 21244-1850.

(Because access to the interior of the HHH 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.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and could be considered late.
We encourage commenters submitting as comments information that
contains beneficiary specific information (for example, medical
records, or invoices with beneficiary identification) to remove any
individually identifiable information, such as information that
identifies an individual, diagnoses, addresses, telephone numbers,
attending physician, medical record number, or Medicare or other
insurance number. Moreover, individually identifiable beneficiary
medical records, including progress notes, medical orders, test
results, consultation reports, and photocopies of checks from hospitals
or other documents that contain bank routing numbers should not be
submitted to us. Persons or organizations submitting proprietary
information as public comments must designate in writing if part or all
of the information contained in such comments should be considered as
exempt from disclosure under Exemption 4 of the Freedom of Information
Act (FOIA). Generally, Exemption 4 of the FOIA protects trade secrets
and commercial or financial information that is privileged or
confidential, and affords the same protections as the Trade Secrets
Act, which is also applicable. We will attempt to keep confidential and
protect from disclosure information that qualifies under Exemption 4.
However, only data that can be available for public inspection would be
used for the final rule. For information on viewing public comments,
see the beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Dana Burley, (410) 786-4532--
outpatient prospective payment issues; Suzanne Asplen, (410) 786-4558
or Jana Petze, (410) 786-9374--partial hospitalization and community
mental health centers issues.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received timely will be
available for public inspection as they are received, generally
beginning approximately 3 weeks after publication of a document, at the
headquarters of the Centers for Medicare & Medicaid Services, 7500
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view
public comments, call (410) 786-7197.

Availability of Copies and Electronic Access

Copies: To order copies of the Federal Register containing this
document, send your request to: New Orders, Superintendent of
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an alternative, you can view and photocopy the Federal Register
document at most libraries designated as Federal Depository Libraries
and at many other public and academic libraries throughout the country
that receive the Federal Register.
This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html
.
To assist readers in referencing sections contained in this
document, we are providing the following table of contents.

Outline of Contents

I. Background
A. Authority for the Outpatient Prospective Payment System
B. Summary of Rulemaking for the Outpatient Prospective Payment
System
II. Proposed Changes to the Ambulatory Payment Classification (APC)
Groups and Relative Weights
A. Recommendations of the Advisory Panel on APC Groups
1. Establishment of the Advisory Panel on APC Groups
2. The Panel's Meetings
3. Establishment of an Observation Subcommittee
4. Recommendations of the Advisory Panel and Our Responses
B. Other Changes Affecting the APCs
1. Limit on Variation of Costs of Services Classified Within an
APC Group
2. Procedures Moved from New Technology APCs to Clinically
Appropriate APCs
3. Revision of Cost Bands and Payment Amounts for New Technology
APCs
4. APC Assignment for New Codes Created During Calendar Year
(CY) 2003
5. Creation of APCs for Combinations of Device Procedures
6. New APC for Antepartum Care
III. Recalibration of APC Weights for CY 2004

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A. Data Issues
1. Period of Claims Data Used
2. Treatment of ``Multiple Procedure'' Claims
3. Adjustment of Median Costs for CY 2003 OPPS
B. Description of How We Propose To Calculate Weights for CY
2004
IV. Transitional Pass-Through and Related Payment Issues
A. Background
B. Discussion of Pro Rata Reduction
V. Payment for Devices
A. Pass-Through Devices
B. Expiration of Transitional Pass-Through Payments in CY 2004
C. Other Policy Issues Relating to Pass-Through Device
Categories
VI. Payment for Drugs, Biologicals, Radiopharmaceutical Agents,
Blood, and Blood Products
A. Pass-Through Drugs and Biologicals
B. Drugs, Biologicals, and Radiopharmaceuticals Without Pass-
Through Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs,
Biologicals, and Radiopharmaceuticals
3. Payment for Drugs, Biologicals, and Radiopharmaceuticals That
Are Not Packaged
4. Proposed Payment Methodology for Drug Administration
5. Generic Drugs and Radiopharmaceuticals
6. Orphan Drugs
7. Vaccines
8. Blood and Blood Products
9. Intravenous Immune Globulin
10. Drug and Device Coding
11. Payment for Split Unit of Blood
12. Other Issues
VII. Wage Index Changes for CY 2004
VIII. Copayment for CY 2004
IX. Conversion Factor Update for CY 2004
X. Proposed Outlier Policy and Elimination of Transitional Corridor
Payments for CY 2004
A. Proposed Outlier Policy for CY 2004
B. Elimination of Transitional Corridor Payments for CY 2004
XI. Other Policy Decisions and Proposed Changes
A. Hospital Coding for Evaluation and Management (E/M) Services
B. Status Indicators and Issues Related to OCE Editing
C. Observation Services
D. Procedures That Will Be Paid Only As Inpatient Procedures
E. Partial Hospitalization Payment Methodology
1. Background
2. PHP APC Update for CY 2004
3. Outlier Payments to CMHCs
XII. Summary of and Responses to MedPAC Recommendations
XIII. Summary of Proposed Changes for 2004
A. Changes Required by Statute
B. Additional Changes
XIV. Collection of Information Requirements
XV. Response to Public Comments
XVI. Regulatory Impact Analysis
A. General
B. Changes in This Proposed Rule
C. Limitations of Our Analysis
D. Estimated Impacts of This Proposed Rule on Hospitals
E. Projected Distribution of Outlier Payments
F. Estimated Impacts of This Proposed Rule on Beneficiaries

Addenda

Addendum A--List of Ambulatory Payment Classifications (APCs) with
Status Indicators, Relative Weights, Payment Rates, and Copayment
Amounts
Addendum B--Payment Status by HCPCS Code, and Related Information
Addendum C--Hospital Outpatient Payment for Procedures by APC:
Displayed on Web Site Only
Addendum D--Payment Status Indicators for the Hospital Outpatient
Prospective Payment System
Addendum E--CPT Codes That Would Be Paid Only as Inpatient
Procedures
Addendum H--Wage Index for Urban Areas
Addendum I--Wage Index for Rural Areas
Addendum J--Wage Index for Hospitals That Are Reclassified
Addendum L--Packaged Nonchemotherapy Infusion Drugs
Addendum M--Separately Paid Nonchemotherapy Infusion Drugs
Addendum N--Packaged Chemotherapy Drugs Other Than Infusion
Addendum O--Separately Paid Chemotherapy Drugs Other Than Infusion
Addendum P--Packaged Chemotherapy Drugs Infusion Only
Addendum Q--Separately Paid Chemotherapy Drugs Infusion Only

Alphabetical List of Acronyms Appearing in the Proposed Rule

ACEP--American College of Emergency Physicians
AHA--American Hospital Association
AHIMA--American Health Information Management Association
AMA--American Medical Association
APC--Ambulatory payment classification
ASC--Ambulatory surgical center
AWP--Average wholesale price
BBA--Balanced Budget Act of 1997
BIPA--Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000
BBRA--Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act
of 1999
CAH--Critical access hospital
CCR--Cost center specific cost-to-charge ratio
CMHC--Community mental health center
CMS--Centers for Medicare & Medicaid Services (Formerly known as the
Health Care Financing Administration)
CPT--[Physicians'] Current Procedural Terminology, Fourth Edition,
2002, copyrighted by the American Medical Association
CY--Calendar year
DMEPOS--Durable medical equipment, prosthetics, orthotics, and
supplies
DRG--Diagnosis-related group
DSH--Disproportionate Share Hospital
EACH--Essential Access Community Hospital
E/M--Evaluation and management
ESRD--End-stage renal disease
FACA--Federal Advisory Committee Act
FDA--Food and Drug Administration
FI--Fiscal intermediary
FSS--Federal Supply Schedule
FY--Federal fiscal year
HCPCS--Healthcare Common Procedure Coding System
HCRIS--Hospital Cost Report Information System
HHA--Home health agency
HIPAA--Health Insurance Portability and Accountability Act of 1996
ICD-9-CM--International Classification of Diseases, Ninth Edition,
Clinical Modification
IME--Indirect Medical Education
IPPS--(Hospital) inpatient prospective payment system
IVIG--Intravenous Immune Globulin
LTC--Long Term Care
MedPAC--Medicare Payment Advisory Commission
MDH--Medicare Dependent Hospital
MSA--Metropolitan statistical area
NECMA--New England County Metropolitan Area
OCE--Outpatient code editor
OMB--Office of Management and Budget
OPD--(Hospital) outpatient department
OPPS--(Hospital) outpatient prospective payment system
PHP--Partial hospitalization program
PM--Program memorandum
PPS--Prospective payment system
PPV--Pneumococcal pneumonia (virus)
PRA--Paperwork Reduction Act
RFA--Regulatory Flexibility Act
RRC--Rural Referral Center
SBA--Small Business Administration
SCH--Sole Community Hospital
SDP--Single drug pricer
SI--Status Indicator
TEFRA--Tax Equity and Fiscal Responsibility Act
TOPS--Transitional outpatient payments
USPDI--United States Pharmacopoeia Drug Information

I. Background

A. Authority for the Outpatient Prospective Payment System

When the Medicare statute was originally 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 cost-based payment
methodology with a prospective payment system (PPS). The Balanced
Budget Act of 1997 (BBA) (Pub. L. 105-33), enacted on August 5, 1997,
added section 1833(t) to the Social Security Act (the Act) authorizing
implementation of a PPS for hospital outpatient services. The Balanced
Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), enacted on
November 29, 1999, made major changes that affected the hospital
outpatient PPS (OPPS). The Medicare, Medicaid, and

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SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L.
106-554), enacted on December 21, 2000, made further changes in the
OPPS. The OPPS was first implemented for services furnished on or after
August 1, 2000.

B. Summary of Rulemaking for the Outpatient Prospective Payment System

[sbull] On September 8, 1998, we published a proposed rule (63 FR
47552) to establish in regulations a PPS for hospital outpatient
services, to eliminate the formula-driven overpayment for certain
hospital outpatient services, and to extend reductions in payment for
costs of hospital outpatient services. On June 30, 1999, we published a
correction notice (64 FR 35258) to correct a number of technical and
typographic errors in the September 1998 proposed rule including the
proposed amounts and factors used to determine the payment rates.
[sbull] On April 7, 2000, we published a final rule with comment
period (65 FR 18434) that addressed the provisions of the PPS for
hospital outpatient services scheduled to be effective for services
furnished on or after July 1, 2000. Under this system, Medicare payment
for hospital outpatient services included in the PPS is made at a
predetermined, specific rate. These outpatient services are classified
according to a list of ambulatory payment classifications (APCs). The
April 7, 2000 final rule with comment period also established
requirements for provider departments and provider-based entities and
prohibited Medicare payment for nonphysician services furnished to a
hospital outpatient by a provider or supplier other than a hospital
unless the services are furnished under arrangement. In addition, this
rule extended reductions in payment for costs of hospital outpatient
services as required by the BBA and amended by the BBRA. Medicare
regulations governing the hospital OPPS are set forth at 42 CFR part
419.
[sbull] On June 30, 2000, we published a notice (65 FR 40535)
announcing a delay in implementation of the OPPS from July 1, 2000 to
August 1, 2000. We implemented the OPPS on August 1, 2000.
[sbull] On August 3, 2000, we published an interim final rule with
comment period (65 FR 47670) that modified criteria that we use to
determine which medical devices are eligible for transitional pass-
through payments. The August 3, 2000 rule also corrected and clarified
certain provider-based provisions included in the April 7, 2000 rule.
[sbull] On November 13, 2000, we published an interim final rule
with comment period (65 FR 67798). This rule provided for the annual
update to the amounts and factors for OPPS payment rates effective for
services furnished on or after January 1, 2001. We implemented the 2001
OPPS on January 1, 2001. We also responded to public comments on those
portions of the April 7, 2000 final rule that implemented related
provisions of the BBRA and public comments on the August 3, 2000 rule.
[sbull] On November 2, 2001, we published a final rule (66 FR
55857) that announced the Medicare OPPS conversion factor for calendar
year (CY) 2002. In addition, it described the Secretary's estimate of
the total amount of the transitional pass-through payments for CY 2002
and the implementation of a uniform reduction in each of the pass-
through payments for that year.
[sbull] On November 2, 2001, we also published an interim final
rule with comment period (66 FR 55850) that set forth the criteria the
Secretary will use to establish new categories of medical devices
eligible for transitional pass-through payments under Medicare's OPPS.
[sbull] On November 30, 2001, we published a final rule (66 FR
59856) that revised the Medicare OPPS to implement applicable statutory
requirements, including relevant provisions of BIPA, and changes
resulting from continuing experience with this system. In addition, it
described the CY 2002 payment rates for Medicare hospital outpatient
services paid under the PPS. This final rule also announced a uniform
reduction of 68.9 percent to be applied to each of the transitional
pass-through payments for certain categories of medical devices and
drugs and biologicals.
[sbull] On December 31, 2001, we published a final rule (66 FR
67494) that delayed, until no later than April 1, 2002, the effective
date of CY 2002 payment rates and the uniform reduction of transitional
pass-through payments that were announced in the November 30, 2001
final rule. In addition, this final rule indefinitely delayed certain
related regulatory provisions.
[sbull] On March 1, 2002, we published a final rule (67 FR 9556)
that corrected technical errors that affected the amounts and factors
used to determine the payment rates for services paid under the
Medicare OPPS and corrected the uniform reduction to be applied to
transitional pass-through payments for CY 2002 as published in the
November 30, 2001 final rule. These corrections and the regulatory
provisions that had been delayed became effective on April 1, 2002.
[sbull] On November 1, 2002, we published a final rule (67 FR
66718) that revised the Medicare OPPS to update the payment weights and
conversion factor for services payable under the 2003 OPPS on the basis
of data from claims for services furnished from April 1, 2001 through
March 31, 2002. The rule also removed from pass-through status most
drugs and devices that had been paid under pass-through provisions in
2002 as required by the applicable provisions of law governing the
duration of pass-through payment.

II. Proposed Changes to the Ambulatory Payment Classification (APC)
Groups and Relative Weights

Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the APC group to which the
service is assigned. Each APC weight represents the median hospital
cost of the services included in that APC relative to the median
hospital cost of the services included in APC 601, Mid-Level Clinic
Visits. The APC weights are scaled to APC 601 because a mid-level
clinic visit is one of the most frequently performed services in the
outpatient setting.
Section 1833(t)(9)(A) of the Act requires the Secretary to review
the components of the OPPS not less often than annually and to revise
the groups, relative payment weights, and other adjustments to take
into account changes in medical practice, changes in technology, and
the addition of new services, new cost data, and other relevant
information and factors. Section 1833(t)(9)(A) of the Act requires the
Secretary, beginning in 2001, to consult with an outside panel of
experts to review the APC groups and the relative payment weights.
Finally, section 1833(t)(2) of the Act provides that, subject to
certain exceptions, the items and services within an APC group cannot
be considered comparable with respect to the use of resources if the
highest median (or mean cost, if elected by the Secretary) for an item
or service in the group is more than 2 times greater than the lowest
median cost for an item or service within the same group (referred to
as the ``2 times rule'').
We use the median cost of the item or service in implementing this
provision. The statute authorizes the Secretary to make exceptions to
the 2 times rule ``in

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unusual cases, such as low volume items and services.''
For purposes of this proposed rule, we analyzed the APC groups
within this statutory framework.

A. Recommendations of the Advisory Panel on APC Groups

1. Establishment of the Advisory Panel on APC Groups
Section 1833(t)(9)(A) of the Act requires that we consult with an
outside panel of experts, the Advisory Panel on APC Groups (the Panel),
to review the clinical integrity of the groups and weights. The Act
specifies that the Panel will act in an advisory capacity. This expert
panel, which is to be composed of representatives of providers subject
to the OPPS (currently employed full-time, in their respective areas of
expertise), reviews and advises us about the clinical integrity of the
APC groups and their weights. The Panel is not restricted to using our
data and may use data collected or developed by organizations outside
the Department in conducting its review.
On November 21, 2000, the Secretary signed the charter establishing
an ``Advisory Panel on APC Groups.'' The Panel is technical in nature
and is governed by the provisions of the Federal Advisory Committee Act
(FACA) as amended (Pub. L. 92-463).
On November 1, 2002, the Secretary renewed the charter. The new
charter indicates that the Panel continues to be technical in nature,
is governed by the provisions of the FACA, may convene ``up to three
meetings per year,'' and is chaired by a Federal official.
To establish the Panel, we solicited members in a notice published
in the Federal Register on December 5, 2000 (65 FR 75943). We received
applications from more than 115 individuals nominating either a
colleague or themselves. After carefully reviewing the applications, we
chose 15 highly qualified individuals to serve on the Panel.
Because of the loss of 6 Panel members in March 2003 due to the
expiration of terms of office, retirement, and a career change, a
Federal Register notice was published on February 28, 2003 (68 FR
9671), requesting nominations of Panel members. From the 40 nominations
we received, 6 new members have been chosen and will be identified on
the CMS Web site.
2. The Panel's Meetings
The first Panel meeting was held on February 27, February 28, and
March 1, 2001. During the 2001 meeting, the Panel members felt that
requiring consistency for all presentations with regard to format, data
submission, and general information would assist them in analyzing the
submissions and presentations and making recommendations. Therefore,
upon the Panel's recommendation, the Research Subcommittee was
established during the 2001 meeting.
The Panel began its 2002 meeting on January 22, 2002, by
considering the Research Subcommittee's recommendation to the Panel on
requirements for written submissions and oral presentations. The
Research Subcommittee recommended that all future oral presentations
and written submissions contain the following:
[sbull] Name, address, and telephone number of the proposed
presenter.
[sbull] Financial relationship(s), if any, with any company whose
products, services, or procedures are under consideration.
[sbull] CPT ([Physicians'] Current Procedural Technology) codes
involved.
[sbull] APC(s) affected.
[sbull] Description of the issue.
[sbull] Clinical description of the service under discussion, with
comparison to other services within the APC.
[sbull] Description of the resource inputs associated with the
service under discussion, with a comparison to resource inputs for
other services within the APC.
[sbull] Recommendations and rationale for change.
[sbull] Expected outcome of change and potential consequences of no
change.
The Panel adopted these Subcommittee recommendations.
The third Panel meeting was held on January 21 and 22, 2003, to
discuss the APCs of the newly implemented 2003 OPPS. We published a
notice in the Federal Register on December 27, 2002 (67 FR 79107), to
announce the following: The location and time of the third Panel
meeting; a list of agenda items; and that the meeting was open to the
public. In that document, we solicited public comment specifically on
the items included on the agenda for the January 2003 Panel meeting. In
this section, ``commenter'' refers to entities that provided comments
in response to that Federal Register notice. We also provided
additional information about the Panel meeting through a press release
and on the CMS Web site. Presentations for the 2003 meeting met, at a
minimum, the adopted guidelines for presentations referred to above.
3. Establishment of an Observation Subcommittee
At the third annual meeting in January 2003, the Panel suggested
numerous changes to the APCs (listed below) and that a subcommittee be
established to review observation issues, such as allowable
International Classification of Diseases, clinical modification codes,
and operational issues. Therefore, before the close of the third annual
meeting, the Observation Subcommittee was established. Other Panel
members that are not currently participating in this subcommittee are
welcome to take part in this subcommittee, which is tasked with
reviewing International Classification of Disease Codes, clinical
modification codes, and operational issues related to observation. This
subcommittee will report its findings to the Panel in 1 year.
4. Recommendations of the Advisory Panel and Our Responses
In this section, we consider the Panel's recommendations affecting
specific APCs. The Panel based its recommendations on claims data for
the period April 1, 2002 through September 30, 2002. This data set
comprises a portion of the data that will be used to set 2004 payment
rates. APC titles in this discussion are those that existed when the
APC Panel met in January 2003. In a few cases, APC titles have been
changed for this proposed rule, and, therefore, some APCs do not have
the same title in Addendum A as they have in this section.
The Panel's agenda included APCs that our staff believe violate the
2 times rule as well as APCs for which comments were submitted. As
discussed below, the Panel sometimes declined to recommend a change in
an APC even though the APC appeared to violate the 2 times rule. In
section II.B of this preamble, we discuss our proposals regarding the 2
times rule based on the April 1, 2002 through December 31, 2002 data
that we used to determine the proposed 2004 APC relative weights.
Section II.B also details the criteria we used when deciding to propose
exceptions to the 2 times rule.
a. Debridement and Destruction.
APC 0012: Level I Debridement & Destruction.
APC 0013: Level II Debridement & Destruction.
We expressed concern to the Panel that APCs 0012 and 0013 appear to
violate the 2 times rule. In order to remedy these violations, we asked
the Panel to consider the following changes:
(1) Move the following codes from APC 0013 to APC 0012:

[[Page 47970]]

15786............................. Abrasion, lesion, single.
15793............................. Chemical peel, nonfacial.
15851............................. Removal of sutures.
16000............................. Initial treatment of burn(s).
16025............................. Treatment of burn(s).
------------------------------------------------------------------------

(2) Move code 11057 (Trim skin lesions, over 4) from APC 0012 to
APC 0013.
The Panel agreed with our staff and recommended that we make these
changes. We propose to accept the Panel's recommendation.
b. Excision/Biopsy.
APC 0019: Level I Excision/Biopsy.
APC 0020: Level II Excision/Biopsy.
APC 0021: Level III Excision/Biopsy.
We expressed concern to the Panel that APCs 0019 and 0020 appear to
violate the 2 times rule. In order to remedy these violations, we asked
the Panel to consider the following changes:
(1) Move the following HCPCS codes from APC 0019 to a new APC:

(2) Move the following HCPCS codes from APC 0020 to APC 0021:

The Panel recommended that we not change the structure of APCs
0019, 0020, and 0021 at this time in the interest of preserving
clinical homogeneity. We propose to accept the Panel's recommendation
that we make no changes to the structure of these APCs for 2004. We
plan to place these APCs on the Panel's agenda for the 2005 update.
c. Thoracentesis/Lavage Procedures and Endoscopies.
APC 0071: Level I Endoscopy Upper Airway.
APC 0072: Level II Endoscopy Upper Airway.
APC 0073: Level III Endoscopy Upper Airway.
We expressed concern to the Panel that APCs 0071 and 0072 appear to
violate the 2 times rule. In order to remedy these violations, we asked
the Panel to consider the following changes:
Move the following HCPCS codes as described below:

Table 1.--HCPCS Codes Proposed To Be Redistributed From APCs 0071 and 0072 to APCs 0071, 0072, and 0073
----------------------------------------------------------------------------------------------------------------
HCPCS Description 2003 APC 2004 APC
----------------------------------------------------------------------------------------------------------------
31505......................................... Diagnostic laryngoscopy......... 0072 0071
31575......................................... Diagnostic laryngoscopy......... 0071 0072
31720......................................... Clearance of airways............ 0072 0073
----------------------------------------------------------------------------------------------------------------

The Panel recommended that we make the above changes. We propose to
accept the Panel's recommendation, with the exception of CPT code
31720. After reviewing an additional quarter of claims data that was
not available at the time the Panel convened, placement of CPT code
31720 into APC 0072 better reflects its resource consumption.
Therefore, we propose to keep CPT code 31720 in APC 0072.
d. Cardiac and Ambulatory Blood Pressure Monitoring.
APC 0097: Cardiac and Ambulatory Blood Pressure Monitoring.
We expressed concern to the Panel that APC 0097 appears to violate
the 2 times rule. We asked the Panel to recommend options for resolving
this violation, and suggested splitting APC 0097 into two APCs. The
Panel recommended that the structure of APC 0097 should not be changed
at this time based on clinical homogeneity considerations. We propose
to accept the Panel's recommendation that we make no changes to APC
0097 for 2004. We plan to place this APC on the Panel's agenda for the
2005 update.
e. Electrocardiograms.
APC 0099: Electrocardiograms.
APC 0340: Minor Ancillary Procedures.
We expressed concern to the Panel that APC 0099 appears to violate
the 2 times rule. We asked the Panel to recommend options for resolving
this violation, and suggested moving CPT code 93701 (Bioimpedance,
thoracic) from APC 0099 to APC 0340. The Panel felt, however, that the
structure of APC 0099 should not be changed at this time based on
clinical homogeneity considerations. We propose to accept the Panel's
recommendation that we make no changes to APC 0099 for 2004. We plan to
place this APC on the Panel's agenda for the 2005 update.
f. Cardiac Stress Tests.
APC 0100: Cardiac Stress Tests.
A presenter to the Panel, who represented a device manufacturer,
requested that we move CPT code 93025 (Microvolt t-wave assessment) out
of APC 0100. The presenter believes that the actual cost for this
procedure is significantly higher than for other procedures in the same
APC. Since this technology is often billed in conjunction with other
procedures (for example, stress tests, CPT code 93017), few single-APC
claims were available to evaluate the presenter's contention.
The Panel felt the data presented are insufficient to merit moving
the code and recommends that CPT code 93025 remain in APC 0100 until
more data are available for review. We propose to accept the Panel's
recommendation that CPT code 93025 remain in APC 0100 until more claims
data become available for review.
g. Revision/Removal of Pacemakers or Automatic Implantable
Cardioverter Defibrillators.
APC 0105: Revision/Removal of Pacemakers, AICD, or Vascular.
We asked the Panel to review the codes within APC 0105 for an
apparent violation of the 2 times rule, stating that we believe the
apparent violation is a result of incorrectly coded claims. The Panel
agreed and recommended no changes to APC 0105 at this time. We propose
to accept the Panel's recommendation that we make no changes to APC
0105 until more accurate claims data become available and support the
need for a change.
h. Sigmoidoscopy.
APC 0146: Level I Sigmoidoscopy.
APC 0147: Level II Sigmoidoscopy.
We expressed concern to the Panel that relatively simple procedures
such as anoscopy and rigid sigmoidoscopy have higher median costs than
more complex procedures such as flexible sigmoidoscopy. Panel members
suggested the high costs may be due to the need to perform an otherwise
minor office procedure in a hospital setting (for example, due to the
clinical condition of the patient). Panel members also suggested that
claims may be incorrectly coded because coding

[[Page 47971]]

instructions do not clearly state how to code when the procedure
performed is not as extensive as the procedure planned (for example,
when a colonoscopy is planned but only a sigmoidoscopy is performed).
In these cases, coding instructions are unclear as to whether the
planned procedure should be reported with a modifier for reduced
services or with the code for the actual procedure performed.
The Panel recommended that we make no changes to APCs 0146 and 0147
at this time. We propose to accept the Panel's recommendation that we
make no changes to APCs 0146 and 0147. We plan to place this APC on the
Panel's agenda for the 2005 update.
i. Anal/Rectal Procedures.
APC 0148: Level I Anal/Rectal Procedure.
APC 0149: Level III Anal/Rectal Procedure.
APC 0155: Level II Anal/Rectal Procedure.
We expressed concern to the Panel that APCs 0148 and 0149 appear to
violate the 2 times rule. We asked the Panel to recommend options for
resolving these violations, and suggested rearranging some of the CPT
codes within APCs 0148, 0149, and 0155. The Panel recommended that we
move CPT code 46040 (Incision of rectal abscess) from APC 0155 to APC
0149. We propose to accept the Panel's recommendation.
j. Insertion of Penile Prosthesis.
APC 0179: Urinary Incontinence Procedures.
APC 0182: Insertion of Penile Prosthesis.
A presenter to the Panel representing manufacturers and providers
requested that APC 0182 be split into two APCs, based on whether the
procedure used inflatable or non-inflatable penile prostheses. The
presenter stated that the complexity of the procedure, the cost of the
devices, and related resources were all significantly higher with
inflatable prostheses.
The Panel recommended that we eliminate APCs 0179 and 0182 and
create two new APCs, 0385 and 0386 that contain the following CPT
codes:

We propose to accept the Panel's recommendation to eliminate APCs
0179 and 0182 and create two new APCs, 0644 and 0645, containing the
above CPT code configurations.
k. Surgical Hysteroscopy.
APC 0190: Surgical Hysteroscopy.
A presenter to the Panel, who represented a device manufacturer,
requested that we move CPT code 58563 (Hysteroscopy, ablation) from APC
0190 to a higher paying APC. The presenter noted that endometrial
cryoablation is included in a new technology APC, while a thermal
ablation system is included with older, less costly techniques. The
presenter expressed concern that cryoablation may be reimbursed at a
higher rate than the thermal ablation system, giving its manufacturers
an unfair competitive advantage.
Panel members agreed that new, more expensive technologies that
prove to be more effective merit review for a higher payment rate.
Without substantial evidence of greater effectiveness, however, the
Panel was reluctant to create APCs that provide an incentive to use a
more expensive device. In its discussion of whether or not to recommend
moving CPT code 58563 to a higher paying APC, the Panel recommended
that we take into account different methods of endometrial ablation
associated with hysteroscopy, adequately reflect the resources used for
the various procedures, avoid creating a competitive advantage or
disadvantage, and collect data needed to track costs on the type of
technologies used for this procedure.
After consulting with experts in the field, we propose to split APC
0190 (Surgical Hysteroscopy) into 2 APCs that are more clinically
homogeneous. We propose to change the description for APC 0190 from
``Surgical Hysteroscopy'' to ``Level I Hysteroscopy'' and keep the
following HCPCS codes in APC 0190:

We also propose to move the following HCPCS codes from APC 0190 to
newly created APC 0387 titled ``Level II Hysteroscopy'':

In addition, we propose to move the following HCPCS codes as
described below:

Table 2.--HCPCS Codes Proposed To Be Redistributed to APCs 0130, 0195, and 0190
----------------------------------------------------------------------------------------------------------------
HCPCS Description 2003 APC 2004 APC
----------------------------------------------------------------------------------------------------------------
58578......................................... Laparoscopic procedure, uterus.. 0190 0130
58353......................................... Endometrial ablate, thermal..... 0193 0195
58555......................................... Hysteroscopy, diagnostic, sep. 0194 0190
procedure.
----------------------------------------------------------------------------------------------------------------

We believe these proposed changes take into account the different
technologies used to perform these procedures while maintaining the
clinical comparability of these APCs as well as improving their
homogeneity in terms of resource consumption.
l. Female Reproductive Procedures.
APC 0195: Level VII Female Reproductive Proc. APC 0202: Level VIII
Female Reproductive Proc.
A commenter requested that we place CPT code 57288 (Repair bladder
defect) in its own APC because it requires the use of a device. Our
staff suggested that CPT codes 57288 and 57287 remain in APC 0202,
while the remaining codes in APC 0202 be moved to APC 0195:

The Panel agreed with our staff, and we propose to accept the
Panel's recommendation to move CPT codes

[[Page 47972]]

57109, 58920, and 58925 from APC 0202 to APC 0195.
m. Nerve Injections.
APC 0203: Level IV Nerve Injections.
APC 0204: Level I Nerve Injections.
APC 0206: Level II Nerve Injections.
APC 0207: Level III Nerve Injections.
Several commenters suggested changes in the configuration of APCs
0203, 0204, 0206, and 0207 because of concerns that the current
classifications result in payment rates that are too low relative to
the resource costs associated with certain procedures in these APCs.
Several of these APCs include procedures associated with drugs or
devices for which pass-through payments are scheduled to expire in
2003.
We requested the Panel's input regarding whether or not these APCs
should be restructured. The Panel stated that the current configuration
of APCs 0203, 0204, 0206, and 0207 is more clinically cohesive than the
previous year's configuration and that more data should be collected
before making any changes. We propose to accept the Panel's
recommendation that we make no changes to the structure of these APCs
until more data become available for review.
n. Laminotomies and Laminectomies; Implantation of Pain Management
Device.
APC 0208: Laminotomies and Laminectomies.
APC 0223: Implantation of Pain Management Device.
A presenter to the Panel, who represented a device manufacturer,
requested that we move CPT code 62351 (Implant spinal canal catheter)
from APC 0208 to APC 0223 to better capture the device cost that may be
involved with the procedure. The Panel felt the data were insufficient
to merit moving the code and recommended that CPT code 62351 remain in
APC 0208 until more data are available for review. We propose to accept
the Panel's recommendation that CPT code 62351 remain in APC 0208 until
more claims data become available for review.
o. Extended EEG Studies and Sleep Studies; Electroencephalogram.
APC 0209: Extended EEG Studies and Sleep Studies, Level II.
APC 0213: Extended EEG Studies and Sleep Studies, Level I.
APC 0214: Electroencephalogram.
We expressed concern to the Panel that APC 0213 appears to
minimally violate the 2 times rule. In order to remedy this violation,
we asked the Panel to consider a commenter's suggestion that we move
CPT code 95955 (EEG during surgery) from APC 0214 to APC 0213. The
Panel agreed with the commenter's suggestion. We propose to accept the
Panel's recommendation to move CPT code 95955 from APC 0214 to APC
0213.
p. Nerve and Muscle Tests.
APC 0215: Level I Nerve and Muscle Tests.
APC 0216: Level III Nerve and Muscle Tests.
APC 0218: Level II Nerve and Muscle Tests.
We expressed concern to the Panel that APC 0218 appears to violate
the 2 times rule. In order to remedy this violation, one commenter
requested that we move CPT codes 95921 (Autonomic nerve function test)
and 95922 (Autonomic nerve function test) from APC 0218 to APC 0216,
while another commenter requested that we move CPT code 95904 (Sensory
nerve conduction test) from APC 0215 to APC 0218. Alternatively, our
staff suggested to the Panel that the following CPT codes be moved from
APC 0218 to APC 0215.

After considering all of the above proposals, the Panel recommended
that we move CPT codes 95858, 95870, 95900, and 95903 from APC 0218 to
APC 0215. We propose to accept the Panel's recommendation.
q. Implantation of Drug Infusion Device.
APC 0227: Implantation of Drug Infusion Device.
APC 0227 contains only two CPT codes: one for implantation of
programmable spine infusion pumps, 62362, and for implantation of non-
programmable spine infusion pumps, 62361. A commenter requested that we
split APC 0227 into two APCs to recognize the cost difference between
CPT code 62361 and CPT code 62362. However, since our cost data do not
show a significant cost difference between the two devices and APC 227
does not violate the 2 times rule, the Panel recommended that CPT codes
62361 and 62362 remain in APC 0227. We propose to accept the Panel's
recommendation.
r. Ophthalmologic APCs.
APC 0230: Level I Eye Tests & Treatments.
APC 0235: Level I Posterior Segment Eye Procedures.
APC 0236: Level II Posterior Segment Eye Procedures.
APC 0698: Level II Eye Tests & Treatments.
We advised the Panel that APCs 0230 and 0235 violate the 2 times
rule but that the current configuration of these APCs reflects the
Panel's previous recommendations. A presenter to the Panel, who
represented a device manufacturer, expressed concern that the pass-
through device category ``New Technology: Intraocular Lens'' was
discontinued and these devices are now packaged. The presenter asked
the Panel to recommend that future new intraocular lens devices be
considered for a new pass-through category.
To remedy the violations to the 2 times rule, we asked the Panel to
consider moving CPT code 67820 (Revise eyelashes) from APC 0230 to APC
0698 and CPT code 67110 (Repair detached retina) from APC 0235 to APC
0236. The Panel recommended that we make these changes. We propose to
accept the Panel's recommendation and monitor the data for APC 0235 for
possible review next year. The Panel also acknowledged that making
recommendations concerning pass-through categories is beyond their
purview.
s. Skin Tests and Miscellaneous Red Blood Cell Tests; Transfusion
Laboratory Procedures.
APC 0341: Skin Tests and Miscellaneous Red Blood Cell Tests.
APC 0345: Level I Transfusion Laboratory Procedures.
We advised the Panel that APCs 0341 and 0345 minimally violate the
2 times rule and suggested moving several CPT codes within these APCs
into a new APC because a commenter expressed concern over the
combination of skin tests and miscellaneous red blood cell tests in APC
0341, asserting that services within this APC cannot be considered
comparable with respect to resource usage.
In order to remedy these violations to the 2 times rule, we
suggested moving CPT code 86901 (Blood typing, Rh (D)) from APC 0345 to
a new APC along with the following CPT codes from APC 0341:

The Panel recommended that we make the above changes. We propose to
accept the Panel's recommendation to move HCPCS codes 86880, 86885,
86886, and 86900 from APC 0341 to new APC 0409 and to move CPT code
86901 (Blood typing, Rh (D)) from APC 0345 to new APC 0409.

[[Page 47973]]

t. Otorhinolaryngologic Function Tests.
APC 0363: Level I Otorhinolaryngologic Function Tests.
APC 0660: Level II Otorhinolaryngologic Function Tests.
We expressed concern to the Panel that APC 0660 appears to violate
the 2 times rule and suggested moving CPT codes 92543 (Caloric
vestibular test) and 92588 (Evoked auditory test) from APC 0660 to APC
0363. The Panel recommended that we make these CPT code changes. We
propose to accept the Panel's recommendation to move CPT codes 92543
and 92588 from APC 0660 to APC 0363.
u. Tube Changes and Repositioning.
APC 0121: Level I Tube changes and Repositioning
APC 0122: Level II Tube changes and Repositioning
We expressed concern to the Panel that APC 0121 appears to violate
the 2 times rule. In order to remedy this violation, we suggested
moving the following CPT codes from APC 0121 to APC 0122:

The Panel recommended that we make these CPT code changes. We
propose to accept the Panel's recommendation to move CPT codes 47530,
50688, 51710, and 62225 from APC 0121 to APC 0122.
v. Myelography.
APC 0274: Myelography.
We advised the Panel that APC 0274 minimally violates the 2 times
rule and suggested moving CPT codes 72285 (X-ray c/t spine disk) and
72295 (X-ray
c/t spine disk) from APC 0274 to a new APC. A presenter, from an
organization representing radiologists, agreed with our proposal. The
Panel recommended that we make these CPT code changes. We propose to
accept the Panel's recommendation to move CPT codes 72285 and 72295
from APC 0274 to new APC 0388.
w. Therapeutic Radiologic Procedures.
APC 0296: Level I Therapeutic Radiologic Procedures
APC 0297: Level II Therapeutic Radiologic Procedures
We advised the Panel that APCs 0296 and 0297 appear to minimally
violate the 2 times rule as a result of changes recommended by the
Panel and adopted by CMS last year. The Panel recommended that no
changes be made to APCs 0296 and 0297 in the interest of preserving the
clinical homogeneity of these APCs. We propose to accept the Panel's
recommendation that we make no CPT code changes to APCs 0296 and 0297.
x. Vascular Procedures; Cannula/Access Device Procedures.
APC 0103: Miscellaneous Vascular Procedures
APC 0115: Cannula/Access Device Procedures
A commenter requested that we move CPT code 36860 (External cannula
declotting) from APC 0103 to APC 0115, asserting that this procedure is
more similar to other procedures in APC 0115 and does not fit well in
its current miscellaneous APC. The Panel found that the claims data
were insufficient to support moving CPT code 36860 from APC 0103 to the
higher paying APC 0115 and recommends that CPT code 36860 remain in APC
0103 until more data are available for review. We propose to accept the
Panel's recommendation that CPT code 36860 remain in APC 0103 until
more claims data become available for review.
y. Angiography and Venography Except Extremity.
APC 0279: Level II Angiography and Venography except Extremity.
APC 0280: Level III Angiography and Venography except Extremity.
APC 0668: Level I Angiography and Venography except Extremity.
A commenter requested that we move CPT code 75978 (Repair venous
blockage) from APC 0668 to APC 0280 and that we move CPT code 75774
(Artery x-ray, each vessel) from APC 0668 to APC 0279. A presenter to
the Panel testified that CPT code 75978 is commonly used for dialysis
patients and often requires multiple intraoperative attempts to
succeed; thus, it should be paid under APC 280. The Panel felt that
APCs 0279, 0280, and 0668 were clinically homogenous and recommended
that we only make changes after consulting with experts in the field.
We propose to accept the Panel's recommendation to make no changes to
APCs 0279, 0280, and 0668 until consulting with experts in the field.
We plan to place these APCs on the Panel's agenda for the 2005 update.
z. Computed Tomography (CT), Magnetic Resonance (MR), and
Ultrasound Guidance Procedures Currently Packaged.
APC 0332: Computerized Axial Tomography and Computerized
Angiography without Contrast Material.
APC 0335: Magnetic Resonance Imaging, Miscellaneous.
APC 0268: Ultrasound Guidance Procedures.
A presenter to the Panel expressed concern that the packaging of
guidance procedures for tissue ablation does not recognize the
significant difference in cost and time required to perform each
procedure (for example, MRI vs. CT). This presenter felt that hospitals
needed more education on the appropriate application of these codes.
Another commenter requested that CPT codes 76362, 76394, and 76490 be
changed from a status indicator of N to a status indicator of S and
included in an appropriate clinical or new technology APC.
The Panel agreed with the above comments and stated that the
packaging of these three procedures made it difficult for hospitals to
track their use for the purpose of allocating funds. The Panel
recommended changing the following CPT codes from a packaged status (N
status indicator) to a separately payable status (S status indicator)
within the indicated APCs:

Table 3.--HCPCS Codes Proposed To Be Designated as Separately Payable
------------------------------------------------------------------------
HCPCS Description 2003 status 2004 APC
------------------------------------------------------------------------
76362.......... CT scan for tissue Packaged........ 0332
ablation.
76394.......... MRI for tissue Packaged........ 0335
ablation.
76490.......... US for tissue Packaged........ 0268
ablation.
------------------------------------------------------------------------

We propose to accept the Panel's recommendation to change HCPCS
codes 76362, 76394, and 76490 from a packaged status to a separately
payable status as indicated above.
aa. Magnetic Resonance Imaging and Magnetic Resonance Angiography
Without Contrast.

[[Page 47974]]

APC 0336: Magnetic Resonance Imaging and Magnetic Resonance
Angiography without Contrast
A commenter requested that we change CPT code 76393 (MR guidance
for needle placement) from a packaged status to a separately payable
status within APC 0336. Based on clinical homogeneity considerations,
the Panel agreed with the commenter and recommended that CPT code 76393
be changed from a status indicator of N to a status indicator of S and
placed in APC 0335. We propose to accept the Panel's recommendation.
bb. Plain Film Except Teeth; Plain Film Except Teeth Including Bone
Density Measurement.
APC 0260: Level I Plain Film Except Teeth.
APC 0261: Level II Plain Film Except Teeth Including Bone Density
Measurement.
APC 0272: Level I Fluoroscopy.
A commenter requested that we move CPT codes 76120 (Cine/video x-
rays) and 76125 (Cine/video x-rays add-on) from APC 0260 to APC 0261.
However, a presenter to the Panel argued that these CPT codes are
fluoroscopic procedures that should not be grouped with Level I
radiography procedures. The Panel recommended that we move CPT code
76120 from APC 0260 to APC 0272 and that CPT code 76125 remain in APC
0260. This change makes the APCs more clinically coherent. We propose
to accept the Panel's recommendation.
cc. Chemotherapy Administration by Other Technique Except Infusion.
APC 0116: Chemotherapy Administration by Other Technique Except
Infusion.
A presenter to the Panel requested that we split APC 0116 into
three APCs according to the method of administration: (a) Subcutaneous
or intramuscular administration (CPT code 96400); (b) ``push''
administration (CPT code 96408); and (c) central nervous system
administration (CPT code 96450). The presenter also requested that
existing CPT codes should replace the more nonspecific Q codes for
administration of chemotherapy because the CPT codes would provide more
detailed data on methods of chemotherapy administration, which could be
used for future payment policy decisions. Another presenter agreed with
this request and stated that CPT codes are preferable to Q codes
because other payers require CPT codes.
The Panel agreed with the above suggestions to split APC 0116 into
3 APCs according to the method of administration. The Panel recommended
that we require hospitals to use the existing CPT codes (for example,
96400, 96408, and 96450) for administration of chemotherapy and map
them to APCs 0116, 0117, and 0118, as appropriate. The Panel also
recommended that payment rates be based on current Q code cost data
until cost data for the CPT codes are available. These cost data would
be used to determine whether to change the APC structure for
chemotherapy administration.
We propose not to accept the Panel's recommendations to split APC
0116 into 3 APCs and to use CPT codes for administration of
chemotherapy. We would consider such a split in the future but would
like to first address the administration of drugs issue. We believe
that making a change in APC 116 would be too complicated for hospitals
given the changes for administration in general that we are considering
in this proposed rule for implementation in CY 2004. We will consider
such a split for APC 116 for CY 2005. We also believe the use of CPT
codes would be burdensome to hospitals, would require extensive
education, and would result in a significant amount of miscoding. The
CPT codes for infusion therapy are based on the service furnished per
hour. We do not believe that all hospitals routinely record the start
and stop time for infusion therapy and that doing so in order to be
able to bill the proper number of hours of infusion therapy could be
very burdensome for them. Moreover, the historic cost data on which we
base the payment for the service is reported on a per visit basis (much
easier to cull from the record than the number of hours of service) and
if we changed to CPT codes for these services, we would be unable to
convert the charge/cost data now on a per visit basis to a per hour
basis (as required by the CPT code) for budget neutrality purposes.
Please see section VI of this proposed rule for further discussion on
payments for drugs and drug administration.
dd. Capturing the Costs of Drugs and Biologicals Packaged Into
APCs.
APC 0290: Level I Diagnostic Nuclear Medicine Excluding Myocardial
Scans.
APC 0291: Level II Diagnostic Nuclear Medicine Excluding Myocardial
Scans.
APC 0292: Level III Diagnostic Nuclear Medicine Excluding
Myocardial Scans.
APC 0294: Level II Therapeutic Nuclear Medicine.
APC 0666: Myocardial Add-on Scans.
We told the Panel that APCs 0290 and 0291 appear to violate the 2
times rule. Several presenters to the Panel expressed concern that our
cost data are inadequate because of confusion over coding due to
changes in codes and coding instructions for these procedures, poor
hospital reporting of radiopharmaceutical use, and the use of single
(not multiple) claims in determining costs. One presenter claimed that
the current cost data used for CPT code 78122 (Whole blood volume
determination) underestimated real costs because of confusion about
whether to code radiopharmaceuticals on a ``per dose'' basis or ``per
millicurie'' basis. This presenter requested that we move CPT code
78122 from APC 0290 to the higher paying APC 0292.
Other presenters agreed with these concerns and said they were
applicable to payments for all drugs, not just radiopharmaceuticals.
These commenters were also concerned about the loss of drug-specific
data due to packaging because hospitals would have no incentive to
code, and thereby, identify, packaged drugs.
Pass-through payments for 236 drugs, biologicals, and
radiopharmaceuticals expired as of 2003, and these items are now paid
either separately or packaged with the procedures with which they are
associated. Drugs and radiopharmaceuticals with median costs for
administration of $150 or less were packaged. Beginning in 2003 claims
data will not provide specific cost information for packaged items. We
requested input from the Panel for methods to determine drug costs.
Panel members were concerned that packaging the costs of
radiopharmaceuticals into procedures would result in underpayments for
the service because we lack adequate data on the cost of
radiopharmaceuticals. They were also concerned about creating
incentives to use radiopharmaceuticals based on cost rather than
clinical efficacy. The Panel recommended that we consider grouping
drugs and radiopharmaceuticals into new APCs taking into account both
their cost and clinical use. The Panel further recommended that, if new
APCs for radionucliides are created, the descriptors should be as
simple as possible and use of confusing units of measure should be
limited.
Due to the packaging of radiopharmaceuticals into the APC payments
for nuclear medicine procedures, we, along with commenters have
expressed concern to the Panel regarding whether the current nuclear
medicine APC structure is homogeneous in terms of resource consumption.
We have reviewed information about the use and cost of various

[[Page 47975]]

radiopharmaceuticals and believe that reorganizing the APCs for nuclear
medicine would result in greater clinical and resource homogeneity.
Therefore, we propose to eliminate APCs 0286, 0290, 0291, 0292, 0294,
0666 and create 20 new APCs for nuclear medicine that contain the
following CPT codes:

------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
APC 0389:
78000............................ Thyroid, single uptake.
78001............................ Thyroid, multiple uptakes.
78003............................ Thyroid suppress/stimul.
78020............................ Thyroid met uptake.
78099............................ Endocrine nuclear procedure.
78190............................ Platelet survival, kinetics.
78191............................ Platelet survival.
78199............................ Blood/lymph nuclear exam.
78299............................ GI nuclear procedure.
78399............................ Musculoskeletal nuclear exam.
78499............................ Cardiovascular nuclear exam.
78599............................ Respiratory nuclear exam.
78699............................ Nervous system nuclear exam.
78725............................ Kidney function study.
78799............................ Genitourinary nuclear exam.
78999............................ Nuclear diagnostic exam.
79999............................ Nuclear medicine therapy.
APC 0390:
78006............................ Thyroid imaging with uptake.
78010............................ Thyroid imaging.
78015............................ Thyroid met imaging.
78016............................ Thyroid met imaging/studies.
APC 0391:
78007............................ Thyroid image, mult uptakes.
78011............................ Thyroid imaging with flow.
78018............................ Thyroid met imaging, body.
78070............................ Parathyroid nuclear imaging.
APC 0392:
78075............................ Adrenal nuclear imaging.
APC 0393:
78110............................ Plasma volume, single.
78111............................ Plasma volume, multiple.
78120............................ Red cell mass, single.
78121............................ Red cell mass, multiple.
78122............................ Blood volume.
78130............................ Red cell survival study.
78135............................ Red cell survival kinetics.
78140............................ Red cell sequestration.
78160............................ Plasma iron turnover.
78162............................ Radioiron absorption exam.
78170............................ Red cell iron utilization.
78172............................ Total body iron estimation.
APC 0400:
78102............................ Bone marrow imaging, ltd.
78103............................ Bone marrow imaging, mult.
78104............................ Bone marrow imaging, body.
78185............................ Spleen imaging.
78195............................ Lymph system imaging.
APC 0394:
78201............................ Liver imaging.
78202............................ Liver imaging with flow.
78205............................ Liver imaging (3D).
78206............................ Liver image (3d) with flow.
78215............................ Liver and spleen imaging.
78216............................ Liver & spleen image/flow.
78220............................ Liver function study.
78223............................ Hepatobiliary imaging.
APC 0395:
78230............................ Salivary gland imaging.
78231............................ Serial salivary imaging.
78232............................ Salivary gland function exam.
78258............................ Esophageal motility study.
78261............................ Gastric mucosa imaging.
78262............................ Gastroesophageal reflux exam.
78264............................ Gastric emptying study.
78278............................ Acute GI blood loss imaging.
78290............................ Meckel's divert exam.
78291............................ Leveen/shunt patency exam.
78270............................ Vit B-12 absorption exam.
78271............................ Vit b-12 absrp exam, int fac.
78272............................ Vit B-12 absorp, combined.
78282............................ GI protein loss exam.
APC 0396:
78300............................ Bone imaging, limited area.
78305............................ Bone imaging, multiple areas.
78306............................ Bone imaging, whole body.
78315............................ Bone imaging, 3 phase.
78320............................ Bone imaging (3D).
APC 0397:
78414............................ Non-imaging heart function.
78445............................ Venous thrombosis study.
78455............................ Venous thrombosis study.
78456............................ Acute venous thrombus image.
78457............................ Venous thrombosis imaging.
78458............................ Ven thrombosis images, bilat.
APC 0398:
78428............................ Cardiac shunt imaging.
78460............................ Heart muscle blood, single.
78461............................ Heart muscle blood, multiple.
78464............................ Heart image (3d), single.
78465............................ Heart image (3d), multiple.
78466............................ Heart infarct image.
78468............................ Heart infarct image (ef).
78469............................ Heart infarct image (3D).
78472............................ Gated heart, planar, single.
78473............................ Gated heart, multiple.
78481............................ Heart first pass, single.
78483............................ Heart first pass, multiple.
78494............................ Heart image, spect.
APC 0399:
78478............................ Heart wall motion add-on.
78480............................ Heart function add-on.
78496............................ Heart first pass add-on.
APC 0401:
78580............................ Lung perfusion imaging.
78584............................ Lung V/Q image single breath.
78585............................ Lung V/Q imaging.
78586............................ Aerosol lung image, single.
78587............................ Aerosol lung image, multiple.
78588............................ Perfusion lung image.
78591............................ Vent image, 1 breath, 1 proj.
78593............................ Vent image, 1 proj, gas.
78594............................ Vent image, mult proj, gas.
78596............................ Lung differential function.
APC 0402:
78600............................ Brain imaging, ltd static.
78601............................ Brain imaging, ltd w/flow.
78605............................ Brain imaging, complete.
78606............................ Brain imaging, compl w/flow.
78607............................ Brain imaging (3D).
78610............................ Brain flow imaging only.
78615............................ Cerebral vascular flow image.
APC 0403:
78630............................ Cerebrospinal fluid scan.
78635............................ CSF ventriculography.
78645............................ CSF shunt evaluation.
78647............................ Cerebrospinal fluid scan.
78650............................ CSF leakage imaging.
78660............................ Nuclear exam of tear flow.
APC 0404:
78700............................ Kidney imaging, static.
78701............................ Kidney imaging with flow.
78704............................ Imaging renogram.
78707............................ Kidney flow/function image.
78708............................ Kidney flow/function image.
78709............................ Kidney flow/function image.
78710............................ Kidney imaging (3D).
78715............................ Renal vascular flow exam.
APC 0405:
78730............................ Urinary bladder retention.
78740............................ Ureteral reflux study.
78760............................ Testicular imaging.
78761............................ Testicular imaging/flow.
APC 0406:
78800............................ Tumor imaging, limited area.
78801............................ Tumor imaging, mult areas.
78802............................ Tumor imaging, whole body.
78803............................ Tumor imaging, whole body.
78805............................ Abscess imaging, ltd area.
78806............................ Abscess imaging, whole body.
78807............................ Nuclear localization/abscess.
G0273............................ Pretx planning, non-Hodgkins.
APC 0407:
79000............................ Init hyperthyroid therapy.
79001............................ Repeat hyperthyroid therapy.
79020............................ Thyroid ablation.
79030............................ Thyroid ablation, carcinoma.
79035............................ Thyroid metastatic therapy.
APC 0408:
79100............................ Hematopoetic nuclear therapy.
79200............................ Intracavitary nuclear trmt.
79300............................ Interstitial nuclear therapy.
79400............................ Nonhemato nuclear therapy.
79420............................ Thyroid metastatic therapy.
79440............................ Nuclear joint therapy.
G0274............................ Radiopharm tx, non-Hodgkins.
------------------------------------------------------------------------

We believe that the proposed APC structure, which takes into
account the organ(s) being examined (or treated) as well as the type
and complexity of the procedure, is more homogeneous both clinically
and in terms of resource consumption than the current APC structure.
Currently, payment for the radiopharmaceutical ``zevalin''
(Ibritumomab Tiuxetan) is packaged into the payment for HCPCS codes
G0273 (Pretx planning, non-Hodgkins) and G0274 (Radiopharm tx, non-
Hodgkins). To ensure consistency with our payment policy for other
radiopharmaceuticals (that is, making separate payment for
radiopharmaceuticals whose costs are greater than $150 per episode of
care), we are proposing to make payment for ``zevalin'' (Ibritumomab
Tiuxetan) separately from payment for the procedures with which
``zevalin'' (Ibritumomab Tiuxetan) is used.
We propose to use HCPCS A9522 (Indium 111 ibritumomab tiuxetan) to
report the use of In-111 Zevalin (In-111 Ibritumomab Tiuxetan) and
HCPCS A9523 (Yttrium 90 ibritumomab tiuxetan) to report the use of Y90
Zevalin (Y90 Ibritumomab Tiuxetan). We would place HCPCS A9522 in APC
9118 with a payment amount of $2,084.55 and HCPCS A9523 in APC 9117
with a payment amount of $18,066.09. We note that payment rates for
radiopharmaceuticals are not subject to wage index adjustments because
no

[[Page 47976]]

portion of the payment is attributed to labor-related costs.
Because we propose that payment for G0273 and G0274 no longer
include payment for ``zevalin,'' we also propose to place G0273 into
newly created APC 0406 and G0274 into newly created APC 0408. These
APCs include procedures that are similar clinically and in terms of
resource consumption to G0274 and G0273, respectively.
Please see section VI of this proposed rule for further discussion
on payments for drugs, biologicals, and radiopharmaceuticals.
ee. Endoscopy Lower Airway.
APC 0076: Endoscopy Lower Airway.
A presenter to the Panel expressed concern that APC 0076 apparently
violates the 2 times rule and requested that we move CPT code 31631
(bronchoscopy with tracheal stent placement) from APC 0076 and into a
new APC.
The Panel suggested that a new APC comprised of the four most
costly procedures in APC 0076 would result in a more homogenous
grouping, and recommended that we move the following CPT codes from APC
0076 and into newly created APC 0415.

------------------------------------------------------------------------
HCPCS Description
------------------------------------------------------------------------
31630............................. Bronchoscopy dilate/fracture
reduction.
31631............................. Bronchoscopy, dilate w/stent.
31640............................. Bronchoscopy w/tumor excise.
31641............................. Bronchoscopy, treat blockage.
------------------------------------------------------------------------

We propose to accept the Panel's recommendation that we move CPT
codes 31630, 31631, 31640, and 31641 from APC 0076 to new APC 0415.
ff. Gastrointestinal Endoscopic Stenting Procedures.
APC 0141: Upper GI Procedures.
APC 0142: Small Intestine Endoscopy.
APC 0143: Lower GI Endoscopy.
APC 0147: Level II Sigmoidoscopy.
A commenter requested that we create a new APC that would be
comprised of all the gastrointestinal endoscopic stent codes. The Panel
agreed with the commenter's suggestion because the resource
requirements for all gastrointestinal endoscopic stents appear to be
similar.
The Panel recommended that we move the following CPT codes from
their 2003 APCs to newly created APC 0384 for 2004:

Table 4.--HCPCS Codes To Be Moved Into New APC 0646
------------------------------------------------------------------------
HCPCS Description 2003 APC 2004 APC
------------------------------------------------------------------------
43219................ Esophagus endoscopy........ 0141 0384
43256................ Upper GI endoscopy w/stent. 0141 0384
44370................ Small bowel endoscopy w/ 0142 0384
stent.
44379................ Small bowel endoscopy w/ 0142 0384
stent.
44383................ Small bowel endoscopy...... 0142 0384
44397................ Colonoscopy w/stent........ 0143 0384
45387................ Colonoscopy w/stent........ 0143 0384
45327................ Proctosigmoidoscopy w/stent 0147 0384
45345................ Sigmoidoscopy w/stent...... 0147 0384
------------------------------------------------------------------------

We propose to accept the Panel's recommendation to move the
following gastrointestinal endoscopic stent CPT codes into newly
created APC 0384: 43219, 43256 (from APC 0141); 44370, 44379, 44383
(from APC 0142); 44397, 45387 (from APC 0143); 45327, and 45345 (from
APC 0147).
gg. Capturing the Costs of Devices That Are Packaged Into APCs.
APC 0081: Non-Coronary Angioplasty or Atherectomy.
APC 0083: Coronary Angioplasty and Percutaneous Valvuloplasty.
APC 0104: Transcatheter Placement of Intracoronary Stents.
APC 0222: Implantation of Neurological Device.
APC 0223: Implantation of Pain Management Device.
APC 0227: Implantation of Drug Infusion Device.
APC 0229: Transcatheter Placement of Intravascular Shunts.
Several commenters requested that the status indicators for the
above APCs (all of which include high-cost devices) be changed from T
(multiple-procedure discount applies) to S (multiple-procedure discount
does not apply). Two presenters to the Panel stated that hospitals do
not pay less for devices when they are used in the context of a
multiple-procedure claim and suggested that we apply the multiple-
procedure reduction to the non-device portion of the claim only.
Alternatively, these presenters recommended that we apply the discount
policy only when the device cost is below a predetermined proportion of
the APC cost. Another presenter to the Panel requested that APCs 0222,
0223, and 0227 be exempt from the multiple procedure discount policy
because the cost of the devices used in these procedures makes up more
than 50 percent of the APC cost.
We sought the Panel's input as to whether there are situations in
which we should not apply our multiple procedure discount policy. The
Panel recommended no changes to the status indicators for any of the
device-related APCs discussed because they were concerned that
exemptions from the discount policy could result in incentives to use
more devices than necessary. However, the Panel asked that we analyze
our data to determine if we may be underpaying for devices when the
multiple procedure discounting policy is applied and recommended that
we develop some methodology to track device costs. In section V.C of
this proposed rule, we discuss the issue of device costs and multiple
procedure reductions and our progress to date in developing
``combination APCs'' to address the Panel's concern.
hh. Discussion of Ways To Increase the Use of Multiple Claims To
Set APC Payment Rates.
A presenter to the Panel suggested that we use dates of service on
multiple procedure claims to increase the number of claims we use to
set payment rates. Another presenter suggested that we could further
increase the number of multiple procedure claims that could be used to
set payment rates by ignoring codes with status indicator K. Other
suggestions were to exclude from consideration those APCs with small
dollar values and to create a new code or APC specifically for the
insertion and removal of devices.
The Panel recommended that our staff explore ways to increase the
number of claims used to set payment rates, including the following
methodologies: sort multiple claims by date of service; exclude codes
with K status indicator from evaluation; exclude those APCs with
nominal costs (the definition of ``nominal'' can be determined by

[[Page 47977]]

modeling a variety of possible dollar amounts). In addition, the Panel
recommended that we create no G codes as part of the effort to use
multiple procedure claims for developing relative weights. If new codes
are needed, the Panel suggested that our staff work with the American
Medical Association's CPT Board to identify possible new codes. Please
see section V.C of this proposed rule for our discussion of the use of
multiple procedure claims for developing payment rates for procedures
that use devices.

B. Other Changes Affecting the APCs

1. Limit on Variation of Costs of Services Classified Within an APC
Group
Section 1833(t)(2) of the Act provides that the items and services
within an APC group cannot be considered comparable with respect to the
use of resources if the highest cost item or service within an APC
group is more than 2 times greater than the lowest cost item or service
within the same group. However, the statute authorizes the Secretary to
make exceptions to this limit on the variation of costs within each APC
group in unusual cases such as low volume items and services. No
exception may be made 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.
Taking into account the proposed APC changes discussed in relation
to the APC Panel recommendations in section II.A.4 of this proposed
rule and the use of 2002 claims data to calculate the median cost of
procedures classified to APCs, we reviewed all the APCs to determine
which of them would not meet the 2 times limit. We use the following
criteria when deciding whether to make exceptions to the 2 times rule
for affected APCs:
[sbull] Resource homogeneity.
[sbull] Clinical homogeneity.
[sbull] Hospital concentration.
[sbull] Frequency of service (volume).
[sbull] Opportunity for upcoding and code fragmentation.
For a detailed discussion of these criteria, refer to the April 7,
2000 final rule (65 FR 18457).
The following table contains APCs that we propose to exempt from
the 2 times rule based on the criteria cited above. In cases in which a
recommendation of the APC Panel appeared to result in or allow a
violation of the 2 times rule, we generally accepted the Panel
recommendation because Panel recommendations were based on explicit
consideration of resource use, clinical homogeneity, hospital
specialization, and the quality of the data used to determine payment
rates.
The median cost for hospital outpatient services for these and all
other APCs can be found at Web site: http://www.cms.hhs.gov.

Table 5.--Table of APCs Exempted From 2 Times Rule
------------------------------------------------------------------------
Proposed rule APC Description
------------------------------------------------------------------------
0004...................................... Level I Needle Biopsy/
Aspiration Except Bone
Marrow.
0018...................................... Biopsy of Skin/Puncture of
Lesion.
0019...................................... Level I Excision/Biopsy.
0020...................................... Level II Excision/Biopsy.
0032...................................... Insertion of Central Venous/
Arterial Catheter.
0043...................................... Closed Treatment Fracture
Finger/Toe/Trunk.
0046...................................... Open/Percutaneous Treatment
Fracture or Dislocation.
0048...................................... Arthroplasty with
Prosthesis.
0055...................................... Level I Foot Musculoskeletal
Procedures.
0058...................................... Level I Strapping and Cast
Application.
0060...................................... Manipulation Therapy.
0072...................................... Level II Endoscopy Upper
Airway.
0073...................................... Level III Endoscopy Upper
Airway.
0080...................................... Diagnostic Cardiac
Catheterization.
0084...................................... Level I Electrophysiologic
Evaluation.
0097...................................... Cardiac and Ambulatory Blood
Pressure Monitoring.
0099...................................... Electrocardiograms.
0105...................................... Revision/Removal of
Pacemakers, AICD, or
Vascular.
0130...................................... Level I Laparoscopy.
0147...................................... Level II Sigmoidoscopy.
0148...................................... Level I Anal/Rectal
Procedure.
0155...................................... Level II Anal/Rectal
Procedure.
0164...................................... Level I Urinary and Anal
Procedures.
0165...................................... Level III Urinary and Anal
Procedures.
0192...................................... Level IV Female Reproductive
Proc.
0203...................................... Level IV Nerve Injections
0204...................................... Level I Nerve Injections.
0207...................................... Level III Nerve Injections.
0213...................................... Extended EEG Studies and
Sleep Studies, Level I.
0214...................................... Electroencephalogram.
0218...................................... Level II Nerve and Muscle
Tests.
0231...................................... Level III Eye Tests &
Treatments.
0233...................................... Level II Anterior Segment
Eye Procedures.
0235...................................... Level I Posterior Segment
Eye Procedures.
0239...................................... Level II Repair and Plastic
Eye Procedures.
0245...................................... Level I Cataract Procedures
without IOL Insert.
0252...................................... Level II ENT Procedures.
0262...................................... Plain Film of Teeth.
0266...................................... Level II Diagnostic
Ultrasound Except Vascular.
0274...................................... Myelography.
0303...................................... Treatment Device
Construction.
0330...................................... Dental Procedures.
0340...................................... Minor Ancillary Procedures.

[[Page 47978]]

0341...................................... Skin Tests.
0344...................................... Level III Pathology.
0363...................................... Level I Otorhinolaryngologic
Function Tests.
0364...................................... Level I Audiometry.
0367...................................... Level I Pulmonary Test.
0368...................................... Level II Pulmonary Tests.
0370...................................... Allergy Tests.
0373...................................... Neuropsychological Testing.
0385...................................... Urinary Incontinence
Procedures.
0397...................................... Vascular Imaging.
0408...................................... Non-thyroid Radionucliide
Treatment.
0409...................................... Red Blood Cell Tests.
0600...................................... Low Level Clinic Visits.
0668...................................... Level I Angiography and
Venography except
Extremity.
0692...................................... Electronic Analysis of
Neurostimulator Pulse
Generators.
0698...................................... Level II Eye Tests &
Treatments.
------------------------------------------------------------------------

2. Procedures Moved From New Technology APCs to Clinically Appropriate
APCs
In the November 30, 2001 final rule (66 FR 59903), we made final
our proposal to change the period of time during which a service may be
paid under a new technology APC. The April 7, 2000 final rule initially
established the time frame that new technology APCs would be in effect
(65 FR 18457). Beginning in 2002, we retain a service within a new
technology APC group until we have acquired adequate data that allow us
to assign the service to a clinically appropriate APC. This policy
allows us to move a service from a new technology APC in less than 2
years if sufficient data are available, and it also allows us to retain
a service in a new technology APC for more than 3 years if sufficient
data upon which to base a decision for reassignment have not been
collected.
In the context of new technology procedures, we create HCPCS codes
for services only. We do not create HCPCS codes for equipment that is
used in the course of providing an item or service (except in the case
of ``C'' codes for devices that meet the criteria for transitional
pass-through payments). Equipment that is used to provide an item or
service is not separately coded because it is a resource required to
furnish the service. Like other resources that are required to furnish
a service (for example, cost of a room, cost of staff, cost of
supplies), the hospital should show charges either as part of its
charge for the procedure or with a revenue code.
As described in more detail below, we propose to delete four HCPCS
codes that are currently paid in new technology APCs. These four HCPCS
codes do not conform to our current policy to not create HCPCS codes
for equipment used to provide a service. In addition, there exist, or
soon will exist, CPT codes to describe the services being furnished,
including any equipment that is needed to perform them, so we believe
it is appropriate at this time to delete the HCPCS codes. The HCPCS
codes we propose to delete effective January 1, 2004 are:
C1088: Laser Optic Treatment system, Indigo Laseroptic Treatment
System,
C9701: Stretta System,
C9703: Bard Endoscopic Suturing System, and
C9711: H.E.L.P. Apheresis System.
These codes were created and assigned to New Technology APCs when
it was CMS policy to create a C code to describe an item of equipment
for which there was no other means of making payment for the service in
which the equipment was used. In the November 30, 2001 final rule, we
announced that we would not use New Technology APCs to pay for drugs,
devices, and equipment that are used in the performance of a procedure,
but which are not in and of themselves a complete service. It is due to
an oversight on our part that we did not delete these codes at that
time. We stopped using C codes to describe specific devices in April
2001 and no longer create C codes to describe items of equipment.
Moreover, we have found that there are existing CPT codes or, in the
case of C9701, there will soon be a CPT tracking code, that will
accurately report the services being furnished, and under which the
hospital should report the charges for providing the services,
including charges related to the equipment needed to furnish the
service. Therefore, payment will be appropriate regardless of whether
there are separate codes for these items of equipment.
HCPCS code C1088, the Laser Optic Treatment System, Indigo
Laseroptic Treatment System, now paid under APC 0980 is no longer
needed because our review of data shows that the equipment it describes
is appropriately reported under CPT codes 52647 and 52648. The
procedures described by these CPT codes may be performed by using
several types of equipment, one of which is the type described by
C1088. In fact, most of the claims containing line items for C1088 are
accompanied by line items for 52647 or 52648. This means that hospitals
are appropriately reporting these services under the applicable CPT
codes and that any charges associated with C1088 are likely duplicate
charges for the service provided. Therefore, we propose to delete C1088
and to have hospitals continue to report these services under CPT codes
52647 and 52648, which are in APC 0163.
HCPCS code C9701, the Stretta System, now paid under APC 0980, is
used in a procedure that will soon be given a CPT Category Three
Tracking Code by the American Medical Association's CPT Editorial
Panel. We propose to use the CPT tracking code to report services using
the Stretta System and to delete HCPCS code C9701. We propose to assign
the new CPT tracking code in APC 1557.
HCPCS code C9703, the Bard Endoscopic Suturing System, now paid
under APC 0979, is used in a procedure that has been granted a CPT
Category Three Tracking Code, 0008T, which describes the procedure for
which this equipment is used. We propose to delete C9703 and to require
hospitals to use 0008T to report services using this equipment. We
propose to assign CPT code 0008T to APC 1555 for 2004.
HCPCS code C9711, the H.E.L.P. Apheresis System, now paid under APC

[[Page 47979]]

0978, is used to provide apheresis, which is appropriately reported
using CPT codes 36511 through 36516. Therefore, we propose to delete
C9711 and to require hospitals to report the service in which this
equipment is used by using CPT codes 36511 through 36516.
3. Revision of Cost Bands and Payment Amounts for New Technology APCs
In the April 7, 2000 final rule (68 FR 18477), we created 15 new
technology APCs (APCs 0970 through 0984) to pay for certain new
technology services under the OPPS. As discussed in both the April 7,
2000 and November 30, 2001 final rules, new technology APCs are
intended to pay for new or rarely performed procedures for which we
lack sufficient cost data to make an assignment to a clinical APC. New
technology APCs are defined on the basis of costs, not the clinical
characteristics of a service. The payment rate for each new technology
APC is based on the midpoint of a range of costs.
In the November 30, 2001 final rule (66 FR 59856), we revised
several of the cost bands, added a payment level to the original group
of new technology APCs, and assigned status indicator ``T'' to APCs
0970 through 0985. We also created a parallel set of new technology
APCs (APCs 0706 through 0721), each of which was assigned status
indicator ``S.'' In addition, we changed the definition of what is
appropriately paid for under a new technology APC; we refined the
criteria for determining assignment of a procedure or service to a new
technology APC; we clarified the information that must be supplied for
a request for new technology status to be considered; and we removed
the restrictions on how long a procedure can be assigned to a new
technology APC. These changes, which are discussed in detail in the
November 30, 2001 final rule, were implemented effective April 1, 2002.
In the November 1, 2002 final rule, we established two additional
new technology APCs, APC 989, and APC 725; as these APCs were not
discussed in the proposed rule, they were considered interim with
comment.
In this proposed rule, we are proposing to implement a
comprehensive restructuring of all the new technology APCs. First, the
cost intervals in the current new technology APCs are inconsistent,
ranging from $50 to $1,500. Secondly, as the number of procedures
assigned to new technology APCs increases, we believe that narrower
cost bands are required to avoid significant mispayment for new
technology services. The increased number of new technology APCs that
would result from narrowing the cost bands cannot be accommodated
within the current sequence of available APC numbers. Therefore, we are
proposing to dedicate two new series of APC numbers to the restructured
new technology APCs, which would allow us to narrow the cost bands and
also afford us flexibility in creating additional bands as future needs
may dictate.
We propose to establish cost bands from $0 to $100 in increments of
$50, from $100 through $2,000 in intervals of $100, and from $2,000
through $6,000 in intervals of $500. We believe that these intervals
would allow us to price new technology services more appropriately and
consistently. We also propose to retain two parallel sets of new
technology APCs, one with status indicator ``S'' and the other with
status indicator ``T.'' We invite comments on the hierarchy of cost
levels of the restructured new technology APCs.
We would reassign current new technology procedures to the level in
the restructured new technology APCs so that the payment amount for the
procedure in 2004 closely approximates the current payment amount. As
we explained in the November 30, 2001 final rule, we generally keep a
procedure in the new technology APC to which it is initially assigned
until we have collected data sufficient to enable us to move the
procedure to a clinically appropriate APC. However, in cases where we
find that our original new technology APC assignment was based on
inaccurate or inadequate information, we may, based on more recent
information (including claims data), reassign the procedure or service
to a different new technology APC that more appropriately reflects its
cost.
The proposed restructured new technology APCs are listed in
Addendum A.
4. APC Assignment for New Codes Created During Calendar Year (CY) 2003
During CY 2003, we created several HCPCS codes to describe services
payable under the hospital OPPS. These codes have already been assigned
to APCs for CY 2003. In this proposed rule, we solicit comment on the
APC assignment of these services. In addition, in this proposed rule,
we propose to create a new HCPCS code with an effective date of July 1,
2003. Table 6 includes a new procedural HCPCS code created for
implementation in July 2003.
Table 6 does not include new codes for drugs and devices for which
we established or intend to establish pass-through payment eligibility
effective July or October 2003. Furthermore, neither the new procedural
HCPCS nor the new pass-through codes proposed for implementation
beginning October 2003, or later, are included in Addendum B of this
proposed rule.

Table 6--New G Code for 2003
------------------------------------------------------------------------
Effective
HCPCS code Long descriptor SI date APC
------------------------------------------------------------------------
G0296........... PET imaging, full and S 07/01/03 0714
partial ring PET
scanner only, for
restaging of
previously treated
thyroid cancer of
follicular cell
origin following
negative I-131 whole
body scan.
------------------------------------------------------------------------

5. Creation of APCs for Combinations of Device Procedures
In the course of developing the proposed rule for the 2004 OPPS, we
wanted to ensure that the claims we use to set payment rates for APCs
into which we package medical devices accurately reflect the costs of
both the device and non-device portions of the service. As discussed in
section III of this proposed rule, we have made a number of changes to
our methodology for the creation of single procedure claims used to set
relative weights. These changes enabled us to use charge data from more
claims to set relative weights. However, we have noted that in spite of
our new methodology, we were unable to significantly increase the
number of single procedure claims used to set relative weights for
several APCs that use high cost devices. One reason for this is that
these APCs are often billed in combination with several other major
procedures so that we are unable to generate single procedure claims
for these APCs.
In the past, commenters have alleged that without using multiple
procedure claims, we will be unable to capture the

[[Page 47980]]

costs of the more complex cases in which multiple procedures are
performed and multiple devices are used. These commenters further
requested that we change the status indicator of certain APCs from
``T'' to ``S'' in order to appropriately capture the cost of high cost
devices when multiple procedures, each using devices, were billed. In
addition to attempting to find a way to use multiple procedure claims,
we also decided to examine our claims data to investigate whether our
current payments for multiple procedures performed on the same date,
each using high cost devices accurately captured the costs of the
device and non-device portion of each procedure.
In order to do this, we reviewed claims from APCs that required
high cost devices and from which we were unable to use the majority of
claims to set a relative weight for the APC (for example, APCs for
insertion of pacemakers, defibrillators, and neurostimulators). We
determined the frequency with which other APCs were billed with the
high cost device APCs. We then selected those claims where two APCs
using high cost devices, or one APC using high cost devices and one
high cost, non-device-requiring APC, were billed together with a
frequency of more than 100 for the time period April 1, 2002 through
September 30, 2002. This number was chosen in order to ensure that we
had enough claims to determine reliable median costs. We included the
APC combination 0081/0104 unintentionally and performed the analysis
without realizing until after the data were developed that it had fewer
than 100 claims and therefore should not have been selected. We
expected that the data being used to set the 2004 weights would have a
similar number of each combination to the number we found in the April
2002 to September 2002 claims. Review of Table 7, Combination APCs Used
in Analysis, shows that even starting with 100 claims, we frequently
had to determine median costs with very few claims. Additionally, Table
7 reveals that only a few combinations of two high cost device-
requiring APCs are billed together 100 or more times. Six of the twelve
combinations we analyzed (for example, claims for insertion of
pacemakers and defibrillators) contained APC 0105 (Removal of pacemaker
defibrillator), which is not a high cost, device-requiring APC. As the
data show, APC 0105 is frequently found on multiple procedure claims,
but because it is not a high cost device-requiring APC, when it is
billed with these APCs, the multiple procedure reductions are applied
to APC 0105. Therefore, we have determined that the vast majority of
claims for APCs, such as ``insertion of Cardioverter Defibrillators,''
were not usable multiple procedure claims for the purpose of
determining relative weights under our single claim process because
they were billed with APC 0105.
After selecting the combinations to review, we determined the
hospital costs associated with providing these ``combination''
procedures using the following methodology:
1. We selected claims where the two APCs of interest both appeared
on the claim with the same date of service, and subjected them to the
same trimming methodology we use for single procedure claims.
2. We then required that each APC appear on the claim only once.
(For example, if two HCPCS codes from APC 0081 appeared on a claim with
one HCPCS code from APC 0229, we did not use the claim. Many claims
were discarded because of this requirement.)
3. From the claims in step two, we selected only those claims that
included the device category codes for the devices required to perform
the service. This is similar to our methodology for using single
procedure claims where the procedure requires the use of a device with
a category code (for example, for claims involving APCs 0222/0225, we
used only claims that contained C codes for both a neurostimulator
pulse generator and neuroelectrodes).
4. We ignored any line items for separately payable services under
OPPS or the lab fee schedule and any line items with revenue centers
containing HCPCS other than those in the APCs of interest.
5. At this point, we were left with claims where the only
separately payable services were the line items for the HCPCS in the
APCs of interest.
6. We packaged into the payable HCPCS codes all device category
codes, all packaged HCPCS codes, and all revenue center codes without
HCPCS.
7. We then determined the median cost for each APC pair using the
remaining claims.
We believe the median cost estimate determined by this methodology
should, if anything, overestimate the costs of the procedure
combinations studied since all packaged line items were attributed to
the APCs of interest unless they were clearly identified as being
associated with other procedures. For example, if line items for a
clinic visit and a medical or surgical supply revenue center appeared
on the claim, we packaged the charges associated with the revenue
center entirely into the APCs of interest and not into the APC for
clinic visits.
We also determined the median costs for these APCs using our usual
single claims methodology (these medians are contained in Addendum A).
We then determined a summed median cost of each APC pair using our
current payment policy, which allows payment at 100 percent for the
most expensive APC with ``T'' status indicator and 50 percent for each
additional APC with ``T'' status indicator. That is, we added the
median cost of the more expensive APC and 50 percent of the median cost
of the less expensive APC as a proxy for the total median cost (and
payment) using our current payment policy. We then compared this figure
with the median cost for the ``combination APC.'' (See Table 7.) We
believe this comparison is an indicator of whether our current payment
policy accurately pays for the costs of these APCs when they are billed
together on the same date of service.
Our comparison reveals that, of the 12 ``combination APCs''
created, 7 had higher median costs than the median costs obtained with
the multiple procedure methodology (we note that because APC 222 has a
status indicator of ``S'', we did not apply the multiple procedure
reduction for the APC 0222/0225 combination).
For three of these seven combinations, we consider the data
unreliable because we were able to use very few claims to determine the
``combination'' median cost. Specifically, for APC combination 0085/
0655, we were able to use only 37 claims; for APC combination 0105/
0089, we were to use only 16 claims; and for APC combination 0105/0655,
we were able to use only 12 claims. This is in distinction to the
number of claims we used to determine the median costs for APCs 0655
and 0089 alone (1,170 and 303 respectively). Further, two of these
combinations contain only one APC using high cost devices because APC
0105 does not require the use of high cost devices. This means that the
multiple procedure reduction was applied to APC 0105. In such cases, we
believe the reduction is appropriate because when a pacemaker or
defibrillator is removed and replaced, the patient is only anesthetized
once, the room only needs to be prepared once, and the time for
replacement is usually less than the time for insertion due to the
existence of a subcutaneous pocket.
Three other APC combinations, 0105/0090, 0105/0107, and 0105/0654,
also contain only one APC requiring the use of high cost devices and
therefore

[[Page 47981]]

should not pose the problem of underpayment due to the multiple
procedure reduction, which was applied to APC 0105. Furthermore, in
these three cases, the difference in median costs between the
combination median and the median determined by our multiple procedure
reduction methodology was, in our view, insignificant (all much less
than 5 percent).
For APC combination 0222/0225, the difference in median cost could
be considered significant at slightly under 5 percent, but only 74
claims were used to determine the combination median. Because we used
approximately 600 claims to determine the median costs for APCs 0222
and APC 0225 individually, we consider the combination median cost
comparatively unreliable.
Lastly, we note that for the other five combinations, our current
payment policy pays more than the ``combination'' payment methodology.
Based on this comparison we considered several options for payment
of these APCs when billed together:
1. Maintain our current payment policy.
2. Change the status indicators of certain APCs requiring the use
of high cost devices to ``S.''
3. Create ``combination APCs'' with relative weights calculated
using the methodology described above in order to make a single payment
when the two APCs in the combination are billed together.
The third option need not result in creation of new HCPCS codes and
APCs for hospitals to report. Instead, we could make changes in the
logic of the outpatient code editor (OCE) so that when hospitals bill
the two APCs in a combination, the OCE would ``map'' the payment to a
single amount rather than paying the more expensive APC at 100 percent
and the less expensive at 50 percent. The following is an example of
how combination APCs might work: If a unit of a code in APC 0081 was
billed with a unit of a code in APC 0104 on the same date, the multiple
procedure discount would not be applied, so payment would no longer be
made at 100 percent of the payment for APC 0104 (the highest paid APC
in the pair) and 50 percent of the payment for APC 0081. Instead, if we
were to implement combination APCs for this pair, the combination of
codes would be mapped to a new ``combination'' APC, and we would make a
single payment for both services. The payment rate for the new
``combination'' APC would be based upon a scaled weight calculated from
the median cost for all claims containing one unit of a code from APC
0081 and one unit of a code from APC 0104 (using the methodology
described above). If either of the APCs were billed without the partner
APC for that established ``combination'' APC, then the APC would map to
the current APC that contains the code.
Based on our analysis, we are proposing option one: Maintaining our
current payment policy. We believe that our analysis shows that our
current payments for these APCs adequately reflect the costs of the
procedures, even when billed in combination.
We note that only a few APCs requiring the use of high cost devices
are billed in combination. Thus, we do not believe there are compelling
reasons to establish a new, or special, payment policy in situations
where two APCs requiring high cost devices are billed together fewer
than 100 times. Even when APCs are billed together, we have shown that
frequently the data are unreliable due to the low number of claims we
can actually use to determine the total median cost of the ``combined''
procedure. Furthermore, even where the number of usable claims is large
enough to give us some assurance that the data are reliable, the median
costs as determined by the two methodologies do not support any changes
in our current payment policy. In some instances, adoption of the new
payment policy would actually reduce payments for these services, and,
in most other cases, any increase in payments would be negligible.
One commenter has brought to our attention the fact that, rarely,
correct coding does not allow hospitals to bill for two APCs requiring
high cost devices. One example is APC 0082 (Coronary Atherectomy) and
APC 0104 (Transcoronary Stent Placement) because atherectomy is
considered to be a component of stent placement when both are performed
together. In those cases, we would expect hospitals to bill for all the
devices used to accomplish the atherectomy and the stent placement. To
the extent that both were performed, the median cost of stent placement
should reflect the cost of performing an atherectomy. Therefore, we do
not believe there is a compelling reason to create new payment policy
for these rare situations. (See also the discussion below on ``case
rate'' purchasing by hospitals.)
It could be reasoned that our analysis of the costs of ``combined''
procedures is faulty because hospital coding and billing inaccuracies
may apply to these claims as well as single procedure claims (and may
even be magnified). However, that reasoning would undercut, and be
contrary to, the repeated comments that we need to use more multiple
procedure claims to set relative weights because single procedure
claims do not capture the true costs of complex procedures or episodes
of care. Our investigation was performed precisely to address these
concerns, determine how we might use multiple procedure claims, and
what effect use of those claims would have on payment rates. Even with
use of a methodology that overestimated the costs of combination
procedures, we were unable to show that the median costs (and payments)
using our current payment policy do not accurately reflect the costs
for performing these procedures.
Other possible factors affecting our analysis include charge
compression and/or inadequate charges for these procedures or the
devices associated with them. However, it is not possible for us to
know the magnitude of how charge compression or inadequate charges
might affect costs or what methodologic or payment adjustment would be
appropriate to address the problem. Furthermore, we point out that
charge compression and inadequate charges should affect our cost data
for these APCs when billed alone and when these APCs are billed in
combination. It is unknown whether the effects would be similar in each
instance but we have no reason to believe they would be different.
Therefore, we do not believe that adjusting for charge compression or
inadequate charges would change the ``relative'' median costs of the
APCs when billed alone or in combination. Finally, we believe that the
median costs of the APCs billed in combination support the concept that
economies of scale are achieved in those cases. There are at least two
reasons why this might occur: First, many hospitals purchase devices on
a case rate or capitated basis, which means that the hospitals' device
cost ``per case'' is fixed (with quarterly adjustments made based on
volume and actual device use in the previous quarter(s)). For example,
inserting a stent or cardioverter defibrillator requires the use of
multiple devices in addition to the stent or defibrillator. A hospital
may agree to pay $XXXX ``per case'' for all the devices used to insert
a stent (for example, guidewires, introducers, catheters, rotablators
etc.). This ``per case'' payment means that the hospital has the same
cost irrespective of whether a rotablator, two catheters, or four
catheters were used for a specific patient. Second, even if hospitals
purchase devices on a ``per device'' basis, it is possible that no
extra catheters, guidewires, and/or

[[Page 47982]]

introducers, for example, are used when a second related procedure is
performed (for example, an electrophysiology study and a defibrillator
lead placement, or an angioplasty and a stent placement).
In summary, we have concluded that there is no compelling reason to
change our current payment policy for APCs requiring the use of high
cost devices.
We solicit public comments on our methodology, analysis, and
payment options for these APCs. We particularly solicit comments on how
our analysis should affect any use of external data sources in the
final rule. Specifically, we ask commenters to explain why submitted
external data should be used in preference to our single or multiple
claim data for APCs requiring the use of high cost devices.
We also note that creation of ``combination APCs'' would allow us
to set relative weights using a number of claims that we otherwise
would not be able to use. Therefore we solicit comments on this
approach to using more claims to set relative weights and specifically
request comments on how to use those claims even if we do not create
``combination APCs.''

Table 7.--Combination APCs Used in Analysis
----------------------------------------------------------------------------------------------------------------
Sum of Percent
single APC Frequency Frequency difference
medians of of claims Median cost median for
Descriptions of both adjusted combination used for of services both APCs
Combination of APCs APCs in the for APC billed median cost in both to sum of
combination multiple on the same of services APCs adjusted
procedure date in both single
policy APCs medians
----------------------------------------------------------------------------------------------------------------
0081/0104.............. Noncoronary $5,760.50 55 2 $5,589.14 -2.97
Angioplasty/Athectomy
& Transcatheter
Placement of
Intracoronary Stent.
0081/0229.............. Noncoronary 4,507.09 6177 135 4,116.50 -8.67
Angioplasty/Athectomy
& Transcatheter
Placement of
Iintravascular Stent.
0085/0108.............. Level II 29,749.68 502 63 20,438.99 -31.30
Electrophysiologic
Evaluation &
Insertion/Replacement/
Convert of
Cardioverter
Defibrillator.
0085/0655.............. Level II 9,398.45 268 37 10,832.16 15.25
Electrophysiologic
Evaluation &
Insertion/Replacement/
Conversion of
Permanent Dual
Chamber Pacemaker.
0105/0089.............. Revision/Removal of 7,360.80 221 16 12,268.96 66.68
Pacemakers, AICD, or
Vascular & Insertion/
replacement of
Permanent Pacemaker
and Electrodes.
0105/0090.............. Revision/Removal of 5,668.72 1426 516 5,751.30 1.46
Pacemakers, AICD, or
Vascular & Insertion/
replacement of
Permanent Pacemaker
Pulse Generator.
0105/0107.............. Revision/Removal of 17,579.21 1106 235 18,294.85 4.07
Pacemakers, AICD, or
Vascular & Insertion
of Cardioverter-
Defibrillator.
0105/0108.............. Revision/Removal of 29,239.29 294 8 26,843.72 -8.19
Pacemakers, AICD, or
Vascular & Insertion/
Replacement/Repair of
Cardioverter-
Defibrillator Leads.
0105/0654.............. Revision/Removal of 6,639.65 3653 1475 7,014.00 5.64
Pacemakers, AICD, or
Vascular & Insertion/
Replacement of a
permanent dual
chamber pacemaker.
0105/0655.............. Revision/Removal of 8,888.06 237 12 10,290.88 15.78
Pacemakers, AICD, or
Vascular & Insertion/
Replacement/
Conversion of a
Permanent Dual
Chamber Pacemaker.
0222/0225.............. Implantation of 14,345.41 368 74 15,002.40 4.58
Neurological Device &
Implantation of
Neurostimulator
Electrodes.
0223/0227.............. Implantation of Pain 10,350.16 222 65 9,815.08 -5.17
Management Device &
Implantation of Drug
Infusion Device.
----------------------------------------------------------------------------------------------------------------
Table 7 lists the combinations that we investigated, abbreviated titles for the single APCs in the pair, the
number of times the APCs were billed together, the number of claims used to set the combination APC median, a
combined median cost for claims in which both the APCs appeared (derived from the methodology discussed
above), the median cost for the two APCs using the multiple procedure reduction policy, and the difference in
median costs (expressed in percent).

6. New APC for Antepartum Care
We propose to split APC 0199, Obstetrical Care Service into two
APCs. New APC 0700, Antepartum Care Service, would be created and 59412
(external cephalic version) would be assigned there. The two remaining
HCPCS code 59409 (vaginal delivery only) and 59612 (vaginal delivery
only, after previous cesarean delivery) would remain in APC 0199,
Obstetrical Care Service. We propose to make this change because of the
great difference in cost between vaginal delivery and the external
cephalic version procedures. We believe that inclusion of the lower
cost procedure in the APC with vaginal deliveries may have an affect on
the median cost for the APC that results in less accurate payment.

III. Recalibration of APC Weights for CY 2004

Section 1833(t)(9)(A) of the Act requires that the Secretary review
and revise the relative payment weights for APCs at least annually,
beginning in 2001. In the April 7, 2000 final rule (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. Except for some
reweighting due to APC changes, these relative weights continued to be
in effect for CY 2001. (See the November 13, 2000 interim final rule
(65 FR 67824 to 67827).)
To recalibrate the relative APC weights for services furnished on
or after January 1, 2004 and before January 1, 2005, we are proposing
to use the same basic methodology that we

[[Page 47983]]

described in the April 7, 2000 final rule. That is, we would
recalibrate the weights based on claims and cost report data for
outpatient services. We propose to use the most recent available data
to construct the database for calculating APC group weights. For the
purpose of recalibrating APC relative weights for CY 2004, the most
recent available claims data are the approximately 115 million final
action claims for hospital outpatient department services furnished on
or after January 1, 2002 and before January 1, 2003. We then eliminated
the following 45.7 million claims because many of these claims were for
services that are not paid under OPPS: Claims in the first quarter of
calendar year 2002; claims for bill types other than OPPS bill types;
claims for services furnished in Maryland, Guam, and the Virgin
Islands. We matched the 69.3 million claims that were paid under the
OPPS to the most recent cost report filed by the individual hospitals
represented in our claims data. The APC relative weights would continue
to be based on the median hospital costs for services in the APC
groups.

A. Data Issues

1. Period of Claims Data Used
We propose to use claims for the period beginning April 1, 2002
through and including December 31, 2002 as the base for the CY 2004
OPPS. The statute requires that we take into account new cost data and
other relevant information and factors in reviewing and revising the
weights, and we believe that this period will give us the most recent
costs. We chose not to include the claims for the period beginning on
January 1, 2002 through March 31, 2002 because they were used to set
the payment rates for the 2003 OPPS and we believe that the most recent
9 months of claims data will result in payment rates that are most
representative of the current relative costs of hospital outpatient
services.
The claims base used to calculate the proposed payment weights and
payment rates in this proposed rule is not the totality of claims on
which the final weights and rates will be based. The use of this claims
base is due to (1) a lag in claims submission by providers; (2) a
statutory limit on the date before which no claim can be paid; and (3)
the additional processing time it takes for the claims data to be
included in the national claims history, which is the source of our
claims data. For these reasons, the claims data used for this proposed
rule are for the period of services furnished between April 1, 2002 and
November 1, 2002. However, when the final weights and rates are
calculated, we will have access to approximately 95 percent of the
claims data for services furnished from April 1, 2002 through December
1, 2002.
2. Treatment of ``Multiple Procedure'' Claims
We have received many requests asking that we ensure that the data
from claims that contain charges for multiple procedures are included
in the data from which we calculate the CY 2004 relative payment
weights. Those making the requests believe that relying solely on
single-procedure claims to recalibrate APC weights fails to take into
account data for many frequently performed procedures, particularly
those commonly performed in combination with other procedures.
We agree that optimally, it is desirable to use the data from as
many claims as possible to recalibrate the relative payment weights,
including those with multiple procedures. We identified certain
multiple-procedure claims that could be treated as single-procedure
claims, enabling us to greatly increase the number of services used to
develop the APC payment weights for CY 2003. However, several inherent
features of multiple procedure claims prevented us from using all of
them to recalibrate the payment weights. We discussed these obstacles
in detail in the August 9, 2002 proposed rule (67 FR 52092, 52108
through 52111), and the November 1, 2002 final rule (67 FR 66718, 66743
through 66746).
For the CY 2004 OPPS, we propose several changes to how we handle
and use claims data to enable us to use more claims in the creation of
median costs on which our payment weights and rates are based.
Specifically, we propose to expand the number of HCPCS codes that we
ignore for purposes of creating a pseudo single claim from claims that
contain other separately payable HCPCS codes. We also looked at dates
of service on packaged HCPCS codes and packaged revenue centers, and
propose, where possible, to attribute the charges to major, separately
payable HCPCS codes based on the codes' dates of service. Our complete
discussion of the use of data to set the weights for CY 2004 OPPS
follows in section III.B of this proposed rule.
Expansion of the list of codes to be ignored in creation of single
claims. For CY 2003 OPPS, we ignored the presence of HCPCS codes 93005,
71010, and 71020 to create pseudo single claims where there was one
remaining separately paid, major HCPCS code on the claim. This enabled
us to attribute the costs of packaged HCPCS codes and packaged revenue
centers to the remaining separately paid HCPCS codes and, therefore, to
use the charge data on the claim. We did this based on our belief that
these three separately payable HCPCS codes would not have charges
related to them that would be placed in packaged HCPCS codes or
packaged revenue centers. Instead, we believe that the charges found in
the packaged HCPCS or packaged revenue centers would be appropriately
associated with the only other separately payable HCPCS that remained
on the claim when these codes are ignored.
For CY 2004 OPPS, we propose to expand the list of HCPCS codes that
we would ignore for purposes of creating pseudo single claims. On
claims that contain other separately payable HCPCS, we propose to
ignore the HCPCS codes in the APCs identified in Table 9. As with HCPCS
codes 93005, 71010, and 71020, we believe that these codes are highly
unlikely to have charges that are found in packaged HCPCS or in
packaged revenue centers. Therefore, we believe that they can be
ignored for the purpose of creating a pseudo single claim from the
remaining charges on the claim. We solicit comments on the proposed
methodology to create pseudo single claims, on the list of codes in
Table 9 that we propose to ignore, and whether there are other low cost
services that we could ignore in using this methodology. We also
request comments on whether we should use the charges for the codes in
the APCs in Table 9 to create pseudo single claims to be used in
setting the median costs for these APCs.
Use of dates of service to create single claims. For CY 2003, we
did not use dates of service to attribute charges on packaged HCPCS and
packaged revenue centers to major separately payable HCPCS codes. For
CY 2004, we propose to use dates of service on HCPCS codes and on
packaged revenue centers to attribute charges to a major payable HCPCS
code where the dates of service match. We can only use this approach
where there are different dates of service for the separately payable
major HCPCS codes. Where there are multiple major payable HCPCS codes
on a claim with the same date, we cannot use this approach because
there is no way to tell to which major payable HCPCS code the charges
from the packaged HCPCS or packaged revenue center belong. Moreover,
where the hospital does not provide dates for all packaged revenue
centers, we cannot attribute charges based on the date of service.
We believe that this methodology yields more single claims than if
we did not use dates of service. However,

[[Page 47984]]

because hospitals are not required to put dates of service for line
items with only a revenue center but no HCPCS code, we will not be able
to perform this analysis routinely for each claim. Therefore, the
claims from hospitals that do provide those dates are more likely to be
used for weight-setting than claims of hospitals that do not provide
those dates on the claim. We are unable to determine what impact, if
any, this methodology has on the weights for the services and we
solicit comments on the approach.
We invite comments on whether we should require hospitals to enter
a line item date of service for every OPPS charge. We are interested in
receiving comments regarding the implications the policy would have for
hospitals, including potential obstacles and estimates on the amount of
time that would be required to implement this change.
3. Adjustment of Median Costs for CY 2003 OPPS
The relative weights of several APCs, especially APCs requiring the
use of high cost devices, that were developed for the 2003 OPPS fee
schedule, using claims data from April 1, 2001 to March 31, 2002,
showed a significant decrease from the relative weights that were
established for the 2002 OPPS fee schedule. The 2002 OPPS relative
weights were based on both claims data and packaging of 75 percent of
the manufacturer submitted costs for devices into the APC cost. Using
our April 1, 2001, through March 31, 2002 claims data resulted in
significant decreases in payment for many blood products and separately
payable drugs. In order to minimize any beneficiary access problems
related to the reduction in payment for blood products, separately
payable drugs, and certain device-related APCs, we created a limit for
any payment reductions as follows:
Device and Procedural APCs
For APCs requiring the use of one or more devices receiving pass-
through payments, we determined the median cost of the APC using only
claims that contained device category ``C'' codes. For selected APCs,
we used only claims containing the device ``C'' code specific to the
service furnished (for example, we used only claims containing the
``C'' codes for cardioverter defibrillators to determine the median
cost for the APC for inserting cardioverter defibrillators).
We then compared the median costs established for the 2002 OPPS fee
schedule and the median costs based on our April 1, 2001, through March
31, 2002 claims data and limited decreases in median costs (from the
2002 fee schedule) by 15 percent plus half the amount of any reduction
beyond 15 percent (for example, if the claims data showed the median
cost of an APC decreased 45 percent, the amount of allowed reduction
would have been 15 percent + \1/2\ x (45 percent-15 percent) = 30
percent). For a few APCs where device costs accounted for more than 80
percent of the total cost of the APC, we also incorporated external
data into our calculation of the median cost.
Blood and Blood Products
We limited reductions in median costs to 11 percent as compared to
the 2002 median costs so that the reduction in payments, after other
adjustments, for these items would generally not exceed 15 percent.
Separately Payable Drugs
We noted in the November 1, 2002 final rule that the reason our
April 1, 2001, through March 31, 2002 claims data resulted in lower
median costs for many drugs was that the payment rates for 2002 were
based on 95 percent of average wholesale price (AWP) as required by law
for pass-through drugs. We believed, and continue to believe, that the
acquisition cost for many drugs is considerably less than 95 percent of
AWP. However, we limited reductions in median costs for separately
payable drugs and for administration of packaged drugs using the same
methodology as described above for device and procedural APCs.
Procedural and Device Intense APCs for 2004 OPPS
Comparison of procedural APC medians for 2004 OPPS to adjusted
medians for 2003 OPPS. Our analysis of the April 1, 2002, through
December 31, 2002 claims data, which is the basis for the proposed
median costs for the 2004 OPPS, reveals a distribution of changes in
median costs that are not unusual. Compared to the adjusted median
costs used for the 2003 OPPS, most of the median cost increases and
decreases were for nondevice-related APCs. Very few device-related APCs
saw their median costs decrease significantly. We also note that, with
a few exceptions, the median cost increases and decreases were not
unusually distributed; we believe that the fluctuations should not be
unexpected in a new payment system. For example, the cost of providing
items and services changes yearly and, in a new payment system, the
accuracy of coding services will improve year to year. We also compared
the actual median costs from the April 1, 2001 through March 31, 2002
claims data with the actual median costs from the April 1, 2002 through
December 31, 2002 claims data. Given the level of consistency we see in
our claims data, we believe that adjustment of median costs last year
may have resulted in payment amounts for some APCs that were too high.
The medians we propose to use to set weights for the 2004 OPPS for
APCs in Table 8 have decreased more than 10 percent in median cost when
compared to the adjusted median costs for 2003 OPPS. For reference, we
also provide the actual median cost from the claims data we used to set
2003 OPPS payment rates. Some changes appear to be the result of normal
fluctuation in the costs of services. In other cases the actual median
cost in the April through December 2002 data (the 2004 OPPS medians) is
consistent with the actual median cost in the April 1, 2001 through
March 31, 2002 data (used for the 2003 OPPS medians), but decreased
significantly only in comparison to the adjusted 2001 medians used for
2003 OPPS. In general, where there is consistency between the 2001
(2003 OPPS) and 2002 (2004 OPPS) unadjusted medians or where a change
appears to represent normal fluctuations in costs, and we know of no
special circumstances that would cause us to believe that there are
problems in the claims data, we conclude that the claims data
accurately represent the cost of the service. After reviewing the data,
we believe that there is no sound basis for making an across-the-board
adjustment to our April through December 2002 median costs,
notwithstanding that using the unadjusted 2004 median may result in a
reduced payment compared to the payment that was based on adjusted
medians under 2003 OPPS.

[[Page 47985]]

Table 8.--APCs With Median Cost Decreases of 10 Percent or More
----------------------------------------------------------------------------------------------------------------
% diff APC
median cost
Final 2003 2004 (2003
Final APC Description SI dampened proposed dampened
median cost rule APC vs. 2004
median cost proposed
rule)
----------------------------------------------------------------------------------------------------------------
0312............................ Radioelement Applications....... S $3,141.77 $216.18 -93.12
0330............................ Dental Procedures............... S 284.02 32.87 -88.43
0692............................ Electronic Analysis of S 371.55 56.40 -84.82
Neurostimulator Pulse
Generators.
0651............................ Complex Interstitial Radiation S 3,250.63 588.67 -81.89
Source Application.
0225............................ Implantation of Neurostimulator S 8,277.07 3,283.68 -60.33
Electrodes.
0352............................ Level I Injections.............. X 13.10 6.31 -51.83
0068............................ CPAP Initiation................. S 123.29 65.83 -46.61
0124............................ Revision of Implanted Infusion T 2,975.12 1,608.78 -45.93
Pump.
0688............................ Revision/Removal of T 4,429.71 2,495.57 -43.66
Neurostimulator Pulse Generator
Receiver.
1719............................ Brachytx seed, Non-HDR Ir-192... K 31.04 17.89 -42.36
0699............................ Level IV Eye Tests & Treatments. T 223.07 130.15 -41.65
0199............................ Obstetrical Care Service........ T 232.46 142.74 -38.59
0313............................ Brachytherapy................... S 1,249.57 769.14 -38.45
0236............................ Level II Posterior Segment Eye T 1,873.66 1,153.59 -38.43
Procedures.
0123............................ Bone Marrow Harvesting and Bone S 380.54 234.84 -38.29
Marrow/Stem Cell Transplant.
0223............................ Implantation or Revision of Pain T 2,437.21 1,525.61 -37.40
Management Catheter.
0385............................ Level I Prosthetic Urological T 6,199.09 3,895.76 -37.16
Procedures.
0681............................ Knee Arthroplasty............... T 8,780.47 5,669.25 -35.43
0302............................ Level III Radiation Therapy..... S 548.35 363.26 -33.75
0301............................ Level II Radiation Therapy...... S 187.53 125.03 -33.33
0094............................ Level I Resuscitation and S 228.18 154.77 -32.17
Cardioversion.
0671............................ Level II Echocardiogram Except S 140.57 96.05 -31.67
Transesophageal.
0098............................ Injection of Sclerosing Solution T 99.06 68.15 -31.20
0346............................ Level II Transfusion Laboratory X 30.59 22.72 -25.73
Procedures.
0043............................ Closed Treatment Fracture Finger/ T 148.63 112.70 -24.17
Toe/Trunk.
0687............................ Revision/Removal of T 1,535.37 1,171.45 -23.70
Neurostimulator Electrodes.
0359............................ Level II Injections............. X 67.50 51.53 -23.66
0122............................ Level II Tube changes and T 638.40 494.56 -22.53
Repositioning.
0363............................ Level I Otorhinolaryngologic X 64.56 50.02 -22.52
Function Tests.
0081............................ Non-Coronary Angioplasty or T 2,584.47 2,041.29 -21.02
Atherectomy.
0191............................ Level I Female Reproductive Proc T 12.27 9.84 -19.80
0685............................ Level III Needle Biopsy/ T 355.90 286.61 -19.47
Aspiration Except Bone Marrow.
0371............................ Level I Allergy Injections...... X 29.69 23.93 -19.39
0152............................ Percutaneous Abdominal and T 595.64 486.01 -18.41
Biliary Procedures.
0222............................ Implantation of Neurological T 13,528.13 11,061.74 -18.23
Device.
0118............................ Chemotherapy Administration by S 325.75 267.63 -17.84
Both Infusion and Other
Technique.
0086............................ Ablate Heart Dysrhythm Focus.... T 3,138.30 2,611.43 -16.79
0202............................ Level VIII Female Reproductive T 2,706.38 2,273.91 -15.98
Proc.
0228............................ Creation of Lumbar Subarachnoid T 3,541.71 2,996.28 -15.40
Shunt.
0347............................ Level III Transfusion Laboratory X 66.49 56.52 -14.99
Procedures.
0245............................ Level I Cataract Procedures T 863.71 736.87 -14.69
without IOL Insert.
0189............................ Level III Female Reproductive T 90.69 77.39 -14.67
Proc.
0085............................ Level II Electrophysiologic T 2,478.31 2,128.77 -14.10
Evaluation.
0665............................ Bone Density: S 49.02 42.34 -13.63
AppendicularSkeleton.
0670............................ Intravenous and Intracardiac S 1,796.55 1,555.61 -13.41
Ultrasound.
0368............................ Level II Pulmonary Tests........ X 62.61 54.62 -12.76
0107............................ Insertion of Cardioverter- T 19,378.60 17,025.21 -12.14
Defibrillator.
0362............................ Level III Otorhinolaryngologic X 168.41 148.74 -11.68
Function Tests.
0287............................ Complex Venography.............. S 415.06 368.16 -11.30
0120............................ Infusion Therapy Except T 129.56 115.11 -11.15
Chemotherapy.
0212............................ Nervous System Injections....... T 196.63 175.73 -10.63
0004............................ Level I Needle Biopsy/ T 103.36 92.43 -10.57
Aspiration Except Bone Marrow.
0676............................ Level II Transcatheter T 245.24 219.77 -10.39
Thrombolysis.
0268............................ Ultrasound Guidance Procedures.. S 82.47 74.07 -10.19
0106............................ Insertion/Replacement/Repair of T 3,256.61 2,927.17 -10.12
Pacemaker and/or Electrodes.
----------------------------------------------------------------------------------------------------------------

We solicit comments on the proposed weights for all APCs and for
the APC placement of all HCPCS codes. However, because we believe the
public may be interested in commenting on APCs where the payment rate
decreases, we discuss several APCs whose payment rates decrease by more
than 10 percent. We are particularly interested in comments, including
the submission of external data (as discussed below) regarding these
APCs.
Discussion of Selected APCs
APC 312 Radioelement Applications--The proposed median for this APC
falls 93.12 percent in comparison with the 2003 adjusted median (from
$3,141.77 to $216.18). The 2003 OPPS median was adjusted against

[[Page 47986]]

the 2002 OPPS median ($7,080.00) into which we packaged the cost of
brachytherapy seeds. However, for 2003 and 2004, we are making separate
payment for bracytherapy seeds (with the exception of prostate
brachytherapy) and, therefore, the costs of those seeds is not packaged
into the APC payment (except for prostate brachytherapy). The 2003 OPPS
unadjusted median was $265.53, which is comparable to the proposed 2004
OPPS median. Hence, we think the 2003 OPPS median reflects the costs of
brachytherapy, with seeds paid separately.
APC 692 Electronic Analysis of Neurostimulator Pulse Generators--
The proposed median for this APC falls 84.82 percent in comparison with
the 2003 OPPS adjusted median (from $371.55 to $56.40). The 2003 OPPS
median was adjusted against the 2002 OPPS median ($819.00), which
contained costs for devices that should not have been packaged.
Moreover, the 2003 OPPS unadjusted median for the service was $46.95,
and this is comparable to the 2004 OPPS median of $56.40. Hence, we
believe that the proposed 2004 OPPS median reflects the cost of the
service.
APC 651 Complex Interstitial Radiation Source Application--The
proposed median for this APC falls 81.89 percent in comparison with the
2003 OPPS adjusted median (from $3,250.63 to $588.67). The 2003 OPPS
median was adjusted against the 2002 OPPS median ($7,080.00), which
contained costs for brachytherapy seeds that are currently paid
separately. Moreover, the 2003 OPPS unadjusted median for the service
was $483.25, and this is comparable to the proposed 2004 OPPS median of
$588.67. Hence, we believe that the proposed 2004 OPPS median reflects
the cost of the service because brachytherapy seeds are paid
separately.
APC 225 Implantation of Neurostimulator Electrodes--The proposed
median for this APC fell 60.33 percent (from $8,277.07 to $3,283.68) as
compared to the adjusted median used for the 2003 OPPS. The 2003 OPPS
median was adjusted against the 2002 OPPS median ($15,286.00), which
reflected the manufacturer(s) price(s) for the devices packaged into
the APC. However, the proposed 2004 OPPS median ($3,283.68) is very
close to the unadjusted 2003 OPPS median ($3,561.03), causing us to
believe that the 2004 proposed median accurately reflects the costs of
the procedure. Because this APC is commonly performed with implantation
of a neurostimulator pulse generator (APC 222), we changed the status
indicator of APC 225 to ``S'' so that it would not be subjected to the
multiple procedure reduction when it is performed with implantation of
a neurological device. We do not propose to change the status indicator
this year, and the multiple procedure reductions would not be applied
in CY 2004 to APC 0225.
We determined the proposed 2004 OPPS median for APC 225, using only
claims that contained the C codes for the neurostimulator leads (either
C1778 Lead, neurostimulator, or C1897 Lead, neurostimulator test kit)
in order to ensure that we captured the costs for the leads in the data
used to calculate the median. We solicit comments concerning the
accuracy of our data and whether they appropriately reflect the cost of
neurostimulator electrodes, as well as submission of data on the
acquisition cost of neurostimulator electrodes (both permanent and test
electrodes).
APC 352 Level 1 Injections--The proposed 2004 OPPS median for this
APC fell 51.83 percent (from $13.10 to $6.31) as compared to the
adjusted 2003 OPPS median. The 2003 OPPS median was adjusted against
the 2002 OPPS median ($23.00). However, the 2003 OPPS median ($6.65) is
very close to the proposed 2004 OPPS median ($6.31), and this leads us
to believe that the proposed 2004 median reflects the cost of the
service.
APC 313 Brachytherapy.--The proposed median for this APC falls
38.45 percent in comparison with the 2003 OPPS adjusted median (from
$1,249.57 to $769.14) because the 2003 OPPS median was adjusted against
the 2002 OPPS median ($2,030.00), which contained costs for
brachytherapy seeds that should not have been included because the
radioelement sources used in this APC are not single use seeds.
Moreover, the 2003 OPPS unadjusted median for the service was $773.63,
and this is comparable to the proposed 2004 OPPS median of $769.14.
Hence, we believe that the proposed 2004 OPPS median reflects the cost
of the service.
APC 223 Implantation or Revision of Pain Management Catheter.--The
proposed median for this APC falls 37.40 percent in comparison with the
2003 OPPS adjusted median (from $2,437.21 to $1,525.61). The single CPT
code in this APC describes three procedures: revision, repositioning,
and insertion of a pain management catheter. Therefore, the median cost
of this APC should reflect the relative frequencies with which these
three procedures are performed. Furthermore, the descriptor makes it
inappropriate to use only claims containing ``C'' codes to determine
the median cost for this APC because a device is not always used when
this procedure is performed. To require that a ``C'' code be on claims
for this procedure would result in inaccurate median costs. We believe
the decrease in median cost is due to the packaging of 75 percent of
the cost of the catheter into the APC amount for the 2002 OPPS fee
schedule.
APC 385 Level 1 Prosthetic Urological Procedures.--The proposed
median for this APC fell 37.16 percent compared to the adjusted median
for this APC in 2003 OPPS ($3895.76 compared to $6,199.09). This
occurred because we removed the more expensive inflatable penile
prosthesis and prosthetic urinary sphincters from APC 179 and placed
them in a new APC (APC 386 with proposed 2004 OPPS median of
$6,298.89). Hence, we believe that the proposed medians for both APCs
reflect the costs of the services that they now contain.
APC 687 Revision/Removal of Neurostimulator Electrodes--The
proposed median costs of this APC decreased 23.7 percent as compared to
the adjusted median used for the 2003 OPPS fee schedule ($1,171.45
compared to $1,535.37). (See Table 8.) However, none of the procedures
in this APC require the use of high cost devices, and we believe the
change in median cost reflects fluctuation in the costs of providing
these services.
APC 359 Level II Injections--See section VI.B.4 of this proposed
rule for the discussion of administration of drugs.
APC 81 Non Coronary Angioplasty or Atherectomy--The median for this
APC fell 21.02 percent in comparison with the actual median cost used
in the 2003 OPPS fee schedule (from $2,584.47 to $2,041.29). The median
cost used for OPPS 2003 was significantly higher than the median cost
used for the 2002 OPPS, which included packaging of 75 percent of the
devices used in this APC. We believe the decrease this year, which is
still substantially higher than the median used for 2002, reflects the
fluctuating costs of providing this service.
APC 222 Implantation of Neurological Device--The proposed median
for this APC fell 18.23 percent in comparison with the 2003 OPPS
adjusted median (from $13,528.13 to $11.528.13). The 2003 OPPS adjusted
median was adjusted against the 2002 OPPS median, which packaged 75
percent of the cost (based on manufacturer submitted data) of the
devices ($17,284.00) into the APC. However, the proposed 2004 OPPS
median of $11,061.74 compares favorably with the unadjusted 2003 OPPS
median of $9,146.22. Because we

[[Page 47987]]

developed the proposed 2004 median for APC 222 using only claims that
contained charges for device code C1767, we believe our current cost
data better reflect the cost of these devices. We solicit comments on
the accuracy of our data as well as the submission of data on the
acquisition cost of these devices.
APC 118 Chemotherapy Administration by Both Infusion and Other
Technique--See section VI.B.4 of this proposed rule for the discussion
of administration of drugs.
APC 86 Ablate Heart Dysrhythm Focus--The proposed median for this
APC fell 16.79 percent for 2004 OPPS when compared to the adjusted
median for 2003 (from $3,138.30 to $2,611.43). The proposed 2004 OPPS
median is comparable to the unadjusted median for 2003 OPPS of
$2,745.69. Because this APC requires the use of a device, we required
that the claims used to set the median for this APC contain a device
code to qualify. We believe that our cost data accurately reflect the
cost of providing this service. We note that the high payment rate for
2003 was adjusted against the 2002 median, which reflected packaging 75
percent of the device cost (based on manufacturer submitted costs) into
the APC.
APC 202 Level VIII Female Reproductive Procedure--We made several
changes to the structure of this APC and the proposed median for this
APC fell 15.98 percent for 2004 OPPS when compared to the adjusted
median for the 2003 (from $2,706.38 to $2,273.91). The proposed 2004
OPPS median is comparable to the unadjusted median for 2003 OPPS of
$2,327.25. This APC requires the use of a device and, therefore, we
required that the claims used to set the median for this APC must
contain one or more specified device codes to qualify (C1771 Repair
device, urinary incontinence, with sling graft, C2631 Repair device,
urinary incontinence, without sling graft). We believe our cost data
accurately reflect the costs of providing this service.
APC 670 Intravenous and Intracardiac Ultrasound--The proposed
median for this APC fell 13.41 percent for the 2004 OPPS when compared
to the median for 2003 OPPS (from $1,796.55 to $1,555.61). This APC
requires the use of a device and therefore we required that the claims
used to set the median for this APC must contain a device code to
qualify. We believe that our cost data accurately reflect the cost of
providing this service and that any change in median cost is due to
fluctuations in hospital costs.
APC 107 Insertion of Cardioverter-Defibrillator--The proposed 2004
OPPS median for this APC fell 12.14 percent (from $19,378.60 to
$17,025.21) as compared to the adjusted median cost for the 2003 OPPS
fee schedule. The 2003 OPPS median was adjusted against the 2002 OPPS
median ($21,679.00) which reflected packaging 75 percent of the
manufacturer submitted prices for the devices used in this APC. The
proposed 2004 OPPS median is much closer to the adjusted median than it
is to the unadjusted 2003 OPPS median ($13,572.62).
We acquired the proposed 2004 OPPS median for APC 107 by using only
claims that contained the C codes for cardioverter-defibrillators
(either C1721 Cardioverter-defibrillator dual chamber, C1722
Cardioverter-defibrillator, single chamber, or C1882 Cardioverter-
defibrillator, other than single or dual chamber) in order to ensure
that we captured the costs for the device in the data used to calculate
the median. Although the proposed median cost of this APC is lower than
the adjusted median used last year, it is considerably higher than the
actual median from last year, and we have confidence that it reflects
the cost of the devices used in the procedure. We would also note that
the proposed median cost for APC 108 also rose dramatically and is
higher than the adjusted median used for the 2003 OPPS fee schedule.
Assuming that the proposed median cost for APC 108 accurately reflects
the cost of inserting a cardioverter-defibrillator with leads, we would
expect that the proposed median cost of APC 107, which also rose
significantly as compared to the actual median cost used for OPPS 2003,
accurately reflects the cost of inserting a cardioverter-defibrillator
without leads.
APC 120 Infusion Therapy Except Chemotherapy--See section VI.B.4 of
this proposed rule for a discussion of infusion therapy other than
chemotherapy.
APC 106 Insertion/Replacement/Repair of Pacemaker and/or
Electrodes--The proposed 2004 OPPS median for this APC fell 10.12
percent compared to the 2003 OPPS median (from a final 2003 OPPS median
of $3,256.61 to a proposed 2004 Median of $2,927.17). This APC contains
both CPT codes for insertion of temporary pacemaker leads (CPT codes
33210 and 33211) and repair and revision of pacemaker leads (33216,
33217, 33218, and 33220). This APC contains a mixture of services and,
therefore, its median cost should reflect the mixture of services
provided. We solicit comments on whether the proposed median cost for
this APC reflects the cost of providing these services as well as the
submission of data on the acquisition costs of the leads used for each
service in this APC.
Preferred Characteristics of External Data Submitted in Comments.
We will consider external data on devices that are provided to the
extent that they enable us to verify or adjust claims data where we are
convinced that an adjustment is appropriate. All data we use to create
payment amounts for the final rule will be available for public
inspection.
External data must meet the following criterion:
[sbull] Be available for public inspection.
External data that are likely to be of optimal use should meet the
following criteria:
[sbull] Represent a diverse group of hospitals both by location
(for example, rural, urban) and by type (for example, community,
teaching). We would prefer that commenters identify each hospital
including location with city and State, nonprofit vs. for profit
status, teaching vs. nonteaching status, and the percent of Medicare
vs. non-Medicare patients receiving the service; a pseudo identifier
could be used for the hospital identification. Data should be submitted
both ``per hospital'' and in the aggregate.
[sbull] Identify the number of devices billed to Medicare by each
hospital as well as any rebates or reductions for bulk purchase or
similar discounts and identify the characteristics of providers to
which any such price rebates or reductions apply.
[sbull] Identify all HCPCS codes with which each item would be
used.
[sbull] Identify the source of the data.
[sbull] Include both the charges and costs for each hospital, by
quarter for the last 3 quarters of 2002. Cost data for 2003 are not
compatible with 2002 claims data.
This information would enable us to compare our claims data to the
external data and help us determine whether the submitted data are
representative of hospitals that submit claims under OPPS.
Please note that information that contains beneficiary-specific
information (for example, medical records, invoices with beneficiary
identification on it) should be altered, if necessary, to remove any
individually identifiable information, such as information that
identifies an individual, diagnoses, addresses, telephone numbers,
attending physician, medical record number, Medicare or other insurance
number, etc. Moreover, individually identifiable beneficiary medical
records, including progress notes, medical orders, test results,
consultation reports, etc. should

[[Page 47988]]

not be submitted to us. Similarly, photocopies of checks from hospitals
or other documents that contain bank routing numbers should not be
submitted to us.
Blood and Blood Products
See section VI.B.8 of this proposed rule for our discussion of the
analysis of data for blood and blood products and our proposal.
Separately Paid Drugs
See section VI.B.3 of this proposed rule for our discussion of the
analysis of data for separately paid drugs and our proposal.

B. Description of How We Propose To Calculate Weights for CY 2004

The methodology we followed to calculate the APC relative payment
weights proposed for CY 2004 is as follows:
[sbull] We excluded from the data claims for those bill and claim
types that would not be paid under the OPPS (for example, bill type 72X
for dialysis services for patients with end-stage renal disease
(ESRD)).
[sbull] We eliminated claims from hospitals located in Maryland,
Guam, and the U.S. Virgin Islands.
[sbull] Using the most recent available cost report from each
hospital, we converted billed charges to costs and aggregated them to
the procedure or visit level first by identifying the cost-to-charge
ratio specific to each hospital's cost centers (``cost center specific
cost-to-charge ratios'' or CCRs) and then by matching the CCRs to
revenue centers used on the hospital's CY 2001 outpatient bills. The
CCRs include operating and capital costs but exclude items paid on a
reasonable cost basis.
[sbull] We eliminated from the hospital CCR data 325 hospitals that
we identified as having reported charges on their cost reports that
were not actual charges (for example, a uniform charge applied to all
services). Of these, only 166 hospitals had claims data.
[sbull] We eliminated from our data claims for critical access
hospitals that are not paid under OPPS and whose claims are therefore
not suitable for use in setting weights for services paid under OPPS.
[sbull] We calculated the geometric mean of the total operating
CCRs of hospitals remaining in the CCR data. We removed from the CCR
data 29 hospitals whose total operating CCR deviated from the geometric
mean by more than three standard deviations.
[sbull] We excluded from our data approximately 2.1 million claims
submitted by the hospitals that we removed or trimmed from the hospital
CCR data.
[sbull] We matched revenue centers from the remaining universe of
claims to hospital CCRs.
[sbull] We separated the 66.345 million claims that we had matched
with a cost report into the following three distinct groups: (1)
Single-procedure claims; (2) multiple-procedure claims; and (3) claims
on which we could not identify at least one OPPS covered service.
Single-procedure claims are those that include only one HCPCS code
(other than laboratory and incidentals such as packaged drugs and
venipuncture) that could be grouped to an APC. Multiple-procedure
claims include more than one HCPCS code that could be mapped to an APC.
Thus, dividing the claims yielded approximately 21.92 million single-
procedure claims and 14.8 million multiple-procedure claims.
Approximately 19.57 million claims without at least one covered OPPS
service were set aside.
We converted 8.47 million multiple-procedure claims to single-
procedure claims using the following criteria: (1) If a multiple-
procedure claim contained lines with a HCPCS code in the pathology
series (that is, CPT 80000 series of codes), we treated each of those
lines as a single claim. (2) For multiple-procedure claims with a
packaged HCPCS code (status indicator ``N'') on the claim, we ignored
line items for preoperative procedures and for those services in the
APCs identified in Table 9. These are services with payment amounts
below $50 (under CY 2003 OPPS) for which we believe the charge
represents the totality of the charges associated with the service
(that is, that there are no packaged HCPCS or packaged revenue centers
attributable to the service). If only one procedure (other than HCPCS
codes in Table 9) existed on the claim, we treated it as a single-
procedure claim. (3) If the claim had no packaged HCPCS codes and if
there were no packaged revenue centers on the claim, we treated each
line with a procedure as a single-procedure claim if billed with single
units. (4) If the claim had no packaged HCPCS codes but had packaged
revenue centers for the procedure, we ignored the line item for codes
in the APCs identified in Table 9. If only one HCPCS code remained, we
treated the claim as a single-procedure claim.

Table 9.--APCS That Were Ignored To Create Pseudo Single Procedure
Claims
------------------------------------------------------------------------

------------------------------------------------------------------------
0001............................ Level I S
Photochemotherapy.
0060............................ Manipulation Therapy.... S
0077............................ Level I Pulmonary S
Treatment.
0099............................ Electrocardiograms...... S
0215............................ Level I Nerve and Muscle S
Tests.
0215............................ Level I Nerve and Muscle S
Tests.
0230............................ Level I Eye Tests & S
Treatments.
0260............................ Level I Plain Film X
Except Teeth.
0262............................ Plain Film of Teeth..... X
0271............................ Mammography............. S
0341............................ Skin Tests and X
Miscellaneous Red Blood
Cell Tests.
0342............................ Level I Pathology....... X
0343............................ Level II Pathology...... X
0344............................ Level III Pathology..... X
0345............................ Level I Transfusion X
Laboratory Procedures.
0364............................ Level I Audiometry...... X
0367............................ Level I Pulmonary Test.. X
0669............................ Digital Mammography..... S
0690............................ Electronic Analysis of S
Pacemakers and other
Cardiac Devices.
0706............................ New Technology--Level I S
($0-$50).
------------------------------------------------------------------------

[[Page 47989]]

In addition, we assessed the dates of service for HCPCS codes and
packaged revenue centers on each claim that contained more than one
major code. Where it was possible to attribute charges for packaged
HCPCS and packaged revenue centers to HCPCS codes for major procedures
by matching unique dates of service, we did this and created single
claims by packaging charges into the charge for the major service on
the same date. We were only able to do this if the multiple major
procedures had different dates of service and if there were dates of
service on all of the packaged revenue centers. Dates of service on
revenue centers are not required and, therefore, only claims from
hospitals that submitted dates of service on revenue centers in CY 2002
could be used in this process for maximizing the number of single-
procedure claims to be used for weight setting. We created an
additional 23.58 million single-procedure bills through this process,
which enabled us to use these data from multiple-procedure claims in
calculation of the APC relative payment weights.
[sbull] To calculate median costs for services within an APC, we
used only single-procedure bills and those multiple-procedure bills
that we converted into single claims except as described otherwise. If
a claim had a single code with a zero charge (that would have been
considered a single-procedure claim), we did not use it. As we
discussed in section III.A.2 of this proposed rule, we did not use
multiple-procedure claims that billed more than one separately payable
HCPCS code with charges for packaged items and services such as
anesthesia, recovery room, or supplies that could not be reliably
allocated or apportioned among the primary HCPCS codes on the claim. We
have not yet developed what we regard as an acceptable method of using
multiple procedure bills to recalibrate APC weights that minimizes the
risk of improperly assigning charges to the wrong procedure or visit.
For APCs in Table 10, we required that there be a C code on the
claim for the claim to be used. These APCs require the use of a device
in the provision of the service. Moreover, in 2002, hospitals were
required to bill the C code in order for the device to receive pass-
through payment for the device. Therefore, if no C code was billed on
the claim, we presumed that the claim was incorrectly coded, and we did
not use it. For some of these APCs, we further required that specific
devices be on the claim.

Table 10.--APCS for Which a HCPCS for a Device Was Required To Be on a
Claim Used for Weight Setting
------------------------------------------------------------------------
APC APC description Status
------------------------------------------------------------------------
0032............................ Insertion of Central T
Venous/Arterial
Catheter.
0048............................ Arthroplasty with T
Prosthesis.
0080............................ Diagnostic Cardiac T
Catheterization.
0081............................ Non-Coronary Angioplasty T
or Atherectomy.
0082............................ Coronary Atherectomy.... T
0083............................ Coronary Angioplasty and T
Percutaneous
Valvuloplasty.
0085............................ Level II T
Electrophysiologic
Evaluation.
0086............................ Ablate Heart Dysrhythm T
Focus.
0087............................ Cardiac T
Electrophysiologic
Recording/Mapping.
0089............................ Insertion/Replacement of T
Permanent Pacemaker and
Electrodes.
0090............................ Insertion/Replacement of T
Pacemaker Pulse
Generator.
0104............................ Transcatheter Placement T
of Intracoronary Stents.
0106............................ Insertion/Replacement/ T
Repair of Pacemaker and/
or Electrodes.
0107............................ Insertion of T
Cardioverter-
Defibrillator.
0108............................ Insertion/Replacement/ T
Repair of Cardioverter-
Defibrillator Leads.
0115............................ Cannula/Access Device T
Procedures.
0119............................ Implantation of Devices. T
0122............................ Level II Tube Changes T
and Repositioning.
0167............................ Level III Urethral T
Procedures.
0182............................ Insertion of Penile T
Prosthesis.
0202............................ Level VIII Female T
Reproductive Proc.
0222............................ Implantation of T
Neurological Device.
0225............................ Implantation of S
Neurostimulator
Electrodes.
0226............................ Implantation of Drug T
Infusion Reservoir.
0227............................ Implantation of Drug T
Infusion Device.
0229............................ Transcatheter Placement T
of Intravascular Shunts.
0259............................ Level VI ENT Procedures. T
0313............................ Brachytherapy........... S
0384............................ GI Procedures with T
Stents.
0385............................ Level I Prosthetic T
Urological Procedures.
0386............................ Level II Prosthetic T
Urological Procedures.
0648............................ Breast Reconstruction T
with Prosthesis.
0652............................ Insertion of T
Intraperitoneal
Catheters.
0653............................ Vascular Reconstruction/ T
Fistula Repair with
Device.
0654............................ Insertion/Replacement of T
a permanent dual
chamber pacemaker.
0655............................ Insertion/Replacement/ T
Conversion of a
permanent dual chamber
pacemaker.
0670............................ Intravenous and S
Intracardiac Ultrasound.
0674............................ Prostate Cryoablation... T
0680............................ Insertion of Patient S
Activated Event
Recorders.
0681............................ Knee Arthroplasty....... T
------------------------------------------------------------------------

[[Page 47990]]

[sbull] For each single-procedure claim, we calculated a cost for
every billed line item charge by multiplying each revenue center charge
by the appropriate hospital-specific CCR. We used the most recent
settled or submitted cost reports. Using the most recent ``submitted to
settled ratio,'' we adjusted CCRs for the submitted cost reports but
not the settled ones. If an appropriate cost center did not exist for a
given hospital, we crosswalked the revenue center to a secondary cost
center when possible, or used the hospital's overall CCR for outpatient
department services. We excluded from this calculation all charges
associated with HCPCS codes previously defined as not paid under the
OPPS (for example, laboratory, ambulance, and therapy services). We
included all charges associated with HCPCS codes that are designated as
packaged services (that is, HCPCS codes with the status indicator of
``N'').
[sbull] To calculate per-service costs, we used the charges shown
in revenue centers that contained items integral to performing
services. Table 11 contains a list of the revenue centers that we
packaged into major HCPCS codes when they appeared on the same claim.
This is a change to the packaging of revenue centers by category of
service that had been done since the inception of the OPPS in the April
7, 2000 final rule (65 FR 18457). In all prior years of OPPS, we had
specific subsets of revenue centers that we packaged into major HCPCS
codes based on the type of service we assigned to the HCPCS code for
this purpose. For example, we had a set of revenue centers that could
be packaged into visit codes and a different, but overlapping, set of
revenue centers that could be packaged into surgery codes. We propose
to convert these categories to a single set of revenue codes (see Table
11) that would be packaged into the major HCPCS code with which it
appears on a claim. We believe that this will increase the likelihood
that the total charge for the major HCPCS code will capture all of the
costs attributed to the services furnished.
Table 11 lists packaged services by revenue center that we are
proposing to use to calculate per-service costs for outpatient services
furnished in CY 2004.

Table 11.--Packaged Services by Revenue Code
------------------------------------------------------------------------
Revenue Code Description
------------------------------------------------------------------------
250....................................... PHARMACY
251....................................... GENERIC
252....................................... NONGENERIC
254....................................... PHARMACY INCIDENT TO OTHER
DIAGNOSTIC
255....................................... PHARMACY INCIDENT TO
RADIOLOGY
257....................................... NONPRESCRIPTION DRUGS
258....................................... IV SOLUTIONS
259....................................... OTHER PHARMACY
260....................................... IV THERAPY, GENERAL CLASS
262....................................... IV THERAPY/PHARMACY SERVICES
263....................................... SUPPLY/DELIVERY
264....................................... IV THERAPY/SUPPLIES
269....................................... OTHER IV THERAPY
270....................................... M&S SUPPLIES
271....................................... NONSTERILE SUPPLIES
272....................................... STERILE SUPPLIES
274....................................... PROSTHETIC/ORTHOTIC DEVICES
275....................................... PACEMAKER DRUG
276....................................... INTRAOCULAR LENS SOURCE DRUG
278....................................... OTHER IMPLANTS
279....................................... OTHER M&S SUPPLIES
280....................................... ONCOLOGY
289....................................... OTHER ONCOLOGY
290....................................... DURABLE MEDICAL EQUIPMENT
370....................................... ANESTHESIA
371....................................... ANESTHESIA INCIDENT TO
RADIOLOGY
372....................................... ANESTHESIA INCIDENT TO OTHER
DIAGNOSTIC
379....................................... OTHER ANESTHESIA
390....................................... BLOOD STORAGE AND PROCESSING
399....................................... OTHER BLOOD STORAGE AND
PROCESSING
560....................................... MEDICAL SOCIAL SERVICES
569....................................... OTHER MEDICAL SOCIAL
SERVICES
621....................................... SUPPLIES INCIDENT TO
RADIOLOGY
622....................................... SUPPLIES INCIDENT TO OTHER
DIAGNOSTIC
624....................................... INVESTIGATIONAL DEVICE (IDE)
630....................................... DRUGS REQUIRING SPECIFIC
IDENTIFICATION, GENERAL
CLASS
631....................................... SINGLE SOURCE
632....................................... MULTIPLE
633....................................... RESTRICTIVE PRESCRIPTION
637....................................... SELF-ADMINISTERED DRUG
(INSULIN ADMIN. IN
EMERGENCY DIABETIC COMA)
700....................................... CAST ROOM
709....................................... OTHER CAST ROOM
710....................................... RECOVERY ROOM
719....................................... OTHER RECOVERY ROOM
720....................................... LABOR ROOM
721....................................... LABOR
762....................................... OBSERVATION ROOM
810....................................... ORGAN ACQUISITION
819....................................... OTHER ORGAN ACQUISITION
942....................................... EDUCATION/TRAINING
------------------------------------------------------------------------

[sbull] We standardized costs for geographic wage variation by
dividing the labor-related portion of the operating and capital costs
for each billed item by the proposed FY 2004 hospital inpatient
prospective payment system (IPPS) wage index published in the Federal
Register on May 9, 2002 (67 FR 31602). We used 60 percent to represent
our estimate of that portion of costs attributable, on average, to
labor. We have used this estimate since the inception of the OPPS and
continue to believe that it is appropriate. (See the April 7, 2000
final rule (65 FR 18496) for a complete description of how we derived
this percentage).
[sbull] We summed the standardized labor-related cost and the
nonlabor-related cost component for each billed item to derive the
total standardized cost for each procedure or medical visit.
[sbull] We removed extremely unusual costs that appeared to be
errors in the data using a trimming methodology analogous to what we
use in calculating the diagnosis-related group (DRG) weights for the
hospital IPPS. That is, we eliminated any bills with costs outside of
three standard deviations from the geometric mean.
[sbull] After trimming the procedure and visit level costs, we
mapped each procedure or visit cost to its assigned APC, including, to
the extent possible, the proposed APC changes.
[sbull] We calculated the median cost for each APC.
To develop the median cost for observation (APC 339, HCPCS code
G0244), we selected claims containing HCPCS code G0244 (Observation
care

[[Page 47991]]

provided by a facility to a patient with CHF, chest pain, or asthma,
minimum eight hours, maximum forty-eight hours) that also showed one or
more of the ICD-9 (International Classification of Diseases, Ninth
Edition) diagnosis codes required for payment of APC 339. We ignored
other separately payable codes so that the claims with G0244 would not
be excluded for having multiple major procedures on a single claim. We
packaged the costs of allowable revenue centers and HCPCS codes with
status indicator ``N'' into the cost of G0244, and trimmed as was done
for the calculation of the median costs for other APCs.
To calculate the weights for APCs 649 (Prostate Brachytherapy with
Palladium seeds) and 684 (Prostate Brachytherapy with Iodine seeds)
into which the cost of brachytherapy seeds are packaged, we selected
claims that contained HCPCS codes 77778 and 55859 where the lines
containing codes 77778 and 55859 have the same date of service and the
claim contained either HCPCS code C1720 (Palladium seeds) or C1718
(Iodine seeds) (which need not be the same date of service as 77778 and
55859). We ignored line items for services paid on the laboratory fee
schedule and lines with separately payable HCPCS (even if multiple
majors). We packaged all remaining costs from allowable revenue centers
and packaged HCPCS into the claim (regardless of date of service). We
separated the claims with Palladium seeds from claims with Iodine
seeds. We then created a median cost for prostate brachytherapy with
Palladium seeds (APC 0649; G0256) from the claims containing 77778,
55859, and C1720 (Palladium seeds), and we created a median cost for
prostate brachytherapy with Iodine seeds (APC 0684; G0261) from claims
containing 77778, 55859, and C1718 (Iodine seeds).
[sbull] Using the median APC costs, we calculated the relative
payment weights for each APC. As in prior years, we scaled all the
relative payment weights to APC 0601, Mid-level clinic visit, because
it is one of the most frequently performed services in the hospital
outpatient setting. We assigned APC 0601 a relative payment weight of
1.00 and divided the median cost for each APC by the median cost for
APC 0601 to derive the relative payment weight for each APC. Using 2002
data, the median cost for APC 0601 is $58.78.
Section 1833(t)(9)(B) of the Act requires that APC revisions,
relative payment weight revisions, and wage index and other adjustments
be made in a manner that ensures that estimated aggregate payments
under the OPPS for 2004 are neither greater than nor less than the
estimated aggregate payments that would have been made without the
changes. To comply with this requirement concerning the APC changes, we
compared aggregate payments using the CY 2003 relative weights to
aggregate payments using the CY 2004 proposed weights. Based on this
comparison, we are proposing to make an adjustment of 1.003107132 to
the weights. The weights that we are proposing for CY 2004, which
incorporate the recalibration adjustments explained in this section,
are listed in Addendum A and Addendum B.

IV. Transitional Pass-Through and Related Payment Issues

A. Background

Section 1833(t)(6) of the Act provides for temporary additional
payments or ``transitional pass-through payments'' for certain medical
devices, drugs, and biological agents. As originally enacted by the
BBRA, this provision required 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, Public Law 107-186;
current drugs, biological agents, and brachytherapy devices used for
the treatment of cancer; and current drugs and biological products.
For those drugs, biological agents, and devices referred to as
``current,'' the transitional pass-through payment began on the first
date the hospital OPPS was implemented (before enactment of the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
(BIPA), Public Law 106-554, enacted December 21, 2000).
Transitional pass-through payments are also required for certain
``new'' medical devices, drugs, and biological agents that were not
being paid for as a hospital outpatient service as of December 31, 1996
and whose cost is ``not insignificant'' in relation to the OPPS payment
for the procedures or services associated with the new device, drug, or
biological. Under the statute, transitional pass-through payments can
be made for at least 2 years but not more than 3 years.
Section 1833(t)(6)(B)(i) of the Act required that we establish by
April 1, 2001, initial categories to be used for purposes of
determining which medical devices are eligible for transitional pass-
through payments. Section 1833(t)(6)(B)(i)(II) of the Act explicitly
authorized us to establish initial categories by program memorandum
(PM). On March 22, 2001, we issued two PMs, Transmittals A-01-40 and A-
01-41 that established the initial categories. We posted them on our
Web site at: http://www.hcfa.gov/pubforms/transmit/A0140.pdf and http://www.hcfa.gov/pubforms/transmit/A0141.pdf

Transmittal A-01-41 includes a list of the initial device
categories, a crosswalk of all the item-specific codes for individual
devices that were approved for transitional pass-through payments, and
the initial category code by which the cross-walked individual device
was to be billed beginning April 1, 2001. Items eligible for
transitional pass-through payments are generally coded using a Level II
HCPCS code with an alpha prefix of ``C.'' Pass-through device
categories are identified by status indicator ``H'' and pass-through
drugs and biological agents are identified by status indicator ``G.''
Subsequently, we added a number of additional categories, retired 95
categories effective January 1, 2003, and made clarifications to some
of the categories' long descriptors found in various program
transmittals. A list of device category codes in effect as of July 1,
2003, can be found in Transmittal A-03-051, which was issued on June
13, 2003. This PM can be accessed on our Web site at http://www.cms.gov
.
Section 1833(t)(6)(B)(ii) of the Act also requires us to establish,
through rulemaking, criteria that will be used to create additional
device categories. The criteria for new categories were the subject of
a separate interim final rule with comment period published in the
Federal Register on November 2, 2001 (66 FR 55850) and made final in
the November 1, 2002 Federal Register (67 FR 66781) announcing the 2003
update to the OPPS.
Transitional pass-through categories are for devices only; they do
not apply to drugs or biological agents. The regulations at Sec.
419.64 governing transitional pass-through payments for eligible drugs
and biological agents are unaffected by the creation of categories.
The process to apply for transitional pass-through payment for
eligible drugs and biological agents or for additional device
categories can be found on respective pages on our Web site at http://www.cms.gov.
If we revise the application instructions in any way, we
will post the revisions on our Web site and submit the changes for
approval by the Office of Management and Budget (OMB) as required under
the Paperwork Reduction Act (PRA). Notification of new drug,
biological, or device category application processes is generally
posted on the OPPS Web site at http://www.cms.gov.

[[Page 47992]]

B. Discussion of Pro Rata Reduction

Section 1833(t)(6)(E) of the Act limits the total projected amount
of transitional pass-through payments for a given year to an
``applicable percentage'' of projected total Medicare and beneficiary
payments under the hospital OPPS. For a year before 2004, the
applicable percentage is 2.5 percent; for 2004 and subsequent years, we
specify the applicable percentage up to 2.0 percent. We propose to set
the percentage at 2.0 percent for the 2004 OPPS.
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
prospective uniform 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 make an estimate of pass-through spending to determine not
only whether payment exceeds the applicable percentage but also to
determine the appropriate reduction to the conversion factor.
For devices, making an estimate of pass-through spending in 2004
entails estimating spending for two groups of items. The first group
consists of those items for which we have claims data (that is, items
that were eligible in 2002 and that will continue to be eligible in
2004). The second group consists of those items for which we have no
direct claims data (that is, items that became, or will become,
eligible in 2003 and will retain pass-through status and items that
will be newly eligible beginning in 2004).
To estimate 2004 pass-through spending for device categories in the
first group, we would use volume and hospital cost (derived from
charges on claims using cost-to-charge ratios) information from 2002
claims data. This information would be projected forward to 2004 levels
using appropriate inflation and utilization factors. For existing
categories with no claims data in 2002 that are, or will be, active in
2004, we would follow the method described in the November 2, 2001
final rule (66 FR 55857). We would use price information from
manufacturers and volume estimates from claims related to procedures
that use the devices in question. This information would be projected
forward to 2004 using appropriate inflation and utilization factors to
estimate 2004 pass-through spending for this group of categories. For
categories that become eligible in 2004, we would use the same method
as described for categories that were newly active in 2002. We
anticipate that any new categories for January 1, 2004 will be
announced after the publication of this proposed rule but before the
publication of the final rule. Therefore, the estimate of pass-through
spending would incorporate pass-through spending for categories made
effective January 1, 2004.
To estimate 2004 pass-through spending for drugs and biological
agents, we would make estimates of utilization, collect data on average
wholesale price (AWP) and combine these with ratios used to represent
hospital acquisition costs for these drugs. We would collect drug-
specific information on Medicare use from the pharmaceutical
manufacturer where possible and rely on other sources (such as peer-
reviewed clinical studies) as needed. In the past, we relied upon the
AWP published in the Redbook to establish the AWP of pass-through drugs
payable under the OPPS. As described elsewhere in this preamble, we
plan to adopt and apply the provisions outlined in the Payment Reform
for Part B drugs. For the purpose of calculating payments for
transitional pass-through items, we would determine 95 percent of the
drug's average wholesale price based on the newly established AWP. We
would use published ratios on hospital acquisition costs reported in
our proposed rule of August 9, 2002 (67 FR 52129). For sole source
drugs the ratio of acquisition cost to AWP equals 0.71; for multi-
source drugs, the ratio is 0.68; and for multi-source drugs with
generic competitors, the ratio equals 0.46.
For drugs and biological agents that may receive pass-through
status effective January 1, 2004, we propose to use the same
methodology as described for drugs and biological agents that received
pass-through status in 2003. Any new pass-through drugs and biological
agents effective beginning in 2004 would be announced after the
publication of this proposed rule but before the publication of the
final rule. Therefore, the estimate of pass-through spending would
incorporate pass-through spending for these drugs and biological agents
made effective January 1, 2004.
After using the methodologies described above to determine
projected 2004 pass-through spending for the groups of devices, drugs,
and biological agents, we would calculate total projected 2004 pass-
through spending as a percentage of the total projected payments
(Medicare and beneficiary payments) under OPPS to determine if the pro
rata reduction will be required.
Table 12 shows our current estimate of 2004 pass-through spending
for known pass-through drugs, biologicals, and devices based on
information available at the time this table was developed. We are
uncertain whether estimated pass-through spending in 2004 will exceed
$456 million (2.0 percent of total estimated OPPS spending). We have
not yet completed the estimate of pass-through spending for a number of
drugs and devices. In particular, we do not have estimates for those
drugs still under agency review for additional pass-through payments
beginning October 2003 or the changes in pass-through spending that
could result from quarterly rather than annual updates of AWP for pass-
through drugs. Finally, we would incorporate an estimate of pass-
through spending for items for which pass-through payment becomes
effective later in 2004 (that is, April 1, 2004; July 1, 2004; and
October 1, 2004) based on estimates of items that become eligible for
pass-through payment on October 1, 2003 and January 1, 2004.
Specifically, we would assume a proportionate amount of spending for
items that become eligible later in the year while making an adjustment
to account for the fact that items made eligible later in the year will
not receive pass-through payments for the entire year. We invite
comments on the methodology as described above and the estimates for
utilization that appear in the table below.

Table 12.--Estimates for 2004 Transitional Pass-Through Spending
----------------------------------------------------------------------------------------------------------------
2004 pass- 2004
through 2004 estimated anticipated
New HCPC APC Drug biological payment utilization pass-through
portion payments
----------------------------------------------------------------------------------------------------------------
......... Existing Pass-
through Drugs/
Biologicals
C9111........................... 9111 Injection $100.50 21,007 2,111,200
Bivalrudin, 250 mg
per vial.
C9112........................... 9112 Perflutren lipid $37.44 67,000 2,508,480
microsphere, per 2
ml.

[[Page 47993]]

C9113........................... 9113 Inj Pantoprazole $5.76 20,000 115,200
sodium, per vial.
C9116........................... 9116 Ertapenum sodium, $11.45 7,200 82,440
per 1 gm vial.
Q4053........................... 9119 Pegfilgrastim, per $118.00 662,062 78,123,329
1 mg single dose
vial.
C9120........................... 9120 Faslodex, per 50 mg $44.25 137,078 6,065,702
injection.
C9121........................... 9121 Argatroban, per 5 $3.60 50,000 180,000
mg.
C9200........................... 9200 Orcel, per 36 cm2.. $286.80 1,000 286,800
C9203........................... 9203 Perflexane lipid $36.00 82,400 2,966,400
microspheres, per
single use vial.
J2324........................... 9114 Nesiritide, per 0.5 $36.48 60,000 2,188,800
mg vial.
J3315........................... 9122 Triptorelin $104.90 219,600 23,036,040
pamoate, per 3.75
mg.
J3487........................... 9115 Zoledronic acid, 1 $51.38 539,000 27,693,820
mg.
C9204........................... 9204 Ziprasidone $10.50 117,143 1,230,000
mesylate, per 20
mg.
C9205........................... 9205 Oxaliplatin, per 5 $23.86 280,756 6,698,845
mg.

----------------------------------------------------------------------------------------------------------------
2004
HCPCS APC Description 2004 estimated anticipated
utilization payment
----------------------------------------------------------------------------------------------------------------
......... Existing Pass-
through Devices
C1783........................... 1783 Ocular implant, .............. 323 159,756
aqueous drainage
assist device.
C1814........................... 1814 Retinal tamponade .............. 35106 13,649,018
device, silicone
oil.
C1884........................... 1884 Embolization .............. 25000 38,601,544
Protective System.
C1888........................... 1888 Catheter, ablation, .............. 214 129,128
non-cardiac,
endovascular
(implantable).
C1900........................... 1900 Lead, left .............. 2091 2,814,528
ventricular
coronary venous
system.
C2614........................... 2614 Probe, percutaneous .............. 899 1,748,555
lumbar discectomy.
C2632........................... 2632 Brachytherapy .............. 225 1,890,000
solution, iodine-
125, per mCi.
C1818........................... 1818 Integrated .............. 4 27,800
keratoprosthesis.
----------------------------------------------------------------------------------------------------------------

V. Payment for Devices

A. Pass-Through Devices

Section 1833(t)(6)(B)(iii) of the Act requires that a category of
devices be eligible for transitional pass-through payments for at least
2, but not more than 3, years. This period begins with the first date
on which a transitional pass-through payment is made for any medical
device that is described by the category. We propose that two device
categories currently in effect would expire effective January 1, 2004.
Our proposed payment methodology for devices that have been paid by
means of pass-through categories, and for which pass-through status
would expire effective January 1, 2004, is discussed in the section
below.
Although the device category codes became effective April 1, 2001,
most of the item-specific ``C'' codes for pass-through devices that
were crosswalked to the new category codes were approved for pass-
through payment in CY 2000 and as of January 1, 2001. (The crosswalk
for item-specific ``C'' codes to category codes was issued in
Transmittals A-01-41 and A-01-97). We based the expiration dates for
the category codes listed in Table 13, on when a category was first
created, or when the item-specific devices that are described by, and
included in, the initial categories were first paid as pass-through
devices, before the implementation of device categories. These proposed
device category expiration dates are listed in Table 13. We propose to
base the expiration date for a device category on the earliest
effective date of pass-through payment status of the devices that
populate that category. There are two categories for devices that will
have been eligible for pass-through payments for over 2 1/2 years as of
December 31, 2003, and we propose that they would not be eligible for
pass-through payments effective January 1, 2004. The two categories we
propose for expiration are C1765 and C2618, as indicated in Table 13.
Each category includes devices for which pass-through payment was first
made under OPPS in 2000 or 2001.
A comprehensive list of all pass-through device categories
effective on or before July 2003 is displayed in Table 13. Also
displayed are the dates the devices described by the category were
populated and their respective proposed expiration dates.
The methodology used to base expiration of a device category is the
same as that used to determine the 95 initial categories that expired
as of January 1, 2003. A list including those 95 categories that
expired as of January 1, 2003 (as well as 5 categories that continue to
be paid in 2003) is found in the November 1, 2002 final rule (67 FR
66761 through 66763).

Table 13.--List of Current Pass-Through Device Categories With Proposed Expiration Dates
----------------------------------------------------------------------------------------------------------------
Category long Date(s) Expiration
HCPCS codes descriptor populated date
----------------------------------------------------------------------------------------------------------------
C1765................ Adhesion Barrier..... 10/1/00-3/31/ 12/31/03
01; 7/1/01
C2618................ Probe, cryoblation... 4/1/01 12/31/03
C1888................ Catheter, ablation, 7/1/02 12/31/04
non-cardiac,
endovascular
(implantable).
C1900................ Lead, left 7/1/02 12/31/04
ventricular coronary
venous system.
C1783................ Ocular implant, 7/1/02 12/31/04
aqueous drainage
assist device.

[[Page 47994]]

C1884................ Embolization 1/1/03 12/31/04
protective system.
C2614................ Probe, percutaneous 1/1/03 12/31/04
lumbar discectomy.
C2632................ Brachytherapy 1/1/03 12/31/04
solution, iodine-
125, per mCi.
C1814................ Retinal tamponade 4/1/03 12/31/05
device, silicone oil.
C1818................ Integrated 7/1/03 12/31/05
keratoprosthesis.
----------------------------------------------------------------------------------------------------------------

The methodology that we propose to use to package pass-through
device costs is consistent with the packaging methodology that we
describe in section II.B.5. For the codes in APCs displayed in Table
10, we propose to use only those claims on which the hospital included
the ``C'' code and to discard the claims on which no ``C'' code is
billed.
We propose to limit our analysis to the claims with ``C'' codes
because we are not confident that the claims for the relevant APCs
include the charges for the devices unless the ``C'' codes are
specifically billed.
To calculate the total cost for a service on a per-service basis,
we included all charges billed with the service in a revenue center in
addition to packaged HCPCS codes with status indicator ``N.'' We also
packaged the costs of devices that we propose would no longer be
eligible for pass-through payment in 2004 into the HCPCS codes with
which the devices were billed.

B. Expiration of Transitional Pass-Through Payments in CY 2004

In the November 1, 2002 final rule, we established a policy for
payment of devices included in pass-through categories that are due to
expire (67 FR 66763). We stated that we would package the costs of the
devices no longer eligible for pass-through payments in 2003 into the
costs of the procedures with which the devices were billed in 2001.
There were very few exceptions to the policy (for example,
brachytherapy seed for other than prostate brachytherapy), and we
propose to continue this policy. Therefore, we propose that the payment
for the devices that populate C1765 and C2618, which we propose will
cease to be eligible for pass-through payment on January 1, 2004, would
be made as part of the payment for the APCs with which they are billed.

C. Other Policy Issues Relating to Pass-Through Device Categories

Reducing Transitional Pass-Through Payments To Offset Costs Packaged
Into APC Groups
In the November 30, 2001 final rule, we explained the methodology
we used to estimate the portion of each APC rate that could reasonably
be attributed to the cost of associated devices that are eligible for
pass-through payments (66 FR 59904). Beginning with the implementation
of the 2002 OPPS update (April 1, 2002), we deduct from the pass-
through payments for the identified devices an amount that offsets the
portion of the APC payment amount that we determine is associated with
the device, as required by section 1833(t)(6)(D)(ii) of the Act. In the
November 1, 2002 final rule, we published the applicable offset amounts
for 2003 (67 FR 66801).
For the 2002 and 2003 OPPS updates, we estimated the portion of
each APC rate that could reasonably be attributed to the cost of an
associated pass-through device that is eligible for pass-through
payment using claims data from the period used for recalibration of the
APC rates. Using these claims, we calculated a median cost for every
APC without packaging the costs of associated ``C'' codes for device
categories that were billed with the APC. We then calculated a median
cost for every APC with the costs of associated device category ``C''
codes that were billed with the APC packaged into the median. Comparing
the median APC cost minus device packaging to the median APC cost
including device packaging enables us to determine the percentage of
the median APC cost that is attributable to associated pass-through
devices. By applying these percentages to the median APC costs, we
determined the applicable offset amount. We included any APC on the
offset list for which the device cost was at least 1 percent of the
APC's cost.
As we discussed in our November 1, 2002 final rule (67 FR 66801),
the listed offsets are those that may potentially be used because we do
not know which procedures would be billed with newly created
categories.
After publication of the November 1, 2002 final rule, we received a
comment indicating that in some cases it may be inappropriate to apply
an offset to a new device category because the device category is not
replacing any device whose costs have been packaged into the APC. We
agree with this comment. Therefore, we propose to modify our policy for
applying offsets. Specifically, we would apply an offset to a new
device category only when we can determine that an APC contains costs
associated with the device. At this time, we propose to continue our
existing methodology for determining the offset amount, described
above. However, we solicit comments for alternative methodologies for
determining the offset amounts that potentially could be applied to the
payment amounts for new device categories.
We can use this methodology to establish the device offset amounts
for the 2004 OPPS because we are using 2002 claims on which device
codes are reported. However, for the 2005 update to OPPS, we would use
2003 claims that would not include device coding. Thus, for 2005, we
are considering whether or not to use the charges from lines on the
claim having no HCPCS code but have charges under revenue codes 272,
275, 276, 278, 279, 280, 289, and 624 as proxies for the device charges
that would have been billed with HCPCS codes for these devices in
previous years. We are also considering the reinstitution of the ``C''
codes for expired device categories and requiring hospitals to use one
or more newly created ``C'' codes for identification of devices and
costs on claims. See section VI.B of this proposed rule for further
discussion.
We propose to review each new device category on a case-by-case
basis to determine whether device costs associated with the new
category are packaged into the existing APC structure.
We reviewed the device categories eligible for continuing pass-
through payment in 2004 to determine whether the costs associated with
the device

[[Page 47995]]

categories are packaged into the existing APCs. For the categories
existing as of publication of this proposed rule, we have determined
that there are no close or identifiable costs associated with the
devices in our data related to the respective APCs that are normally
billed with those devices. Therefore, for these categories we are
proposing to set the offset to $0 for 2004.
If we create a new device category and determine that our data
contain identifiable costs associated with the devices in any APC, we
would apply an offset. We propose, if any offsets apply, for new
categories, to announce the offsets in the program memorandum that
announces the information regarding the new category.

VI. Payment for Drugs, Biologicals, Radiopharmaceutical Agents, Blood,
and Blood Products

A. Pass-Through Drugs and Biologicals

Section 1833(t)(6)(D)(i) of the Act requires us to make
transitional pass-through payment for new drugs equal to the amount by
which 95 percent of the average wholesale price (AWP) of the drug
exceeds the proposed payment rate. In the past, we have used the AWP
published in the Red Book to determine payment amounts for pass-through
drugs as we explain in the correction notice issued on February 10,
2003 (68 FR 6637). However, we are concerned about the extent to which
Medicare pays more for drugs than other payers and more than the
market-based price of drugs. To address this problem of how to pay
appropriately for drugs that are priced using the AWP, we are
developing regulations that would revise the current payment
methodology for part B covered drugs paid under section 1842(o) of the
Act. When the AWP regulations are made final, we propose to adopt and
apply the provisions of the final AWP rule to establish the AWP of
pass-through drugs payable under the OPPS. If implementation of the AWP
final rule necessitates mid-year changes in the 2004 OPPS payment rates
for pass-through drugs, we propose to make those changes on a
prospective payment basis through our regular OPPS PM and PRICER
quarterly updates. We further propose to issue instructions by program
memorandum regarding implementation of the provisions of the AWP final
rule to set payment rates for pass-through drugs under the OPPS.
An AWP final rule could be published before 2004. However, if the
AWP final rule is not issued in time to permit us to apply its
provisions to price pass-through drugs furnished on or after January 1,
2004, we propose to use 95 percent of the AWP listed in the most recent
quarterly update of the Single Drug Pricer (SDP). In the past, we have
relied solely on the Red Book to determine the AWP for a pass-through
drug, as we explain in the correction notice issued on February 10,
2003 (68 FR 6637). However, on January 1, 2003, we introduced for the
first time a single pricing source for approximately 400 drugs and
biologicals for which the Medicare payment allowance is based on 95
percent of their AWP. We established the SDP to address apparent
discrepancies in drug pricing that were the unintended result of
delegating calculation of AWP to multiple contractors, whose
application of the pricing methodology established under 42 CFR 405.517
sometimes varied. The SDP continues to rely on published compilations
such as the Red Book and First Data Bank to identify wholesale drug
prices. However, using the SDP enables us to establish a uniform
Medicare payment allowance for drugs whose payment is based on 95
percent of their AWP, which results in greater consistency in Medicare
drug pricing nationally. If a drug with pass-through status is not
included in the SDP, we propose to forward to the SDP contractor the
AWP information submitted as part of the pass-through application.
Because the January SDP would not be available in time, we propose
to announce the January 1, 2004 prices for pass-through drugs in our
January 2004 OPPS implementing instructions to fiscal intermediaries
and in the January 2004 OPPS PRICER rather than in the 2004 final rule,
which is to be published in the Federal Register by November 1, 2003.
We further propose to update the AWP for pass-through drugs paid under
the OPPS on a quarterly basis in accordance with the quarterly updates
of the SDP. The updated rates for pass-through drugs and biologicals
would also be issued through our quarterly OPPS program memoranda and
PRICER updates.
Additional information regarding the SDP can be found on the CMS
Web site in Program Memorandum AB-02-174, issued December 3, 2002.

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

1. Background
Under the OPPS, we currently pay for radiopharmaceuticals, drugs,
and biologicals including blood, and blood products, which do not have
pass-through status, in one of three ways: packaged payment, separate
payment (individual APCs), and reasonable cost. As we explained in the
April 7, 2000 final rule (65 FR 18450), we generally package the cost
of drugs and radiopharmaceuticals into the APC payment rate for the
procedure or treatment with which the products are usually furnished.
Hospitals do not receive separate payment from Medicare for packaged
items and supplies, and hospitals may not bill beneficiaries separately
for any such packaged items and supplies whose costs are recognized and
paid for within the national OPPS payment rate for the associated
procedure or service. (Transmittal A-01-133, a Program Memorandum
issued to Intermediaries on November 20, 2001, explains in greater
detail the rules regarding separate payment for packaged services). As
we explained in the November 1, 2002 final rule (67 FR 66757), we do
not classify diagnostic and therapeutic radiopharmaceutical agents as
drugs or biologicals as described in section 1861(t) of the Act.
Packaging costs into a single aggregate payment for a service,
procedure, or episode of care is a fundamental principle that
distinguishes a prospective payment system from a fee schedule. In
general, packaging the costs of items and services into the payment for
the primary procedure or service with which they are associated
encourages hospital efficiencies and also enables hospitals to manage
their resources with maximum flexibility. Notwithstanding our
commitment to package as many costs as possible, we are aware that
packaging payments for certain drugs and radiopharmaceuticals,
especially those that are particularly expensive or rarely used, might
result in insufficient payments to hospitals, which could adversely
affect beneficiary access to medically necessary services.
As discussed in the November 1, 2002 final rule (67 FR 66774), we
packaged payment for drugs and radiopharmaceuticals into the APCs with
which they were billed if the median cost per line for the drug or
radiopharmaceutical was less than $150, and we established a separate
APC payment for drugs and radiopharmaceuticals for which the median
cost per line exceeded than $150. This supported our general view that
payment for drugs and radiopharmaceuticals should be made as part of
the payment for the services in which they are used in order to
encourage efficient purchase and use of drugs and radiopharmaceuticals
provided in the hospital outpatient department.

[[Page 47996]]

Payment Rates for 2003

To limit the dramatic reduction in payment rates for many of the
separately payable drugs and radiopharmaceuticals from 2002 to 2003, we
limited the decrease in their median costs from 2002 median costs to 15
percent plus half of the difference between the total proposed
reduction and 15 percent reduction. (For example, for a drug whose cost
decreased by 35 percent from the applicable 2002 median cost, the
allowed reduction from 2002 to 2003 was 15 percent plus (\1/2\ times
35-15) percent = 25 percent.) For each blood and blood product, we
provide separate payment in an individual APC and limited any decrease
in payment rate from 2002 to 2003 to 15 percent. In 2003, we also
excluded from OPPS certain vaccines and orphan drugs (that met our
orphan criteria) and paid for these items at reasonable cost. Our
intent in implementing these policies was to avoid adversely affecting
beneficiary access to needed treatment.

Drugs for Which We Propose Pass-Through Status Will Expire in 2004

Section 1833(t)(6)(C)(i) of the Act specifies that the duration of
transitional pass-through payments for drugs and biologicals must be no
less than 2 years nor any longer than 3 years. The drugs that are due
to expire December 31, 2003 meet that criterion. Table 14 lists the
drugs and biologicals for which we propose pass-through status will
expire on December 31, 2003.

Table 14.--Proposed List of Drugs and Biologicals for Which Pass-Through Status Expires CY 2004
----------------------------------------------------------------------------------------------------------------
Proposed pass-
through
HCPCS APC Long descriptor Trade name Expiration
date
----------------------------------------------------------------------------------------------------------------
A9700............................... 9016 Injection, Optison (single 12-31-03
Octafluoropropane, per source).
3 ml.
J0587............................... 9018 Injection, Botulinum Myobloc (single 12-31-03
toxin, type B, per 100 source).
units.
J0637............................... 9019 Injection, Caspofungin Cancidas (single 12-31-03
acetate, 5 mg. source).
J7517............................... 9015 Mycophenolate mofetil, CellCept (single 12-31-03
oral per 250 mg. source).
J9010............................... 9110 Injection, Alemtuzumab, Campath (single 12-31-03
per 10 mg. source).
J9017............................... 9012 Injection, Arsenic Trisenox (single 12-31-03
trioxide, per 1 mg. source).
J9219............................... 7051 Implant, Leuprolide Viadur (single source) 12-31-03
acetate, per 65 mg
implant.
C9201............................... 9201 Dermagraft, per 37.5 Dermagraft (single 12-31-03
sq. centimeters. source).
----------------------------------------------------------------------------------------------------------------

2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
To the maximum extent possible, our intention is to package into
the APC payment the costs of any items and supplies that are furnished
with an outpatient procedure. We considered several options for
packaging in 2004 and propose the following policy:
For 2004, we propose to continue with our policy of paying
separately for drugs and radiopharmaceuticals whose median cost per day
exceeds $150 and packaging the cost of drugs and radiopharmaceuticals
with median cost per day of less than $150 into the procedures with
which they are billed.
As discussed in the November 1, 2002 final rule, we received
several comments on our methodology of analyzing single line items on
drug claims for the 2003 OPPS (67 FR 66772). Commenters stated that our
methodology was not consistent with how hospitals bill for certain
drugs, biologicals, and radiopharmaceuticals. They believe that this
inconsistency affected whether or not a drug, biological, or
radiopharmaceutical fell below the $150 median cost per line threshold.
Commenters claimed that we incorrectly assumed ``that a single
administration of a drug was billed as a single line item on a claim.''
These commenters alleged that hospitals often bill for certain drugs
administered during a single patient encounter using multiple lines on
a claim. For example, if 10 units of a drug were administered at a cost
of $100 but the hospital billed 2 line items of 5 units at a cost of
$50 each, then a methodology that determines median costs on a per line
basis would incorporate 2 line items at $50 when the real cost was one
line item at $100. If a significant percentage of administrations for
this drug was billed in this manner, it would result in median costs
that underestimate the true cost of the drug. We agree with this
comment. Therefore, we propose to change our packaging methodology to
account for such hospital billing practices.
We calculated the median cost per day using claims data from April
1, 2002 to December 31, 2002 for all drugs and radiopharmaceuticals
paid under the OPPS that had a HCPCS code during this time period
including drugs for which transitional pass-through payment ended on
January 1, 2003. Although we included orphan drugs in this methodology,
we discuss them separately below. We excluded from these calculations
vaccines and blood and blood products that are discussed below. In
order to calculate the median cost per day for the drugs, biologicals,
and radiopharmaceuticals, we took the following steps:
[sbull] After application of the cost-to-charge ratios, we
aggregated all line items for a single date of service on a single
claim for each drug or radiopharmaceutical. This resulted in creating a
single line item with the total number of units and the total cost of a
drug or radiopharmaceutical given to a patient in a single day.
[sbull] A separate record was then created for each drug or
radiopharmaceutical by date of service, regardless of the number of
lines the drug or radiopharmaceutical was billed in each claim. For
example, drug X is billed on a claim with two different dates of
service, and for each date of service, the drug is billed on 2 line
items with costs of $10 and 5 units in each line item. In this case,
the computer program would have created two records for this drug, and
each record would have a total cost of $20 and 10 units.
[sbull] For each record created for a drug or radiopharmaceutical,
the cost per unit of the drug was calculated. If drug X's descriptor is
``per 1 mg'' and one record was created for a total of 10 mg (as
indicated by the total number of units for the drug on the claim for
each unique date of service), then the computer program divided the
total cost for the record by 10 to give a per unit cost. This unit cost
was then weighted by the total number of units in the record. This was
done by generating a number of line items equivalent to the number of
units in that particular claim. Thus, a claim with 100 units and a
total cost of $200 would be given 100 line items each with a cost of $2
while a

[[Page 47997]]

claim of 50 units with a cost of $50 would be given 50 line items each
with a cost of $1.
[sbull] The unit records with cost per unit greater or less than 3
standard deviations from the geometric mean were then trimmed.
[sbull] The remaining unit observations were arrayed and the median
cost per unit of the drug or radiopharmaceutical was established.
[sbull] Next, the total number of units billed on all claims for
the drug or radiopharmaceutical was divided by the total number of
unique per-day records for the drug or radiopharmaceutical to arrive at
an average number of units per day.
[sbull] The average number of units per day for each drug or
radiopharmaceutical was then multiplied by the median cost per unit to
arrive at its ``median cost'' per day.
[sbull] We then arrayed the median cost per day for all drugs and
radiopharmaceuticals in ascending order and examined the distribution.
Many commenters have alleged that hospitals do not accurately bill
the number of units for drugs and radiopharmaceuticals. Because this
methodology assumes that hospitals bill the number of units accurately,
we compared the median cost per day obtained by the above methodology
with the median cost per day derived as follows: We aggregated line
items as above and created records for each drug and
radiopharmaceutical based on date of service. However, instead of
calculating costs on a per-unit basis, we simply reduced total charges
to total costs for each record and determined the median. This
methodology assumes that hospitals record charges more accurately than
units. We believed that calculating median costs using the second
methodology would address the concerns of commenters and would help us
determine whether our median cost per unit calculation accurately
reflected the costs of drugs and radiopharmaceuticals.
In most cases, the median costs determined by the two methodologies
were similar. Based on this comparison, we believe that calculating
median costs per unit accurately reflects the actual cost of the drug
or radiopharmaceutical. Furthermore, given the wide variability of
doses used for many drugs, we believe that it is important to pay on a
``per unit'' basis for separately payable drugs and
radiopharmaceuticals. For example, many chemotherapy agents are dosed
based on both body area and frequency of administration. Thus, a
patient with a body area of 2 m squared could receive 600 mg of a drug
every 3 weeks, 400 mg every 2 weeks, or 200 mg every week depending on
the chemotherapy regimen.
Based on our analyses, we believe that it is reasonable to continue
our current policy of packaging drugs and radiopharmaceuticals with a
median cost of less than $150 per day. This means that approximately 52
percent of the drugs and radiopharmaceuticals will be packaged and 48
percent of the drugs and radiopharmaceuticals will be paid separately.
We noticed that several drugs and radiopharmaceuticals with median
cost per line that were under $150 for the 2003 OPPS have median costs
per day that are equal to or greater than $150 based on the data used
for the 2004 OPPS. For some other drugs and radiopharmaceuticals, we
saw that their median costs per line were equal to or greater than $150
for 2003 OPPS; however, using the 2002 data, their median costs per day
fell below $150. These shifts from 2003 to 2004 would affect packaging
decisions for a number of drugs.
Given that these variations exist, we propose to provide an
exception in 2004 to the packaging rule for drugs and
radiopharmaceuticals whose payment status would change as a result of
using newer data and a different methodology. As we explain elsewhere
in this proposed rule, we expect to use additional 2002 claims data for
the establishment of our final policies for CY 2004. Based on this
additional data and comments from the public, we intend to re-evaluate
whether to package or pay separately for drugs for which the per-day
median cost would cross the threshold from 2003 to 2004. For 2004, we
propose that:
[sbull] Currently packaged drugs and radiopharmaceuticals with
median costs per day that are at or above $150 would receive separate
payment in 2004.
[sbull] Currently separately payable drugs and radiopharmaceuticals
with median costs per day that are under $150 would continue to receive
separate payment in CY 2004.
[sbull] Drugs whose pass-through status would expire on December
31, 2003, and whose median costs per day are under $150 would receive
separate payment in 2004.
[sbull] Currently packaged drugs and radiopharmaceuticals with
median costs per day below $150 would remain packaged in 2004.
We request comments on the methodology we used to determine the
median cost per day, on the threshold we propose to use for packaging
drugs and radiopharmaceuticals, and on the proposal to pay separately
for drugs and radiopharmaceuticals whose payment status would change
based on use of recent claims data and our proposed methodology.
Although in the future we expect to expand packaging the costs of
drugs and radiopharmaceuticals into the APCs for the services with
which they are billed, we request comments on alternatives to
packaging.
3. Payment for Drugs, Biologicals, and Radiopharmaceuticals That Are
Not Packaged
For the 2003 OPPS, the APC payment rate for separately payable
drugs and radiopharmaceuticals with status indicator ``K'' is based on
a relative weight calculated in the same way that the relative weights
for procedural APCs are calculated. As with procedural APCs, we
observed a decrease in the proposed payment rates for many separately
payable drugs and radiopharmaceuticals; therefore, we dampened the
payment reduction for APCs whose median costs decreased by more than 15
percent from 2002 to 2003.
In order to establish payment rates for separately payable drugs
and radiopharmaceuticals for the 2004 OPPS, we first determined each
drug's and radiopharmaceutical's median cost as described above. When
we compared the median cost per unit used for determining the 2003
payment rate (for example, the true or dampened median cost) for
separately payable drugs and radiopharmaceuticals with their 2004
median cost per unit, we found fluctuations in costs from 2003 to 2004.
CY 2004 median costs decreased more than 15 percent from the
corresponding 2003 median cost for many of the separately payable drugs
and radiopharmaceuticals. Many of these decreases affected low-volume
drugs and radiopharmaceuticals and may be the result of inaccurate
coding. Similarly, the 2004 median costs increased by more than 15
percent from the corresponding 2003 median cost for approximately 12
(mostly low volume) drugs and radiopharmaceuticals. For many of the
high-volume, separately payable drugs and radiopharmaceuticals, the
2004 median costs increased or decreased by less than 15 percent as
compared to the corresponding 2003 median cost. We solicit comments
concerning the reasons for the fluctuations in median costs from 2003
to 2004. We are interested in determining whether these fluctuations
reflect changes in the market prices of these drugs and
radiopharmaceuticals or problems in the hospital claims data (for
example, inaccurate coding, improper

[[Page 47998]]

charges) that we use for setting payment rates.
We considered several options to address the fluctuations in median
costs for separately payable drugs and radiopharmaceuticals. One option
was to base payment on our 2002 claims data without modification. A
second option was to adopt for 2004 the same methodology that we used
to moderate payment decreases in 2003.
A third option was to create drug and radiopharmaceutical cost
bands for separately payable drugs and radiopharmaceuticals (for
example, all drugs with median costs per unit of $60.01 to $70 would be
assigned a proxy median of $70), which would be based on their median
costs calculated using 2002 claims data. We considered adopting two
sets of cost bands: one for separately payable drugs and biologicals
other than radiopharmaceutical agents and one for separately payable
radiopharmaceutical agents. The cost bands for drugs and
radiopharmaceuticals would be assigned based solely on cost, with no
consideration given to the therapeutic use or chemical composition of
the drug.
When we applied the dampening methodology used for the 2003 OPPS to
drugs and radiopharmaceuticals that will be separately payable in 2004,
we observed that this methodology did not sufficiently limit payment
reductions for many of the drugs and radiopharmaceuticals with large
decreases in median cost from 2003 to 2004. Therefore, a fourth option
that we considered and are proposing for 2004 is a variation of the
methodology used for the 2003 OPPS. For separately payable drugs and
radiopharmaceuticals whose 2004 median costs decreased by more than 15
percent from the applicable 2003 median cost, we propose to limit the
reduction in median costs to one fourth of the difference between the
value derived from claims data and a 15 percent reduction (for example,
for a drug whose cost decreased by 35 percent from the applicable 2003
median cost, the allowed reduction from 2003 to 2004 would be 15
percent + (\1/4\ times 35-15) percent = 20 percent). For separately
payable drugs and radiopharmaceuticals whose median costs decreased by
less than 15 percent from 2003 to 2004, we propose to establish their
payment rates using the median costs derived from the 2002 claims data.
We believe that it is appropriate to determine payment rates based on
our claims data where those data show the cost of drugs and
radiopharmaceuticals to be stable over 2 years. In cases where costs
show significant fluctuation, we believe it is appropriate to mitigate
the potential for underpayment. We believe our proposal bases payment
rates on our claims data as required by statute and addresses the
potential for making underpayments. However, based on more complete
claims data we expect to have for the final rule and on the comments
from the public, we will re-evaluate the appropriateness of adjusting
median costs for drugs for which median costs would decline in 2004.
We also propose a separate payment policy, which is described
below, for drugs, biologicals, and radiopharmaceuticals that have
generic alternatives approved by the Food and Drug Administration (FDA)
between October 2001 and December 2002.
We solicit comment on both our proposed methodology and payment
rates for separately payable drugs and radiopharmaceuticals for 2004.
Commenters who disagree with the proposed rate for a drug or
radiopharmaceutical should submit verifiable information that shows our
payment rate does not reflect the price that is widely available to the
hospital market. Thus, information should demonstrate actual, market-
based pricing of drugs and radiopharmaceuticals and should be prices at
which a broadly based, national sample of hospitals are routinely able
to procure the drug or radiopharmaceutical. We do not consider the
published average wholesale price (AWP) for a drug to be an indication
of its market-based price.
4. Proposed Payment Methodology for Drug Administration
Currently, payment for drug administration is made separately using
HCPCS codes Q0081, Q0083, Q0084, Q0085, 90782, 90783, 90784, and 90788
with certain drugs packaged into the median cost for administration.
The amount packaged should reflect the costs of the packaged drugs in
relation to the frequency with which they are administered. Each of
these codes is to be reported once per visit no matter how many drugs
are administered. When a hospital administers only packaged drug(s),
the appropriate HCPCS code is reported once and no separate payment is
made for the drugs. When a hospital administers only separately payable
drug(s) the appropriate HCPCS code is reported once; in addition,
separate payment is made for the drugs. Because the payment for
administration includes payment for packaged drugs, a hospital receives
inappropriate reimbursement every time it administers a separately
payable drug.
In order to facilitate accurate payments for drugs and drug
administration, we are considering whether to make several changes in
our current payment policy with regard to payment for Q0081, Q0083,
Q0084, and Q0085. We are not considering changes to payment policy for
HCPCS codes 90782, 90783, 90784, and 90788 at this time, although we
are interested in receiving comments regarding payment for these codes.
We are proposing to continue our current policy of packaging drugs
and radiopharmaceuticals that cost less than $150 per episode of care
into the APC with which they are associated (for example, nuclear
medicine scans, drug administration).
We are considering whether and how to make different payments to
hospitals for administration of packaged drugs and administration of
unpackaged drugs. We would like to ensure that when a hospital
administers a separately paid drug, it would receive payment for the
drug and the drug administration, but not for any drugs packaged into
the administration. We also would like to ensure that the payments that
are made for administration of packaged drugs are appropriate for the
costs of the drugs as well as the cost of the administration.
In order to achieve the above objectives, we considered several
coding and payment options and analyzed our claims data for the period
April 1, 2002 through December 31, 2002.
Summary of Findings and Alternatives
As explained in greater detail below, we carefully examined data
for administration of packaged and separately paid drugs billed under
Q0081, Q0083, Q0084 and Q0085. We found that the data showed that
paying based on a median cost for the APC for each of the current four
codes generally results in underpayment when packaged drugs are billed
on the claim and overpayment when separately paid drugs are billed on
the claim. In the sections that follow, we discuss our data analysis in
detail. We also discuss four alternatives to the current codes and APC
payments in detail. In summary, those alternatives are:
1. Maintain the current codes and APCs with payments based on the
median costs of all claims in the APC.
2. Eliminate the four current codes and create eight new codes to
enable hospitals to report that they administered a packaged drug or a
separately paid drug. We would pay a different APC amount for each of
the

[[Page 47999]]

eight new codes. The new code descriptors would parallel those of the
current codes. This would retain the concept of using one code rather
than two when both ``infusion'' and administration of chemotherapy by
``other than infusion'' occurred (as exists under the current codes).
Coders would have to look up the drugs administered to know which code
to bill.
3. Eliminate the four current codes and create six new codes to
enable hospitals to report that they administered a packaged drug or
separately paid drug and pay a different APC amount for each of the six
new codes. In this option, no code equivalent to Q0085 would exist.
Therefore, when administering chemotherapy by ``infusion'' or ``other
than infusion,'' hospitals would report two codes, one for
administration by ``infusion'' and one for administration by ``other
than infusion.'' This would eliminate the need to use one code when
both infusion and another method of administration of chemotherapy
occurred. Coders would have to look up the drugs administered to know
which code to bill.
4. Retain three of the current codes (Q0081, Q0083, and Q0084) but
delete Q0085 (infusion and other administration of chemotherapy) and
modify the OCE to use the drugs billed on the claim to assign an APC
for packaged drugs or an APC for separately paid drugs. No drug
administration code could be paid without a drug also being reported on
the claim.
Claims Data Analysis
Using our methodology for creating single procedure claims, we
looked at all single claims for HCPCS codes Q0081, Q0083, Q0084, and
Q0085. We created separate files for each HCPCS code and further
subdivided those into four subgroups for each code. The subgroups were
for the HCPCS code billed (1) without any HCPCS for drugs; (2) with
HCPCS only for packaged drugs; (3) with HCPCS only for separately
payable drugs; and (4) with HCPCS for both packaged and separately
packaged drugs.
We then reviewed the median costs for each of these subgroups and
determined that we could use these subgroups to create two median costs
for each existing administration HCPCS code (Q0081, Q0083, Q0084, and
Q0085). See Table 15 for median cost data for HCPCS subgroups. We used
claims where packaged drugs appeared (subgroups W and X) to create a
median cost for administration of packaged drugs. We used claims
without HCPCS codes for drugs and claims with HCPCS for only separately
payable drugs (subgroups Y and Z) to create a median cost for the
administration of separately payable drugs.
We believe that the resultant median costs accurately reflect the
costs of packaged drugs and the costs of administration of separately
payable drugs. It is obvious that there are significant differences in
median costs of services within the same drug administration code,
depending on whether a packaged or separately paid drug was
administered, the type of drug administered (chemotherapy versus non-
chemotherapy) and the route of administration (infusion versus other
route or both).

Table 15.--Median Costs by Types of Drugs on the Claim
----------------------------------------------------------------------------------------------------------------
Neither With packaged No packaged Both packaged
packaged nor drug but no drug but with drug and
HCPCS Description separate drug separate drug separate drug separate drug
(W) (X) (Y) (Z)
----------------------------------------------------------------------------------------------------------------
Q0081......................... Infusion therapy $104.97 $276.98 $117.89 $231.56
other than
chemo.
Q0083......................... Chemotherapy 35.16 119.88 42.26 188.98
other than
infusion.
Q0084......................... Chemotherapy by 127.34 250.97 159.01 265.46
infusion.
Q0085......................... Chemotherapy by 97.11 154.01 203.43 318.05
both infusion
and other.
----------------------------------------------------------------------------------------------------------------

We then calculated medians for circumstances in which there were
neither packaged nor separately paid drugs on the claim, and there were
no packaged drugs, but there were separately paid drugs on the claim
(both W and Y). We also calculated medians for circumstances in which
there were packaged drugs on the claim (both X and Z). The resultant
medians and the number of claims used to set the medians appear in
Table 16 below with the HCPCS medians for all claims (packaged and
separately paid drugs together).

Table 16.--Numbers of Claims and Medians by Code
----------------------------------------------------------------------------------------------------------------
Number of Median for
Number of Median of claims with no claims with no HCPCS Median
HCPCS code claims with claims with drug or drug or for all claims
packaged drugs packaged drugs separately separately for 2004
paid drug paid drug
----------------------------------------------------------------------------------------------------------------
Q0081........................... 19,116 $274.47 280,939 $107.93 $115.11
Q0083........................... 8,681 125.86 24,710 39.10 48.25
Q0084........................... 34,085 257.57 23,933 142.38 205.70
Q0085........................... 17,749 303.87 3,242 126.55 267.63
----------------------------------------------------------------------------------------------------------------

Review of the data reveals that the median costs for all claims for
Q0081 and Q0083 more closely reflect the median cost of claims where no
drug or only separately payable drugs were on the claim because that
subset of claims represents the vast majority of claims for Q0081 and
Q0083. Therefore, if we do not differentiate payment for Q0081 and
Q0083 based on whether or not a packaged drug was administered, we
would underpay the cases in which a packaged drug was administered. The
opposite is true of Q0084 and Q0085 in which more claims reflect
packaged drugs than separately paid drugs, and, therefore, the claims
with packaged drugs will determine the median cost for the code, thus
overpaying cases in which the drug is separately paid.

[[Page 48000]]

We also examined the mean and median number of drugs billed with
each of the Q codes when only packaged drugs were billed, only
separately paid drugs were billed, and both packaged and separately
payable drugs were billed (see Table 17). With the exception of Q0085,
we believe the data on the number of drugs billed per claim is
consistent with the cost data in Table 15. Again, with the exception of
Q0085, we are confident that the cost of packaged drugs is accurately
reflected in the median cost of the codes for administration of
packaged drugs. We are also confident that the median cost for
administration of separately payable drugs is appropriate.

Table 17.--Numbers of Drugs Billed per Specified Codes
----------------------------------------------------------------------------------------------------------------
Mean number of Median number
Mean number of Median number drugs of drugs
HCPCS drugs of drugs separately separately
packaged packaged paid paid
----------------------------------------------------------------------------------------------------------------
Q0081........................................... 1.05 1 1.01 1
Q0083........................................... 1.77 2 1.02 1
Q0084........................................... 1.68 1 1.10 1
Q0085........................................... 2.33 2 1.19 1
----------------------------------------------------------------------------------------------------------------

We have some concerns about the cost data for Q0085. The cost for
administration of only separately payable drugs is less than the
comparable cost for Q0084 ($126 vs. $142). This is counterintuitive as
Q0085 describes administration of, at minimum, two drugs, while Q0084
describes administration of one or more drugs. These cost data for
Q0085 also raise the concern that proper usage of the code is not
understood by hospitals and, therefore, the data are not being used
properly.
We believe our analysis supports the need for creating different
payment amounts for the administration of packaged drugs and for the
administration of separately payable drugs (and, in the case of Q0081,
the administration of no drug).
While reviewing options for coding and payment for drug
administration we kept five major considerations in mind:
1. Ensuring beneficiary access to drugs.
2. Making accurate payment for both packaged and separately payable
drugs.
3. Collecting sufficient data on drugs and drug administration to
ensure that future policy development in this area will be properly
informed.
4. Facilitating proper coding by hospitals.
5. Avoiding complicated billing rules and hospital burden to the
extent possible.
We thought that three basic coding and payment options were
available:
1. Continuing the current coding structure and payment policy (for
example, a single payment for drug administration per day no matter how
many drugs were administered). (Option 1 below).
2. Creation of new codes and new payment policy to describe drug
administration (for example, different sets of codes for administration
of packaged and separately payable drugs along with allowance for more
than one payment for drug administration per day). (Options 2 and 3
below).
3. Continuation of the current drug administration codes but
creating new payment policy (for example, allowance for more than one
payment for drug administration per day).
After reviewing these three basic options, we developed more fully
four specific options. Under all of these options, hospitals would be
required to bill all drugs using the HCPCS code for the drug.
Moreover, although we have included an expanded option for Q0085
(Chemotherapy by both infusion and other technique) in option 2, and
have retained Q0085 in option 1, we have serious concerns about the
extent to which Q0085 is used correctly and about the extent to which
the data for this code validly reflect the costs of an identifiable
service. Hence, we are particularly interested in comments regarding
whether we should eliminate Q0085. (Option 4 below).
Option 1--Retain the current codes and continue to pay on a per-
visit basis, based on median costs for each code regardless of whether
or not packaged or separately paid drugs are administered.
We would retain the current codes, use all claims for these
services to set a relative weight, and make a single payment based on
the median costs for the code regardless of whether or not packaged or
separately paid drugs are administered. This would result in
significant underpayment for administration of packaged drugs because
the largest volume of claims with this code are either for
administration of no drug (Q0081) or for drugs that are separately paid
(and have no packaged drug costs). See Table 16 for the median costs
determined on the basis of all claims for the existing codes. We would
require hospitals to report HCPCS codes for both packaged and
separately payable drugs in order to inform future policy decisions in
this area.
We do not propose payment amounts for this option because the
budget neutrality scalar would be different under this proposal than
under option 2 (which was used in the scalar and impact analysis).
Option 2--Create eight new drug administration codes to enable
hospitals to report administration of both packaged and separately
payable drugs.
We would create two new sets of HCPCS codes to describe
administration of packaged and separately payable drugs. Each of the
eight codes would have its own APC payment. The descriptions and median
costs for these proposed codes would be as follows:

Table 18.--Median Costs of Proposed G Codes Under Option 2
----------------------------------------------------------------------------------------------------------------
HCPCS 2004 APC 2004 SI Description Median costs
----------------------------------------------------------------------------------------------------------------
GXXX1............................. 0382 S Infusion of packaged non- $274.47
cancer chemotherapy
drug(s), per day.
GXXX3............................. 0376 S Administration of 125.86
packaged cancer
chemotherapy drug(s) by
other than infusion, per
day.

[[Page 48001]]

GXXX4............................. 0378 S Administration of 257.57
packaged cancer
chemotherapy drug(s) by
infusion, per day.
GXXX5............................. 0380 S Administration of 303.87
packaged cancer
chemotherapy drugs by
both infusion and other
than infusion, per day.
GYYY1............................. 0383 S Infusion of separately 107.93
payable non-cancer
chemotherapy drug(s) or
non-drug infusion
therapy, per day.
GYYY3............................. 0377 S Administration of 39.10
separately payable
cancer chemotherapy
drug(s) by other than
infusion, per day.
GYYY4............................. 0379 S Administration of 142.38
separately payable
cancer chemotherapy
drug(s) by infusion, per
day.
GYYY5............................. 0381 S Administration of 126.55
separately payable
cancer chemotherapy
drugs by both infusion
and other than infusion,
per day.
----------------------------------------------------------------------------------------------------------------

The median costs for administration of packaged drugs would be
determined from claims that contain at least one packaged drug and the
median costs for administration of separately payable drugs (or no
drugs in the case of Q0081) would be determined from claims that
contained only separately payable (or no) drugs.
Although payment would not depend on accurate reporting of HCPCS
codes for drugs, we would require hospitals to use HCPCS codes for both
packaged and separately payable drugs in order to ensure that we had
reliable data upon which to base future relative weights for these
services. As described under option 4, we would create six lists of
drugs in order to facilitate proper payment in the future.
Hospitals would report the appropriate code for the type of drug
administered and the route(s) of administration. In this option,
hospitals could bill for administration of both chemotherapy agents and
administration of non-chemotherapy agents (or non-drug infusions). We
would permit a maximum of one chemotherapy and one non-chemotherapy
administration per day.
We are concerned that creation of these codes could require
complicated billing rules and cause burden to hospitals. We would need
to specify how to bill different combinations of route and category of
drug (for example, two infused drugs, one pushed drug, antiemetics, and
hydration). Because hospital billers would have to review both the type
of administration and the type of drug administered to determine the
correct code to bill, we are concerned about the potential for
miscoding (with resultant mispayment) under this option, and we solicit
comments on both of these issues. In some cases, this additional coding
burden might result in less payment for administration (particularly
Q0081).
Under this option, all codes would have a status indicator of S,
and no multiple procedure reductions would apply.
This option is modeled for purposes of the budget neutrality scalar
and the impact analysis (see Table 18).
Option 3--Create six new drug administration codes to enable
hospitals to report administration of both packaged and separately
payable drugs.
This option is similar to option 2 except that we would eliminate
the codes used to describe administration of chemotherapy by both
infusion and other techniques. Where a code is billed with a packaged
drug suitable for the code, we would pay the APC for the packaged drug.
Where both a packaged drug and a separately paid drug were administered
via the same route of administration (and therefore only one code was
billed), we would pay the APC only for the administration of the
packaged drug and would pay separately for the separately paid drug and
would not pay the APC for administration of the separately paid drug.
Under this option, we would allow up to three payments for
administration of drugs or infusions. We would allow one payment for
non-chemotherapy drugs/infusions (for example, antiemetics, fluids),
one payment for chemotherapy administered by infusion, and one payment
for chemotherapy administered by ``other than infusion.'' As stated
above, we would not allow payment for administration of packaged
chemotherapy drugs by infusion and payment for administration of
separately payable chemotherapy by infusion. This coding scheme would
allow us to more accurately recognize the true costs of administering
multiple drugs. For example, there are some economies of scale when
infusing two or more drugs (for example, only one I. V. line needed),
but each drug requires its own mixing and nursing care. This option
would allow up to three payments for administration of drugs or non-
drug infusion, thereby recognizing the unique costs of administering
each drug while not making duplicate payment. In order to ensure that
we do not make duplicate payment for patients receiving chemotherapy
drugs and non-chemotherapy drugs (and/or hydration), we would pay GXXX1
and GYYY1 at 50 percent of their payment when one of these codes is
paid in addition to chemotherapy administration (GXXX3, GXXX4, GYYY3,
and GYYY4). This is because we believe there are economies of scale
achieved for multiple drug administrations and that the additional
resources used to provide non-chemotherapy treatment are minimal.
Following are examples of how payment would be made:
[sbull] When both packaged and separately payable chemotherapy
drugs are infused, we would make payment for GXXX4--Administration of
packaged chemotherapy drugs by infusion and for each separately payable
chemotherapy drug, but we would not make payment for GYYY4--Infusion of
separately payable chemotherapy drugs.
[sbull] When packaged chemotherapy drugs are pushed and infused,
and separately payable chemotherapy drugs are infused, we would make
payment for GXXX3 and GXXX4 and for each separately payable
chemotherapy drug, but we would not make payment for GYYY4.
[sbull] When packaged chemotherapy drugs are infused and pushed;
separately payable chemotherapy drugs are infused and packaged; and
separately payable non-chemotherapy drugs are infused (for example,
antiemetics), and hydration is given; we would make payment for GXXX3,
GXXX4, each separately infused chemotherapy drug, GXXX1, and each
separately payable non-chemotherapy drug. We would not make payment for
GYYY1 or GYYY3. Note that payment for GXXX1 in this case would be made
at 50 percent because it was billed with chemotherapy (if it was billed
without

[[Page 48002]]

chemotherapy, then payment would be made at 100 percent).
Medians for these codes would be as follows:

Table 19.--Median Costs Under Option 3
----------------------------------------------------------------------------------------------------------------
HCPCS 2004 APC 2004 SI Description Median costs
----------------------------------------------------------------------------------------------------------------
GXXX1............................. XXX1 T Infusion of packaged non- $274.47
cancer chemotherapy
drug(s), per day.
GXXX3............................. XXX3 S Administration of 125.86
packaged cancer
chemotherapy drug(s) by
other than infusion, per
day.
GXXX4............................. XXX4 S Administration of 257.57
packaged cancer
chemotherapy drug(s) by
infusion, per day.
GYYY1............................. YYY1 T Infusion of separately 107.93
payable non-cancer
chemotherapy drug(s) or
non-drug infusion
therapy, per day.
GYYY3............................. YYY3 S Administration of 39.10
separately payable
cancer chemotherapy
drug(s) by other than
infusion, per day.
GYYY4............................. YYY4 S Administration of 142.38
separately payable
cancer chemotherapy
drug(s) by infusion, per
day.
----------------------------------------------------------------------------------------------------------------

As modeled, these codes would have status indicator S (except as
described above for GXXX1 and GYYY1).
Similar to option 2, we would require hospitals to report HCPCS
codes for packaged and separately payable drugs to ensure that we have
reliable data upon which to base future relative weights for these
services. As described under option 4, we would create six lists of
drugs in order to facilitate proper coding and payment in the future.
We do not propose payment amounts for this option because the
budget neutrality scalar would be different under this proposal than
under option 2 (which was used in the scalar and impact analysis).
Option 4--Use of codes Q0081, Q0083, and Q0084 and deletion of
Q0085 with creation of logic in the outpatient code editor (OCE) to
enable differential payment for administration of packaged and
separately payable drugs.
This option is similar to option 3 in terms of payment policy.
However, instead of creating six new codes, hospitals would continue to
report codes Q0081, Q0083, Q0084, and the HCPCS codes for all packaged
and separately payable drugs. We would delete Q0085 in order to
simplify hospital reporting and to facilitate creation of payment logic
in the OCE.
We would create six lists of drugs (see Addenda L, M, N, O, P, Q):
packaged chemotherapy agents administered by other than infusion,
separately payable chemotherapy agents administered by other than
infusion, packaged chemotherapy agents administered by infusion,
separately payable chemotherapy agents administered by infusion,
packaged non-chemotherapy agents administered by infusion, and
separately payable non-chemotherapy agents administered by infusion.
These lists would be coded into the OCE, and would be updated quarterly
by program memoranda. We realize that a few drugs may be administered
by both infusion and other techniques. In these lists, we would assign
each drug to its predominant form of administration in a hospital
outpatient setting. If we could not determine whether a drug was
infused or administered by a technique other than infusion (for
example, we receive a claim with Q0083 and Q0084 and two drugs that may
be administered by either infusion or another technique), we would
associate each drug with its predominant administration code.
We would create logic in the OCE that would base payment on the
combination of administration and drug codes on the claim but would
only allow one unit of each administration type as described in option
3. The medians for the APCs to which OCE would assign the codes are
described in Table 20.

Table 20.--Medians for APCS Under Option 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Nonchemo drug,
Nonchemo drug, Chemo drug, separately paid Chemo drug,
Drug administration codes on the packaged list packaged list list or no separately paid Admin APC APC median Applicable
claim (subgroup X) (subgroup W) drug billed list (subgroup addenda
(subgroup Z) Y)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Q0081........................... X ............... ............... ............... A $274.47 L
Q0081........................... ............... ............... X ............... B 107.93 M
Q0083........................... ............... X ............... ............... C 125.86 N
Q0083........................... ............... ............... ............... X D 39.10 O
Q0084........................... ............... X ............... ............... E 257.57 P
Q0084........................... ............... ............... ............... X F 149.38 Q
--------------------------------------------------------------------------------------------------------------------------------------------------------

The payment policy is identical to the policy described in option 3
including the discount for Q0081 when billed with Q0083 and/or Q0084.
Although this option would not require hospitals to change coding of
drug administration it would, unlike options 2 and 3, require accurate
coding of HCPCS codes for drugs in order to ensure proper payment.
Additionally, we would revise the definitions of the administration
codes to ``per day'' instead of ``per visit.''
Similar to option 3, we would make payment for up to three drug
administrations per day, if appropriate. Where a code is billed with a
packaged drug suitable for the code, we would pay the APC for the
packaged drug. Where both a packaged drug and a

[[Page 48003]]

separately paid drug were administered via the same route of
administration (and therefore only one code was billed), we would pay
the APC only for the administration of the packaged drug and would pay
separately for the separately paid drug and would not pay the APC for
administration of the separately paid drug. In no case would we pay for
more than one unit of an administration code.
Under options 2, 3, and 4, we would return a claim to the provider
when a chemotherapy administration code was reported without a HCPCS
code for a chemotherapy drug. Therefore, it is very important that
commenters advise us as to whether there are any cancer chemotherapy
drugs that are not included in Addenda L, M, N, O, P, or Q.
Specifically, we solicit comments as to whether there are any cancer
chemotherapy drugs that do not have HCPCS codes.
We do not propose payment amounts for this option because the
budget neutrality scalar would be different under this proposal than
under option 2 (which was used in the scalar and impact analysis). We
solicit comment on each option described above.
General Billing Instructions
Any previous regulatory or sub-regulatory guidance notwithstanding,
we propose to implement the following billing rules under any of the
above payment options:
(1) Q0081 may not be used to bill separately for the hanging of a
bag of solution for which the sole purpose is to administer
chemotherapy drugs; that charge should be billed as part of the charge
for Q0084 or Q0085.
(2) Q0081 may not be billed when it is an integral part of another
procedure. In those cases, the charge for the procedure should reflect
the costs of the infusion therapy, either as part of the charge for the
HCPCS code or as a revenue code charge (for example, hydration or drug
administration during a surgical procedure performed under general
anesthesia).
(3) Q0081, Q0083, and Q0084 should not be used to bill for the
administration of radiopharmaceuticals that are administered as part of
diagnostic or therapeutic nuclear medicine procedures. In those cases,
the radionucliide should be billed with the appropriate nuclear
medicine HCPCS code.
(4) Q0081, Q0083, and Q0084 may not be used to report the
transfusion of blood, platelets, or any other blood products. Those
transfusions should be reported by use of the appropriate HCPCS code(s)
in APC 0110.
5. Generic Drugs, and Radiopharmaceuticals
In general, hospital acquisition costs for drugs, biologicals, and
radiopharmaceutical agents with generic competitors are lower than the
acquisition costs for sole source or multi-source drugs. In order to
ensure that Medicare recognizes these lower costs in a timely manner,
we are proposing a new method of calculating payment amounts for drugs,
biologicals, and radiopharmaceuticals that are separately paid under
the OPPS and for which the Food and Drug Administration (FDA) has
recently approved generic alternatives when we determine our claims
data do not reflect the costs of the generic alternatives.
Because many hospitals have long term purchasing arrangements for
drugs and radiopharmaceuticals, we believe that there is generally a
12-month lag between the time that generic items are made available and
when our claims data will accurately reflect the costs associated with
the availability of the generic alternative. Therefore, during the
interval between FDA approval of a generic item and the time when we
would reasonably expect claims data to reflect the cost of generic
alternatives, we propose to adopt the following methodology to price
the affected drugs, biologicals, and radiopharmaceuticals under the
OPPS.
We would first identify items approved for generic availability by
the FDA during the 6 months before the first day of the claims period
we would use as the basis for an annual OPPS update. Where we determine
that our claims data do not reflect the costs of generic alternatives
for a separately payable drug, biological, or radiopharmaceutical, we
propose to base our payment rate on 43 percent of the AWP for the drug,
biological, or radiopharmaceutical. As described in the 2003 OPPS rule
(67 FR 66768), the ratio of hospital acquisition cost, on average, to
AWP for multisource drugs with generic competitors equals 0.43. We
believe that using this ratio would allow us to appropriately calculate
the costs that hospitals incur when purchasing generic drugs or
radiopharmaceuticals. When we determine that our claims data accurately
reflect the cost of the generic alternative(s), we would use the claims
data to set payment rates in preference to 43 percent of AWP for the
drug or radiopharmaceutical.
We considered another payment option where we would base our
payment rate on the lower of: (1) The median cost (with dampening if
applicable) based on claims data; or (2) the Federal Supply Schedule
price. We are not proposing this policy because we believe we would not
be able to calculate payment rates that are close to the actual
hospital acquisition costs of generic alternatives since the Federal
Supply Schedule represents prices that are lower than the prices paid
by most hospitals. Also, median costs from the claims data would not
reflect the actual cost of generics because of the time lag described
above.
To apply this payment methodology to the 2004 OPPS update, we
reviewed FDA approvals for generic drugs, biologicals, and
radiopharmaceuticals issued between October 2001 and December 2002. We
found six drugs, which we propose to be separately paid under the 2004
OPPS that had generic alternatives approved during that time. These
drugs are: Daunorubicin, Bleomycin, Pamidronate, Paclitaxel,
Ifosfomide, and Idarubicin. Table 21 shows the dates when the FDA
approved generic alternatives for these drugs.
We understand that there is a wide range of utilization for these
drugs in the OPPS and that price reductions for generic drugs will
depend on their utilization and the types of illnesses for which they
are used. However, we would not expect claims data from April 1, 2002
through December 31, 2002 to reflect fully the availability of the
generic alternatives.
Table 21 shows the median cost for these six drugs as determined by
claims data (with any adjustments for APCs that decreased in median
cost by more than 15 percent from 2003 to 2004) and their costs at 43
percent of AWP as determined under the July 2003 update of the Medicare
Single Drug Pricer.
We solicit comments on this proposed method of calculating payment
for drugs, biologicals, and radiopharmaceuticals for which generic
alternatives have recently been approved. Specifically, we are
interested in comments concerning our proposed methodology for
identifying these items, whether we properly identified all the items,
and whether our proposed payment policy for these generic alternatives
is appropriate.

[[Page 48004]]

Table 21.--Proposed List of Separately Payable OPPS Drugs With Generic Alternatives Approved Between October
2001 and December 2002
----------------------------------------------------------------------------------------------------------------
2004 Median
Date of Generic cost (with
APC Description Approval by the FDA 43% of AWP dampening if
applicable)
----------------------------------------------------------------------------------------------------------------
0832.............................. Idarubicin hcl May 2002............. $190.08 $188.25
injection.
0831.............................. Ifosfomide injection. May 2002............. 68.07 115.46
0863.............................. Paclitaxel injection. May 2002............. 74.27 116.61
0730.............................. Pamidronate disodium. May 2002............. 120.34 184.40
0857.............................. Bleomycin sulfate October 2001......... 130.98 169.28
injection.
0820.............................. Daunorubicin hcl November 2001........ 35.46 89.65
injection.
----------------------------------------------------------------------------------------------------------------

6. Orphan Drugs
In response to last year's proposed rule, many commenters explained
that many orphan drugs were life-saving therapies used solely for the
treatment of rare disorders where no other treatment was available.
They further stated that many of these drugs would be received by very
few Medicare beneficiaries and that if we packaged these drugs into
other procedures, our payment rates would be insufficient to recognize
their high cost, thus impairing the access of beneficiaries who needed
the drugs. These commenters also stated that the claims data we used to
set payment rates for 2003 did not accurately reflect the cost of these
drugs. We shared these concerns, and in the November 1, 2002 final rule
(67 FR 66772), we set forth the following payment policy:
We identified orphan drugs that are used solely for orphan
conditions by applying the following criteria:
[sbull] The drug is designated as an orphan drug by the FDA and
approved by the FDA for treatment of only one or more orphan
condition(s).
[sbull] The current United States Pharmacopoeia Drug Information
(USPDI) shows that the drug has neither an approved use nor an off-
label use for other than the orphan condition(s). Payment for drugs
that met these criteria was made outside of OPPS under reasonable cost.
In that same rule, we identified four orphan drugs (J0205
Injection, alglucerase, per 10 units; J0256 Injection, alpha 1-
proteinase inhibitor, 10 mg; J9300 Gemtuzumab ozogamicin, 5 mg; and
J1785 Injection, imiglucerase, per unit) as meeting these criteria.
Therefore, we excluded them from payment under OPPS and paid for them
at reasonable cost in 2003.
We received several comments in response to the final rule, stating
that we had not identified all drugs that qualified for special payment
as orphans under our criteria. After reviewing these comments, we have
identified 7 additional drugs that meet our criteria. These drugs are:
J2355 Injection, oprelvekin, 5 mg; J3240 Injection, thyrotropin alpha,
0.9 mg; J7513 Daclizumab parenteral, 25 mg; J9015 Aldesleukin, per
vial; J9160 Denileukin diftitox, 300 mcg; J9216 Interferon, gamma 1-b,
3 million units; and Q2019 Injection, basiliximab, 20 mg.
We have now identified a total of 11 drugs that meet our orphan
drug criteria, and we expect to identify more such drugs in the future.
Last year's policy was intended to narrowly target a very small number
of drugs received by very few Medicare beneficiaries in order to ensure
beneficiary access to life saving therapies. The aggregate number of
Medicare beneficiaries who will receive the 11 drugs that meet our
criteria for orphans is significantly higher than the number who
receive the 4 we identified last year. Furthermore, as we identify more
drugs that meet our criteria, we expect the number of beneficiaries who
receive these drugs to grow. As the number of beneficiaries who receive
these drugs increases, so do total payments for the drugs. Therefore,
we no longer believe that paying for these drugs at reasonable cost,
outside of OPPS, is appropriate. Our goal is to pay for as many
hospital outpatient department (OPD) services as possible under the
OPPS system. We believe that any payments made outside of OPPS should
remain relatively small and, as in the case of vaccines, be made
because it is unlikely our claims data will reflect the cost of the
item or service (see discussion of vaccines below).
In the case of orphan drugs, we believe that our claims data for
April 1, 2002 through December 31, 2002 do reflect the cost of orphan
drugs, and we are concerned about the potential of making ever
increasing payments for these drugs outside of the OPPS. Furthermore,
we believe that many of the concerns expressed by commenters would be
addressed if we continue to make separate payment for these drugs.
Therefore, we propose the following payment policy for orphan
drugs:
[sbull] We propose to continue using the same criteria to identify
orphan drugs used solely for an orphan condition under the OPPS.
[sbull] We propose to discontinue retrospective cost payments and
to make prospective payments under the OPPS for those identified orphan
drugs.
[sbull] We propose to base payments on the same methodology we use
to pay for other drugs including any limitation on payment reductions
(as described above).
[sbull] We propose to make separate payment for orphan drugs and
place them in APCs.
We solicit comment on each of these proposals and request that
commenters submit information meeting the same criteria as comments for
other drugs (as discussed above).
7. Vaccines
Outpatient hospital departments administer large amounts of the
vaccines for influenza (flu) and pneumococcal pneumonia (PPV),
typically by participating in immunization programs. In recent years,
the availability and cost of some vaccines (particularly the flu
vaccine) have fluctuated considerably. As discussed in the November 1,
2002 final rule (67 FR 66718), we were advised by providers that OPPS
payment was insufficient to cover the costs of the flu vaccine and that
access of Medicare beneficiaries to flu vaccines might be limited. They
cited the timing of updates to OPPS rates as a major concern. They said
that our update methodology, which uses 2-year-old claims data to
recalibrate payment rates would never be able to take into account
yearly fluctuations in the cost of the flu vaccine. We agreed with this
concern and decided to pay hospitals for influenza and pneumococcal
pneumonia vaccines based on a reasonable cost methodology. As a result
of this change, hospitals, home health agencies (HHAs), and hospices,

[[Page 48005]]

which were paid for these vaccines under OPPS in 2002 are being paid at
reasonable cost for these vaccines in 2003. We are aware that access
concerns continue to exist for these vaccines; therefore, we propose to
continue paying for influenza and pneumococcal pneumonia vaccines under
reasonable cost methodology.
8. Blood and Blood Products
From the onset of the OPPS, we have made separate payment for blood
and blood products in APCs rather than packaging them into payment for
the procedures with which they were administered. As we explained in
the April 7, 2000 final rule (65 FR 18449), wide variations in patient
requirements convinced us that we should pay for these items separately
rather than packaging their costs into the procedural APCs. Moreover,
the Secretary's Advisory Council on Blood Safety and Access recommended
that blood and blood products be paid separately to ensure that we did
not create any incentives that were inconsistent with the promotion of
blood safety and access. Therefore, we propose to continue to pay
separately for blood and blood products.
As described in the November 1, 2002 final rule (67 FR 66773), we
applied a special dampening option to blood and blood products that had
significant reductions in payment rates from 2002 to 2003. For 2003, we
limited the decrease in payment rates for blood and blood products to
approximately 15 percent.
After careful comparison of the 2003 dampened medians with the 2004
medians from our claims data, we believe that establishing payment
rates based on the 2004 median costs would, for many blood and blood
products, result in payments that are significantly lower than hospital
acquisition costs. In order to mitigate any significant payment
reductions and to minimize any compromise in access of beneficiaries to
these products, we propose to limit the decrease in payment rates for
blood and blood products from 2003 to 2004 by approximately 10 percent.
This is different than the amount by which we limited payment
decreases last year because when we applied the dampening methodology
used for the 2003 OPPS to blood and blood products, we observed that it
did not sufficiently limit payment reductions for the blood and blood
products with large decreases in median cost from 2003 to 2004.
Therefore, we are proposing for 2004 a variation of the methodology
used for the 2003 OPPS because we believe that a 10 percent limit in
the decrease in payment rates for blood and blood products would better
reflect hospital acquisition costs, ensure appropriate reimbursement to
hospitals, and enable continued beneficiary access to blood and blood
products.
The list of APCs containing blood and blood products can be found
in the November 1, 2002 final rule (67 FR 66750). We note that the APCs
for these products are intended to make payment for the costs of the
products. Costs for storage and other administrative expenses are
packaged into the APCs for the procedures with which the products are
used.
We solicit comment on this proposal especially from hospitals. We
are especially interested in comments that include verifiable
information about the widely available acquisition cost of commonly
used blood and blood products.
9. Intravenous Immune Globulin
Following publication of the proposed rule on August 9, 2002, we
received comments urging us to reclassify intravenous immune globulin
(IVIG) as a blood product. After carefully reviewing these comments
with our medical advisors, we decided to make final our proposal to
classify immune globulin as a biological, subject to the same payment
policy we implemented for other drugs and biologicals. Our reasons were
set forth in the November 1, 2002 final rule (67 FR 66774). Since
implementation of the 2003 OPPS update, we have received further
comments on this decision. These commenters continue to assert that we
should make special payment provisions for IVIG and reclassify IVIG as
a blood and blood product. They have expressed particular concern about
the potentially negative impact of our payment policy for IVIG on
patient access, especially for those individuals who have primary
immune deficiency diseases.
We appreciate the concerns regarding our decision to pay for IVIG
in accordance with the payment methodology we applied to other drugs
and biologicals in the 2003 update of the OPPS. We have reviewed the
claims data that are the basis for the payment rates in this proposed
rule, and our analysis reveals that IVIG would be separately payable in
2004. The claims data for IVIG are robust, and the most recent claims
data, when compared with claims data used in earlier updates of the
OPPS suggest that hospital costs are consistent and that hospitals are
billing accurately for these products. Therefore, we believe that
payment for these products is appropriate using the methodology we
propose to implement for other drugs and biologicals. Therefore, we
propose to continue to classify IVIG as a biologic. We solicit comments
on this proposal.
10. Drug and Device Coding
We propose to require hospitals to report individual codes for all
drugs and devices used during the episode, including those that are
packaged.
Last year (CY 2003), the pass-through status of many drugs and
devices expired. These drugs and devices were packaged, consistent with
the fundamental principles of a prospective payment system. By
packaging the costs of items and services into the payment for the
primary procedure or service with which they are associated, we
encourage hospital efficiency and provide hospitals with the ability to
manage their resources with maximum flexibility. We believed that an
additional advantage of increased packaging would be that hospitals
would no longer need to report codes for the individual items and
services included in the package. While we continue to support
packaging to the greatest extent possible, the loss of coding
information on claims creates some obstacles to accurate rate-setting.
The data for 2002 that we are using for CY 2004 rate-setting still
have considerable drug and device coding information. However, for the
CY 2005 OPPS update, for which 2003 data would be used, there will be
much less information regarding specific drug and device costs. We do
not expect to have as much Medicare claims information on which to base
certain decisions such as which drugs to remove from packaged status
and pay separately.
This concerns us and has led us to consider the need for drug and
device coding. Even though payment is not directly related to that
information, we believe that reporting the codes may be in hospitals'
best interest because it may result in the most accurate payments. For
example, in setting the weights of certain device-related APCs, we
discovered that the median costs of those APCs were higher when we used
only claims on which the device codes appeared. Similarly, certain drug
administration APCs have higher median costs when separate HCPCS for
drugs are reported on the claims.
If we are to continue to price drugs and devices using up-to-date
median costs from claims data, we need information on the costs of the
items, even when packaged. We propose to require the separate coding of
individual drugs and device categories,

[[Page 48006]]

even where their costs are packaged, to address this need. We would
like comments on whether or not to require coding of devices. We also
solicit comments regarding our proposal to report drug codes on claims
and alternative methods for rate-setting if codes for drugs and/or
devices are no longer present on the claims. We are particularly
interested in receiving comments from hospitals on this proposal.
11. Payment for Split Unit of Blood
Since implementation of the OPPS, we have assigned status indicator
``E'' to HCPCS code P9011, blood (split unit). Status indicator ``E''
designates services for which payment is not allowed under the OPPS or
services that are not covered by Medicare. P9011 was created to
identify situations where one unit of red blood cells or whole blood,
for example, is split and half of the unit is transfused to one patient
and the other half to another patient. Because use of split units is
not uncommon, we propose to change the status indicator for P9011 from
``E'' to ``K'' and assign it to a blood and blood product APC that pays
approximately 50 percent of the payment for the whole unit of blood. We
propose to assign P9010 to APC 0957 (Platelet concentrate) with a
payment rate of $37.30. We invite comments on this proposed change in
the status indicator and payment amount for P9010.
12. Other Issues
We propose to continue our payment policy for Procrit and Aranesp
for calendar year 2004. As explained in detail in the November 1, 2002
final rule (67 FR 66758), Aranesp and Procrit are in separate APCs, and
are paid at equivalent rates with the application of a ratio to convert
the dosage units of Aranesp into units of Procrit. The current
conversion ratio is based on the best information available at the time
we developed the final rule for calendar year 2003. In the final rule,
we explained that we based our conclusion regarding the appropriate
conversion ratio on the FDA labeling for each product and the body of
available clinical evidence contained in published and unpublished
articles and abstracts and in materials provided by the products'
manufacturers. We indicated that we might refine the conversion ratio
as soon as feasible based on information not available at the time we
established the current conversion ratio.
Consistent with our statements in the final rule, we have continued
to gather information regarding an appropriate conversion ratio by
reviewing recent published studies and data from alternative sources.
We have met with the manufacturers of the products and consulted with
clinicians. We are continuing to evaluate this additional data and
information. However, we have not yet determined whether the data would
support a change to the current policy. We remain open to establishing
a different conversion ratio in the final rule if we conclude that a
change is warranted based on public comments and information submitted
during the public comment period and/or any other information we
consider in developing the final rule.
Therefore, we propose to continue with the current policy regarding
payment for Procrit and Aranesp, including the current conversion
ratio. We solicit comments on this issue and are especially interested
in submission of articles in peer-reviewed publications and other
clinical data concerning the frequency of administration and the dosage
amounts of these agents. Submission of prospective, randomized,
controlled trials comparing the dosage amounts, frequency of
administration, and clinical outcomes of these agents are preferred.
All data submitted would be available to the public. We would base any
changes to our current payment policy for these two drugs only on data
that we could make available to the public.

VII. Wage Index Changes for CY 2004

Section 1833(t)(2)(D) of the Act requires that we determine a wage
adjustment factor to adjust for geographic wage differences, in a
budget neutral manner, that portion of the OPPS payment rate and
copayment amount that is attributable to labor and labor-related costs.
We used the proposed Federal fiscal year (FY) 2004 hospital
inpatient PPS wage index to make wage adjustments in determining the
proposed payment rates set forth in this proposed rule. The proposed FY
2004 hospital inpatient wage index published in the May 19, 2003
Federal Register (68 FR 27154) is reprinted in this proposed rule as
Addendum H--Wage Index for Urban Areas; Addendum I--Wage Index for
Rural Areas; and Addendum J--Wage Index for Hospitals That Are
Reclassified. We propose to use the final FY 2004 hospital inpatient
wage index to calculate the payment rates and coinsurance amounts that
we will publish in the final rule implementing the OPPS for CY 2004.

VIII. Copayment for CY 2004

In the November 30, 2001 final rule (66 FR 59887), we adopted a
methodology that applied five rules for calculating APC copayment
amounts when payments for APC groups change because the APCs' relative
weights are recalibrated or when individual services are reclassified
from one APC group to another. In calculating the unadjusted copayment
amounts for 2004, we encountered circumstances that the methodology in
the November 30, 2001 final rule either did not address or whose
applicability was ambiguous. For example, rules 2 and 3 refer to
payment rate changes resulting from the recalibration of relative
payment weights but do not clearly apply to payment rate changes
resulting from the reclassification of HCPCS codes from one APC group
to another APC group. Therefore, we propose to revise and clarify the
methodology we would follow to calculate unadjusted copayment amounts,
including situations in which recalibration of the relative payment
weight of an existing APC results in a change in the APC payment; to
situations in which reclassification of HCPCS codes from an existing
APC to another APC results in a change in the APC payment; and to
payment rates for newly created APCs that are comprised of HCPCS codes
from existing APCs.
As a general rule, we would seek to lower the coinsurance rate for
the services in an APC from the prior year. This principle is
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 and with section 1833(t)(3)(B),
which indicates the congressional goal of achieving 20 percent
coinsurance when fully phased in and gives the Secretary the authority
to set rules for determining copayment amounts to new services.
However, in no event is the proposed 2004 coinsurance rate for an APC
group lower than 20 percent or greater than 50 percent of the payment
rate.
We propose to determine copayment amounts in 2004 and subsequent
years in accordance with the following rules.
1. 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.
2. If a new APC that did not exist during the prior year is created
and

[[Page 48007]]

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.
3. 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 rate is less than 20
percent).
4. 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.
5. 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).
6. 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 rate of the codes being added to the reconfigured APC.
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 the
recalibration of relative payment weights.

IX. Conversion Factor Update for CY 2004

Section 1833(t)(3)(C)(ii) of the Act requires us to update the
conversion factor used to determine payment rates under the OPPS on an
annual basis. Section 1833(t)(3)(C)(iv) of the Act provides that for
2004, the update is equal to the hospital inpatient market basket
percentage increase applicable to hospital discharges under section
1886(b)(3)(B)(iii) of the Act.
The forecast of the hospital market basket increase for FY 2004
published in the inpatient PPS proposed rule on May 19, 2003 is 3.5
percent. To set the proposed OPPS conversion factor for 2004, we
increased the 2003 conversion factor of $52.151 (the figure from the
November 1, 2002 final rule (67 FR 66788) by 3.5 percent.
In accordance with section 1833(t)(9)(B) of the Act, we further
adjusted the proposed conversion factor for 2004 to ensure that the
revisions we are proposing to update by means of the wage index are
made on a budget-neutral basis. We calculated a budget neutrality
factor of 1.003 for wage index changes by comparing total payments from
our simulation model using the proposed FY 2004 hospital inpatient PPS
wage index values to those payments using the current (FY 2003) wage
index values. In addition, for CY 2004, allowed pass-through payments
have decreased to 2 percent of total OPPS payments, down from 2.3
percent in CY 2003. The 0.3 percent was also used to adjust the
conversion factor.
The increase factor of 3.5 percent for 2004, the required wage
index budget neutrality adjustment of approximately 1.003, and the 0.3
percent adjustment to the pass-through estimate, result in a proposed
conversion factor for 2004 of 54.289.

X. Proposed Outlier Policy and Elimination of Transitional Corridor
Payments for CY 2004

A. Proposed Outlier Policy for CY 2004

For OPPS services furnished between August 1, 2000 and April 1,
2002, we calculated outlier payments in the aggregate for all OPPS
services that appear on a bill in accordance with section 1833(t)(5)(D)
of the Act. In the November 30, 2001 final rule (66 FR 59856, 59888),
we specified that beginning with 2002, we will calculate outlier
payments based on each individual OPPS service. We revised the
aggregate method that we had used to calculate outlier payments and
began to determine outliers on a service-by-service basis.
As explained in the April 7, 2000 final rule (65 FR 18498), we set
a target for outlier payments at 2.0 percent of total payments. For
purposes of simulating payments to calculate outlier thresholds, we
propose to continue to set the target for outlier payments at 2.0
percent, as we did for CYs 2001, 2002, and 2003. For 2003, the outlier
threshold is met when costs of furnishing a service or procedure exceed
2.75 times the APC payment amount, and the current outlier payment
percentage is 45 percent of the amount of costs in excess of the
threshold. For the reasons discussed in detail in section XI.E of this
preamble, we are proposing to establish two separate outlier
thresholds, one for community mental health centers (CMHCs) and one for
hospitals. For CY 2004, we propose to continue to set the target for
outlier payments at 2.0 percent of total OPPS payments (a portion of
that 2.0 percent, 0.36 percent, would be allocated to CMHCs for PHP
services). Based on our simulations for 2004, we propose to set the
hospital threshold for 2004 at 2.75 times the APC payment amount, and
the proposed 2004 payment percentage applicable to costs over the
threshold at 50 percent. We propose to set the threshold for CMHCs for
2004 at 11.75 times the APC payment amount and the 2004 outlier payment
percentage applicable to costs over the threshold at 50 percent.

B. Elimination of Transitional Corridor Payments for CY 2004

Since the inception of the OPPS, providers have been eligible to
receive additional transitional payments if the payments they received
under the OPPS were less than the payments they would have received for
the same services under the payment system in effect before the OPPS.
Under 1833(t)(7) of the Act, most hospitals that realize lower payments
under the OPPS received transitional corridor payments based on a
percent of the decrease in payments. However, rural hospitals having
100 or fewer beds, as well as cancer hospitals and children's hospitals
described in section 1886(d)(1)(B)(iii) and (v) of the Act, were held
harmless under this provision and paid the full amount of the decrease
in payments under the OPPS. Transitional corridor payments were
intended to be temporary payments to ease providers' transition from
the prior cost-based payment system to the prospective payment system.
Beginning January 1, 2004, in accordance with section 1833(t)(7) of the
Act, transitional corridor payments will no longer be paid to providers
other than cancer hospitals and children's hospitals. Cancer hospitals
and children's hospitals are held harmless permanently under the
transitional corridor provisions of the statute.
We are concerned that small rural hospitals are not able to achieve
the same level of operating efficiencies as larger rural hospitals and
urban hospitals, and we are concerned that the decrease in payments
these hospitals may experience once they stop receiving transitional
corridor payments will result in these hospitals having to decrease or
altogether cease to provide certain outpatient services. A reduction of
services could have consequences for Medicare beneficiaries and their
continued access to care in rural areas.

[[Page 48008]]

In light of these concerns, one thing we could do is to provide
increased APC payments for clinic and emergency room visits furnished
by rural hospitals having 100 or fewer beds. Any adjustment to payments
for these hospitals would be made under the authority granted to the
Secretary under section 1833(t)(2)(E) of the Act, to establish in a
budget neutral manner adjustments as determined to be necessary to
ensure equitable payments, such as adjustments for certain classes of
hospitals. We invite comments on whether we should provide an
adjustment, such as the one described above, for small rural hospitals.

XI. Other Policy Decisions and Proposed Changes

A. Hospital Coding for Evaluation and Management (E/M) Services

Facilities code clinic and emergency department visits using the
same [Physicians'] Current Procedural Terminology (CPT) codes as
physicians. For both clinic and emergency department visits, there are
currently five levels of care. Because these codes were defined to
reflect only the activities of physicians, they are inadequate to
describe the range and mix of services provided to patients in the
clinic and emergency department settings (for example, ongoing nursing
care, preparation for diagnostic tests, and patient education). An
example to illustrate the services that are billed using E/M codes in
the hospital outpatient department follows:
An adult male patient presents to a clinic after a fall while
working in his yard. As a result, he has scraped off the top layer of
skin covering his entire back. The physician examines the patient,
finds a dirty and possibly infected wound, which is the only injury.
The physician orders the nurse to clean the wound, apply antiseptic
medication, and dress the wound. In addition, the physician orders an
intramuscular antibiotic and a tetanus injection.
The nurse will spend a considerable amount of time cleaning and
dressing the wound with large amounts of sterile supplies (because of
the large body surface area) as well as administering medications. The
nurse also will give the patient discharge instructions regarding the
care of the wound.
Although the physician services are captured using existing E/M
codes, the additional staff and supplies integral to the outpatient
department services are not. The low level E/M code that describes the
physician services in the example is not reflective of the services
provided by the nurse (and any other staff that may have become
involved) or of the quantity of supplies used in the treatment.
In the April 7, 2000 final rule (65 FR 18434), we stated that in
order to ensure proper payment to hospitals, it was important that
emergency and clinic visits be coded properly. To facilitate proper
coding, we required each hospital to create an internal set of
guidelines to determine what level of visit to report for each patient.
In the August 24, 2001 proposed rule (66 FR 44672), we asked for public
comments regarding national guidelines for hospital coding of emergency
and clinic visits. Commenters recommended that we should keep the
current E/M coding system until facility specific E/M codes for
emergency department and clinic visits, along with national coding
guidelines, were established. Commenters also recommended that we
convene a panel of experts to develop codes and guidelines that are
simple to understand, implement, and that are compliant with the Health
Insurance Portability and Accountability Act (HIPAA) requirements.
APC Panel Recommendations
During its January 2002 meeting, the APC Panel made the following
recommendations regarding coding for evaluation and management
services:
1. Propose, and make final, facility coding guidelines for E/M
services for CY 2004.
2. Create a series of G codes with appropriate descriptors for
facility E/M services.
3. Maintain a single set of codes, with five levels of service, for
emergency department visits.
4. Develop a single set of codes, with five levels of service, for
clinic visits. The Panel specifically recommended that we not
differentiate among visit types (for example, new, established, and
consultation visits) for the purposes of facility coding of clinic
visits.
5. Adopt the American College of Emergency Physicians (ACEP)
facility coding guidelines as the national guidelines for facility
coding of emergency department visits.
6. Develop guidelines for clinic visits that are modeled on the
ACEP guidelines but are appropriate for clinic visits.
7. Implement these guidelines as interim and continue to work with
appropriate organizations and stakeholders to develop final guidelines.
After careful review and consideration of written comments, oral
testimony, and the APC Panel's recommendations, we proposed the
following in the August 9, 2002 proposed rule (for implementation no
earlier than January 2004):
1. To develop five G codes to describe emergency department
services:
GXXX1--Level 1 Facility Emergency Services;
GXXX2--Level 2 Facility Emergency Services;
GXXX3--Level 3 Facility Emergency Services;
GXXX4--Level 4 Facility Emergency Services; and
GXXX5--Level 5 Facility Emergency Services.
2. To develop five G codes to describe clinic services:
GXXX6--Level 1 Facility Clinic Services;
GXXX7--Level 2 Facility Clinic Services;
GXXX8--Level 3 Facility Clinic Services;
GXXX9--Level 4 Facility Clinic Services; and
GXXX10--Level 5 Facility Clinic Services.
3. To replace CPT Visit Codes with the 10 new G codes for OPPS
payment purposes.
4. To establish separate documentation guidelines for emergency
visits and clinic visits.
In our November 1, 2002 final rule (67 FR 66792), we stated that
the most appropriate forum for development of new code definitions and
guidelines would be an independent expert panel that would make
recommendations to us. We wanted to ensure that definitions and
guidelines were developed using an open process involving a variety of
experts in the field. We stated that it is critically important to the
development, acceptance, and implementation of facility visit code
definitions and guidelines that the organizations that develop the
guidelines also maintain and update the guidelines and provide ongoing
education to providers on use of the codes. In light of the expertise
of organizations such as the American Hospital Association (AHA) and
the American Health Information Management Association (AHIMA), we felt
that these organizations were particularly well equipped to make
recommendations to us and to provide ongoing education to providers.
Furthermore, we stated that the process should provide adequate time
for the education of clinicians and coders and for hospitals to make
the necessary changes in their systems to accommodate the new codes and
guidelines.
On their own initiative, the AHA and the AHIMA convened an
independent expert panel of individuals from various

[[Page 48009]]

organizations to develop code descriptions and guidelines for hospital
emergency department and clinic visits and make recommendations to us.
The panel recommended the following to us.
1. We should make payment for emergency and clinic visits based on
four levels of care.
2. We should create HCPCS codes to describe these levels of care as
follows:
GXXX1--Level 1 Emergency Visit.
GXXX2--Level 2 Emergency Visit.
GXXX3--Level 3 Emergency Visit.
GXXX4--Critical Care provided in the emergency department.
GXXX5--Level 1 Clinic Visit.
GXXX6--Level 2 Clinic Visit.
GXXX7--Level 3 Clinic Visit.
GXXX8--Critical Care provided in the clinic.
3. We should replace all the HCPCS currently in APCs 600, 601, 602,
610, 611, 612, and 620 with GXXX1 through GXXX8.
4. Based on the above recommendations, we would crosswalk payments
as follows: GXXX1 to APC 610, GXXX2 to APC 611, GXXX3 to APC 612, GXXX4
to APC 620, GXXX5 to APC 600, GXXX6 to APC 601, GXXX7 to APC 602, and
GXXX8 to APC 620. These crosswalks and code descriptions are listed in
Table 22 below.

Table 22.--Crosswalks of 2003 HCPCS Codes to the Proposed G Codes
----------------------------------------------------------------------------------------------------------------
2004 G code 2003 2004 Proposed G Payment
2003 HCPCS description description HCPCS codes APC amount
----------------------------------------------------------------------------------------------------------------
Emergency department visit........ Level 1 Emergency 99281 GXXX1............... 0610 $76.80
Visit. 99282
Emergency department visit........ Level 2 Emergency 99283 GXXX2............... 0611 $135.08
Visit.
Emergency department visit........ Level 3 Emergency 99284 GXXX3............... 0612 $234.72
Visit. 99285
Critical care..................... Level 4 Critical Care 99291 GXXX4............... 0620 $503.03
provided in the 99292
emergency department.
Office/outpatient visit, new...... Level 1 Clinic Visit. 99201 GXXX5............... 0600 $50.90
99202
Office/outpatient visit, new...... Level 2 Clinic Visit. 99203 GXXX6............... 0601 $54.46
Office/outpatient visit, new...... Level 3 Clinic Visit. 99204 GXXX7............... 0602 $84.71
99205
Office/outpatient visit, Level 1 Clinic Visit. 99211 GXXX5............... 0600 $50.90
established. 99212
Office/outpatient visit, Level 2 Clinic Visit. 99213 GXXX6............... 0601 $54.46
established.
Office/outpatient visit, Level 3 Clinic Visit. 99214 GXXX7............... 0602 $84.71
established. 99215
Office consultation............... Level 1 Clinic Visit. 99241 GXXX5............... 0600 $50.90
99242
Office consultation............... Level 2 Clinic Visit. 99243 GXXX6............... 0601 $54.46
Office consultation............... Level 3 Clinic Visit. 99244 GXXX7............... 0602 $84.71
99245 .................... ......... .........
Critical care..................... Level 4 Critical Care 99291 GXXX8............... 0620 $503.03
provided in the 99292
clinic.
----------------------------------------------------------------------------------------------------------------

The independent panel convened by the AHA and AHIMA recommended
these levels in anticipation of the development of national coding
guidelines for emergency and clinic visits that meet the following
criteria we announced in the August 9, 2002 proposed rule (67 FR
52131):
1. Coding guidelines for emergency and clinic visits should be
based on emergency department or clinic facility resource use, rather
than physician resource use.
2. Coding guidelines should be clear, facilitate accurate payment,
be usable for compliance purposes and audits, and comply with HIPAA.
3. Coding guidelines should only require documentation that is
clinically necessary for patient care. Preferably, coding guidelines
should be based on current hospital documentation requirements.
4. Coding guidelines should not create incentives for inappropriate
coding (for example, up-coding).
We have received recommendations for a set of coding guidelines
from the independent E/M panel comprised of members of the AHA and
AHIMA. We propose to implement new evaluation and management codes only
when we are also ready to implement guidelines for their use, after
allowing ample opportunity for public comment, systems change, and
provider education. We also propose to use cost data from the current
HCPCS codes in these APCs to determine the relative weights of these
APCs until cost data from GXXX1 through GXXX8 are available to set
relative weights. We note that this proposal requires discontinuing the
use of all HCPCS codes in these APCs and would not allow us to collect
cost data for the five levels of emergency and clinic visits that are
currently described by CPT codes. We further note that we would no
longer be able to distinguish among the costs for visits by new
patients, established patients, consultation patients, or patients
being seen for more specialized care (for example, pelvic screening
exams and glaucoma screening exams).
We would be using claims data from current HCPCS codes and
crosswalking those data to the new codes in the same APCs; therefore,
there would be no change in payment for any of these services as a
result of these coding changes. Once cost data become available from
the new HCPCS codes, we would use those data to set the relative
weights, and, therefore, there should be no budgetary impact.
We are currently considering the set of proposed national coding
guidelines for emergency and clinic visits recommended by the
independent panel. We plan to make any proposed guidelines available to
the public for comment on the OPPS Web site as soon as they are
complete. We will notify the public through our listserve when these
proposed guidelines become available. To subscribe to this listserve,
please go to the following Web site: http://www.cms.hhs.gov/medlearn/listserv.asp
and follow the directions to the OPPS

[[Page 48010]]

listserve. With regard to the development of these guidelines, our
primary concerns are--
1. To make appropriate payment for medically necessary care;
2. To minimize the information collection and reporting burden on
facilities;
3. To minimize any incentives to provide unnecessary or low quality
care;
4. To minimize the extent to which separately billable services are
counted as E/M services;
5. To develop coding guidelines that are consistent with facility
resource use; and
6. To develop coding guidelines that are clear, facilitate accurate
payment, are useful for compliance purposes and audits, and comply with
HIPAA. Before implementation of the codes and coding guidelines,
adequate time will be provided for the education of clinicians and
coders and for hospitals to make the necessary changes in their systems
to accommodate the codes and guidelines. We are requesting comments on
the amount of time hospitals believe would be adequate to implement
these new codes and guidelines. We remain committed to working with
appropriate organizations and stakeholders in our continuing
development of a standard set of codes and national guidelines for
facility coding of emergency and clinic visits.

B. Status Indicators and Issues Related to OCE Editing

The status indicators we assign to HCPCS codes and APCs under the
OPPS have an important role in payment for services under the OPPS
because 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. We are providing our
proposed status indicator (SI) assignments for APCs in Addendum A,
HCPCS codes in Addendum B, and definitions of the status indicators in
Addendum D.
The OPPS is based on HCPCS codes for medical and other health
services. These codes are used for a wide variety of payment systems
under Medicare, including, but not limited to, the Medicare fee
schedule for physician services, the Medicare fee schedule for durable
medical equipment and prosthetic devices, and the Medicare clinical
laboratory fee schedule. For purposes of making payment under the OPPS,
we must be able to signal the claims processing system which HCPCS
codes are paid under the OPPS and those codes to which particular OPPS
payment policies apply. We accomplish this identification in the OPPS
through the establishment of a system of status indicators with
specific meanings. Addendum D defines the meaning of each status
indicator for purposes of the OPPS.
We assign one and only one status indicator to each APC and to each
HCPCS code. Each HCPCS code that is assigned to an APC has the same
status indicator as the APC to which it is assigned.
Specifically, in 2004 we propose to use the status indicators in
the following manner:
[sbull] We use ``A'' to indicate services that are paid under some
payment method other than OPPS, such as the durable medical equipment,
prosthetics, orthotics, and supplies (DMEPOS) fee schedule or the
physician fee schedule. Some but not all of these other payment systems
are identified in Addendum D.
[sbull] We use ``C'' to indicate inpatient services that are not
payable under the OPPS.
[sbull] We use ``D'' to indicate a code that was deleted effective
with the beginning of the calendar year.
[sbull] We use ``E'' to indicate services for which payment is not
allowed under the OPPS or that are not covered by Medicare.
[sbull] We use ``F'' to indicate acquisition of corneal tissue,
which is paid at reasonable cost. (In 2003, we also use ``F'' to
indicate those orphan drugs that are paid at reasonable cost.) In 2004,
we propose to revise the definition of ``F'' solely to indicate
acquisition of corneal tissue paid at reasonable cost.
[sbull] We use ``G'' to indicate drugs and biologicals that are
paid under OPPS transitional pass-through rules.
[sbull] We use ``H'' to indicate devices that are paid under OPPS
transitional pass-through rules.
[sbull] We use ``K'' to indicate drugs, biologicals (including
blood and blood products), radiopharmaceutical agents, and certain
brachytherapy seeds that are paid in separate APCs under the OPPS but
that are not paid under OPPS transitional pass-through rules.
[sbull] We use ``L'' to indicate flu and pneumococcal immunizations
which are paid at reasonable cost but to which no coinsurance or
copayment apply.
[sbull] We use ``N'' to indicate services that are paid under the
OPPS but for which payment is packaged into another service or APC
group.
[sbull] We use ``P'' to indicate services that are paid under the
OPPS but only in partial hospitalization programs.
[sbull] We use ``S'' to indicate significant procedures that are
paid under OPPS but to which the multiple procedure reduction does not
apply.
[sbull] We use ``T'' to indicate significant services that are paid
under the OPPS and to which the multiple procedure payment discount
under OPPS applies.
[sbull] We use ``V'' to indicate medical visits (including clinic
or emergency department visits) that are paid under the OPPS.
[sbull] We use ``X'' to indicate ancillary services that are paid
under the OPPS.
The software that controls Medicare payment looks to the status
indicators attached to the HCPCS codes and APCs for direction in the
processing of the claim. Therefore, the assignment of the status
indicators has significance for the payment of services.
We are proposing the status indicators identified for each HCPCS
code and each APC in Addenda A and B and are requesting comments on the
appropriateness of the indicators we have assigned.

C. Observation Services

In the November 1, 2002 update to the OPPS (67 FR 66794), we
summarized and clarified previously published guidance (Transmittal A-
02-026) regarding payment requirements for HCPCS code G0244,
Observation care provided by a facility to a patient with congestive
heart failure, chest pain or asthma, minimum of 8 hours, maximum 48
hours. We also implemented HCPCS codes G0263 and G0264 to identify
patients directly admitted to observation. In January 2003, we
published Transmittal A-02-129, which provides further instructions
regarding billing for observation services. In this proposed rule, we
are neither proposing anything new with regard to observation services,
nor are we seeking public comment on observation issues at this time.
As we have in the past, we will update by Program Memorandum any
changes in the list of ICD-9-CM codes required for payment of HCPCS
code G0244 resulting from October 1 annual update of ICD-9-CM. Any such
changes will be included in the 2004 final OPPS rule with comment
period and the public will have an opportunity to comment at that time.

D. Procedures That Will Be Paid Only as Inpatient Procedures

Before implementation of the OPPS, Medicare paid reasonable costs
for services provided in the outpatient department. The claims
submitted were subject to medical review by the fiscal intermediaries
to determine the appropriateness of providing certain services in the
outpatient setting. We did not specify in regulations those services
that were appropriate to provide only in the inpatient setting and

[[Page 48011]]

that, therefore, should be payable only when provided in that setting.
Section 1833(t)(1)(B)(i) of the Act gives the Secretary broad
authority to determine the services to be covered and paid for under
the OPPS. In the April 7, 2000 final rule, we identified procedures
that are typically provided only in an inpatient setting and,
therefore, would not be paid by Medicare under the OPPS (65 FR 18455).
These procedures comprise what is referred to as the ``inpatient
list.'' The inpatient list specifies those services that are only paid
when provided in an inpatient setting. These are services that require
inpatient care because of the nature of the procedure, the need for at
least 24 hours of postoperative recovery time or monitoring before the
patient can be safely discharged, or the underlying physical condition
of the patient. As we discussed in the April 7, 2000 and the November
30, 2001 final rules, we use the following criteria when reviewing
procedures to determine whether or not they should be moved from the
inpatient list and assigned to an APC group for payment under the OPPS:
[sbull] Most outpatient departments are equipped to provide the
services to the Medicare population.
[sbull] The simplest procedure described by the code may be
performed in most outpatient departments.
[sbull] The procedure is related to codes that we have already
removed from the inpatient list.
In the November 1, 2002 final rule, we added the following criteria
for use in reviewing procedures to determine whether they should be
removed from the inpatient list and assigned to an APC group for
payment under the OPPS:
[sbull] We have determined that the procedure is being performed in
multiple hospitals on an outpatient basis; or
[sbull] We have determined that the procedure can be appropriately
and safely performed in an ASC and is on the list of approved
ambulatory surgical center (ASC) procedures or proposed by us for
addition to the ASC list.
At its January 2003 meeting, the APC Panel did not make
recommendations regarding procedures on the inpatient list, and we are
not proposing to make any of the procedures that are currently on the
inpatient list in Addendum E payable under the OPPS in 2004. We solicit
comments on whether any procedures in Addendum E should be paid under
the OPPS. We ask commenters recommending reclassification of a
procedure to an APC to include evidence (preferably from peer-reviewed
medical literature) that the procedure is being performed on an
outpatient basis in a safe and effective manner. We also solicit
comments on the appropriate APC assignment for the procedure in the
event that we determine in the final rule, based on comments, that the
procedure would be payable under the OPPS in 2004.
Following our review of any comments that we receive about the
procedures in Addendum E, we propose either to assign a CPT code to an
APC for payment under the OPPS or, if the comments do not provide
sufficient information and data to enable us to make a decision, to
present the comments to the APC Panel at its 2004 meeting.

Proposed New APC To Pay for Services Furnished on Same Date as Service
with Modifier -CA:

In the 2003 update of the OPPS, we implemented a new modifier -CA,
Procedure payable only in the inpatient setting when performed
emergently on an outpatient who dies before admission. In section VI of
Transmittal A-02-129, issued on January 3, 2003, we instructed
hospitals on the use of modifier -CA when submitting a claim on bill
type 13x for a procedure that is on the inpatient list and that is
assigned payment status indicator ``C.'' (Transmittal A-02-129 can be
found on our Web site at cms.hhs.gov.) We also implemented in the
November 1, 2002 final rule (67 FR 66799) a new payment policy to allow
payment, under certain conditions, for outpatient services on a claim
that have the same date of service as the HCPCS code billed with
modifier -CA. A single payment for outpatient services on the claim,
other than those coded with status indicator ``C'' and modifier -CA, is
currently made under APC 977.
We reviewed this policy and determined that assigning payment for
these services to APC 977, which is a New Technology APC, is
problematic because payment under New Technology APCs is a fixed amount
that does not have a relative payment weight and is, therefore, not
subject to recalibration based on hospital costs. We propose to
establish a new APC for which payment would be made under certain
conditions for otherwise payable outpatient services furnished on the
same date of service that a procedure with status indicator ``C'' is
performed emergently on an outpatient who dies before admission to the
hospital as an inpatient. Beginning in 2004, hospitals would be paid
under APC 375 instead of APC 977 for services furnished on the same
date of service that a procedure with status indicator ``C'' and
modifier -CA is billed. We propose at the outset to set the payment
rate for APC 375 in the amount of $1,150, which is the payment amount
for the newly structured New Technology APC that would replace APC 977.
When the APC weights are recalibrated in 2005, we would use charge data
from CY 2003 claims for line items that have the same date of service
as the line with modifier -CA and that show a HCPCS code with status
indicator ``V,'' ``S,'' ``T,'' ``X,'' ``N,'' or ``K'' to calculate a
median cost and relative payment weight for APC 375. Once we have
claims data, we would be able to determine whether it is appropriate to
calculate a relative payment weight based on median costs from our
claims data or to continue a fixed payment rate for these special
cases. We invite comments on these proposed changes.

E. Partial Hospitalization Payment Methodology

1. Background
As we discussed in the April 7, 2000 OPPS final rule (65 FR 18452),
partial hospitalization is an intensive outpatient program of
psychiatric services provided to patients in place of inpatient
psychiatric care. A partial hospitalization program (PHP) may be
provided by a hospital to its outpatients or by a Medicare-certified
community mental health center (CMHC). Payment to providers under the
OPPS for PHPs represents the provider's overhead costs associated with
the program. 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 APC, effective
for services furnished on or after August 1, 2000.
The PHP per diem amount was based solely on hospital data. Section
1833(t)(2)(C) of the Act required that we initially establish relative
payment weights based on median (or mean, at the discretion of the
Secretary) hospital costs determined by 1996 claims and cost report
data. We analyzed the service components billed by hospitals over the
course of a billing period and determined the median hospital cost of
furnishing a day of partial hospitalization. The analysis of hospital
partial hospitalization claims resulted in a per diem payment of
$202.19, effective August 1, 2000. This amount was updated effective
January 1, 2001 and April 1, 2002 to $206.82 and $212.27, respectively.
Although we did not use CMHC data in establishing the initial APC
amount

[[Page 48012]]

for partial hospitalization, in the April 7, 2000 final rule, we
committed to analyzing future data from hospitals and CMHCs to
determine whether refinements to the per diem were warranted. As a
result, for payment rates presented in the proposed and final rules in
2002, we used data from both hospitals and CMHCs to compute the CY 2003
per diem rate. A description of the methodology we followed in
developing the CY 2003 PHP payment rate is presented below.
We based the CY 2003 per diem amount on hospital and CMHC claims
data for services furnished from April 1, 2001 through March 31, 2002.
We used data from all the hospital bills reporting condition code 41,
which identifies the claim as partial hospitalization, and all bills
from CMHCs, since CMHCs are Medicare providers only for the purpose of
providing partial hospitalization services. We used cost-to-charge
ratios from the most recently available hospital and CMHC cost reports
to convert each provider's line item charges as reported on bills, to
estimate the provider's cost for a day of PHP. Unlike hospitals, CMHCs
do not file cost reports electronically and the cost report information
is not included in the Hospital Cost Report Information System (HCRIS).
The CMHC cost reports are held by the Medicare fiscal intermediaries
(FIs). As a result, we requested that the FIs forward to us the most
recently available CMHC cost-to-charge ratios so that we could apply
the ratio to the CMHC's billed charges and approximate the CMHC's per
diem cost for PHP.
Per diem costs are computed by summing the line item costs on each
bill and dividing by the number of days on the bill. Using this method
of computing costs, preliminary per diem cost estimates for CMHCs were
much higher than expected, in many cases more than twice the average
per diem for inpatient psychiatric care. Closer examination of the CMHC
cost report data summaries showed that costs from CMHC settled cost
reports were considerably lower than costs from ``as submitted'' CMHC
cost reports. To account for the difference between settled and as
submitted cost report data, we computed the ratio of total settled
costs to total as submitted costs over a 3-year period (CMHC FYs 1998
through 2000) and calculated an average adjustment factor (0.583),
which we applied to the costs on each claim. As stated in the 2002
proposed and final OPPS rules, we thought that an adjustment factor of
0.583 was adequate to account for the difference between settled and
``as submitted'' CMHC cost reports and was more reflective of CMHC
costs for PHP. However, we did not have an opportunity to examine the
data in depth before publishing the OPPS final rule on November 1,
2002.
The adjusted CMHC per diem costs on each claim were summed, then
divided by the number of days on the claim. We then combined the CMHC
and hospital PHP data files and determined the median per diem cost for
PHP. Effective January 1, 2003, the PHP APC amount was $240.03, of
which $48.17 is the beneficiary's coinsurance.
2. PHP APC Update for CY 2004
For CY 2004, we analyzed hospital and CMHC PHP claims for services
furnished between April 1, 2002 and December 31, 2002. We intended to
propose to use the same methodology for computing median costs per day
for CY 2004, including the adjustment factor, as we used to compute the
CY 2003 PHP median cost per day. However, when we applied the
adjustment factor to the CMHC claims to compute the CY 2004 per diem,
the CMHC median cost per day was determined to be $605. Without the
adjustment, the median cost per day for CMHCs to provide partial
hospitalization services is $1,038. The median cost per day for
hospital outpatient departments to provide the same benefit is $225. We
do not believe it is reasonable for CMHCs to incur costs that are more
than double those incurred by hospital outpatient departments providing
PHP services. In addition, the median CMHC cost for a day of outpatient
PHP services exceeds the average per diem cost for inpatient
psychiatric facilities, which provide a full 24 hours of care,
medications, and other ancillary services. We do not believe it is
appropriate for Medicare to pay more for a day of outpatient treatment
than for a day of inpatient psychiatric care.
In addition to the vast difference in median costs between CMHCs
and hospital outpatient departments, we are concerned that this
difference has grown significantly larger since last year. The median
per diem cost for hospitals is about the same for 2003 and 2004 ($224
for CY 2003 compared to $225 for the proposed CY 2004 update), while
the median per diem cost for CMHCs (after adjustment) has increased by
58 percent ($384 for CY 2003 compared to $605 for the proposed CY 2004
update). We believe that the increase in the median CMHC per diem cost
is primarily due to large increases in CMHC charges, coupled with the
application of outdated cost-to-charge ratios to determine the per diem
cost. In a Program Memorandum issued on January 17, 2003 (Transmittal
A-03-004), we directed FIs to recalculate hospital and CMHC cost-to-
charge ratios using the most recently settled or tentatively settled
cost reports by April 30, 2003. However, we did not receive the updated
CMHC cost-to-charge ratios in time to use in our data analysis for this
proposed rule.
Therefore, we are proposing a per diem rate for PHP services
furnished during CY 2004 based solely on hospital PHP data. The
resulting PHP APC 0033 amount, after scaling, is $208.95, of which
$41.69 is the beneficiary's coinsurance. We are not inclined to use the
CMHC data in computing the per diem amount until the data discrepancies
can be more fully resolved. We anticipate receipt of the revised CMHC
cost-to-charge ratios this summer and will analyze the updated CMHC
cost data. To the extent we believe the updated cost-to-charge ratios
result in a more reasonable median per diem rate, we propose to use the
CMHC data in developing the final rate for CY 2004.
3. Outlier Payments to CMHCs
In a related matter, the use of outdated cost-to-charge ratios
applied to current charges has resulted in an excessive amount of
outlier payments being made to CMHCs. As a result of more in-depth
analysis of the 2001 data files that were used to compute the CY 2003
PHP per diem amount, we discovered a significant difference in the
amount of outlier payments made to hospitals and CMHCs for PHP. Of the
approximately 660 hospital programs with claims for PHP in CY 2001, 25
hospitals received approximately $9,000 in outlier payments. By
contrast, almost half of the 155 CMHCs in our CY 2001 data file were
paid outlier payments, totaling approximately $48 million.
Based on preliminary analysis of the 125 CMHCs with claims in the
CY 2002 data files, that is, April 1, 2002 through December 31, 2002,
we have determined that CMHCs received approximately $37 million in
outlier payments, compared to approximately $13,000 for all hospitals
in the PHP data file. The $37 million in outlier payments to CMHCs
almost equals the total amount paid to CMHCs in regular APC payments.
CMHCs have indicated that they are unable to reduce their costs to
the per diem payment amount and that outlier payments are needed to
cover operating expenses. This use of outlier payments is contrary to
the intent of an outlier policy. Establishing an outlier policy allows
us to ensure beneficiary access to services by sharing in the loss

[[Page 48013]]

associated with services for specific patients that are extraordinarily
expensive. Through a comparison of the median per diem costs, we have
determined that CMHCs dramatically increased their charges between CY
2001 and CY 2002. During this period, the median per diem cost for
CMHCs increased by 58 percent. We believe that in most cases, these
increases in charges were not related to a corresponding increase in
costs. Since the CMHC cost-to-charge ratios used to calculate outlier
payments remained constant during this period, we believe that the 58
percent increase in computed cost is attributable to artificial
increases in charges designed to enhance outlier payments.
Approximately two-thirds of outlier payments made to PHP providers were
paid to 20 of the 125 CMHCs. The charges reported by these providers,
on average, were over 10 times more than hospital per diem charges.
Given the difference in PHP charges between hospitals and CMHCs, we
no longer believe it is appropriate to make outlier payments to CMHCs
using the outlier percentage target amount and threshold established
for hospitals. Therefore, we are proposing to designate a portion of
the estimated 2.0 percent outlier target amount specifically for CMHCs,
consistent with the percentage of projected payments to CMHCs under the
OPPS in CY 2004, excluding outlier payments. CMHCs are projected to
receive 0.36 percent of total OPPS payments in CY 2004, excluding
outlier payments. Therefore, we are proposing to designate 0.36 percent
of the estimated 2.0 percent outlier target amount for CMHCs and
establish a threshold to achieve that level of outlier payments. Based
on our simulations of CMHC payments in 2004, we are proposing to set
the threshold for CY 2004 at 11.75 times the PHP APC payment amount. We
believe that this approach would neutralize the impact of inflated CMHC
charges on outlier payments. We are proposing to apply the same outlier
payment percentage that applies to hospitals. Therefore, for CY 2004,
we are proposing to pay 50 percent of CMHC per diem costs over the
threshold. To the extent charges remain relatively constant, CMHCs
would qualify for outlier payments in CY 2004 only for truly high cost
patients.
As noted previously, we expect to receive updated cost-to-charge
ratios from the FIs this summer. Many of the cost-to-charge ratios are
expected to be considerably lower than those currently used to
determine a provider's cost for the purpose of outlier and transitional
pass-through or corridor payments. For example, we are aware of a
number of situations where the updated cost-to-charge ratios have
declined by more than 50 percent.
We specifically request public comments on this proposed outlier
policy. We intend to monitor the extent to which the current pattern of
escalating charges continues. CMS and the Office of the Inspector
General will be further examining the excessive outlier payments to
CMHCs.

XII. Summary of and Responses to MedPAC Recommendations

The Medicare Payment Advisory Commission (MedPAC) in its March 2002
Report to the Congress: ``Medicare Payment Policy,'' makes a number of
recommendations relating to the OPPS. This section provides responses
to those recommendations.
Recommendation: The Congress should increase payment rates for the
OPPS by the rate of increase in the hospital market basket, less 0.9
percent, for CY 2004.
Response: Section 1833(t)(3)(C)(ii) of the Act requires the
Secretary to update the conversion factor annually. Under section
1833(t)(3)(C)(iv) of the Act, the update must be equal to the hospital
market basket percentage increase applicable under the hospital
inpatient PPS. For years 2000 and 2002 only, the statute required the
update to be determined by reducing the increase by one percentage
point, but current law specifies such a reduction only for those 2
years. For 2004, we propose to increase the conversion factor by the
rate of increase in the hospital market basket.
Recommendation: The Secretary should introduce clinical criteria
for eligibility of drugs and biologicals to receive pass-through
payments under the outpatient PPS.
Response: In accordance with section 402 of the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act (BIPA), pass-through
payments for medical devices is made on the basis of categories of
devices. On November 2, 2001, we published in the Federal Register (66
FR 55850) a rule that specified the criteria for establishment of a new
category of devices for purposes of pass-through payments. Among these
is the requirement that the devices to be included in a possible
category must demonstrate a substantial improvement in medical benefits
for Medicare beneficiaries compared to benefits obtained by devices in
previously established categories or other available treatments. We
elaborated further about this criterion in the final rule updating the
OPPS for CY 2003, published in the Federal Register on November 1,
2002. As we stated at that time, ``We established this criterion
because 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, the
need for additional payments for devices that offer little or no
clinical improvement over a previously existing device is less
apparent.'' (67 FR 66782)
At present, pass-through payment for drugs and biologicals is not
made on the basis of categories, and no comparable criterion applies to
them. Whether we should apply such a requirement to drugs and
biologicals is an important question. On the one hand, as noted above,
limiting extra payment to those items that have the potential to make a
significant difference in treatment of Medicare beneficiaries appears
useful. On the other hand, developing an appropriate mechanism for
identifying which drugs or biologicals might qualify is difficult.
Because the clinical characteristics of particular cases that are
relevant for drug use may vary substantially, we believe that this
challenge is more difficult than in the case of devices. Consequently,
we have not developed a proposal in this area, and we are not prepared
to advance one at this time.

XIII. Summary of Proposed Changes for 2004

A. Changes Required By Statute

We are proposing the following changes to implement statutory
requirements:
[sbull] Add APCs, delete APCs, and modify the composition of some
existing APCs.
[sbull] Recalibrate the relative payment weights of the APCs.
[sbull] Update the conversion factor and the wage index.
[sbull] Revise the APC payment amounts to reflect the APC
reclassifications, the recalibration of payment weights, and the other
required updates and adjustments.
[sbull] Cease transitional pass-through payments for drugs and
biologicals and devices that will have been paid under the transitional
pass-through methodology for at least 2 years by January 1, 2004.
[sbull] Cease transitional outpatient payments (TOPS payments) for
all hospitals paid under OPPS except for cancer hospitals and
children's hospitals.

[[Page 48014]]

B. Additional Changes

We are proposing the following additional changes to the OPPS:
[sbull] Adjust payment to moderate the effects of decreased median
costs for non-pass-through drugs, biologicals, and
radiopharmaceuticals.
[sbull] Implement a new method for paying for drug administration.
[sbull] Create new evaluation and management service codes for
outpatient clinic and emergency department encounters.
[sbull] Change status indicators for HCPCS codes.
[sbull] List midyear and proposed HCPCS codes that are paid under
OPPS.
[sbull] Allocate a portion of the outlier percentage target amount
to CMHCs and create a separate threshold for outlier payments for
partial hospitalization services.
[sbull] Create methodology and payment rates for separately payable
drugs and radiopharmaceuticals for 2004.
[sbull] Make several changes in our current payment policy with
regard to payment for Q0081, Q0083, Q0084, and Q0085 to facilitate
accurate payments for drugs and drug administration.
[sbull] Change the status indicator and payment amount for P9010 by
assigning it to APC 0957 (Platelet concentrate) with a payment rate of
$37.30.

XIV. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
[sbull] The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
[sbull] The accuracy of our estimate of the information collection
burden.
[sbull] The quality, utility, and clarity of the information to be
collected.
[sbull] Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
The OPPS provisions set forth in this proposed rule do not impose
information collection and recordkeeping requirements. Consequently, it
need not be reviewed by the Office of Management and Budget under the
authority of the Paperwork Reduction Act of 1995.

XV. Response to Public Comments

Because of the large number of items of correspondence we normally
receive on a proposed rule, we are not able to acknowledge or respond
to them individually. However, in preparing the final rule, we will
consider all comments concerning the provisions of this proposed rule
that we receive by the date and time specified in the DATES section of
this preamble and respond to those comments in the preamble to that
rule.

XVI. Regulatory Impact Analysis

A. General

We have examined the impacts of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 (as amended by Executive Order 13258, which
merely reassigns responsibility of duties) directs agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
We estimate the effects of the provisions that would be implemented
by this proposed rule would result in expenditures exceeding $100
million in any 1 year. We estimate the total increase (from changes in
the proposed rule as well as enrollment, utilization, and case mix
changes) in expenditures under the OPPS for CY 2004 compared to CY 2003
to be approximately $0.457 billion. Therefore, this proposed rule is an
economically significant rule under Executive Order 12866, and a major
rule under 5 U.S.C. 804(2).
The RFA requires agencies to determine whether a rule would have a
significant economic impact on a substantial number of small entities.
For purposes of the RFA, small entities include small businesses,
nonprofit organizations, and government agencies. Most hospitals and
most other providers and suppliers are small entities, either by
nonprofit status or by having revenues of $6 million to $29 million in
any 1 year (see 65 FR 69432).
For purposes of the RFA, we have determined that approximately 37
percent of hospitals would be considered small entities according to
the Small Business Administration (SBA) size standards. We do not have
data available to calculate the percentages of entities in the
pharmaceutical preparation manufacturing, biological products, or
medical instrument industries that would be considered to be small
entities according to the SBA size standards. For the pharmaceutical
preparation manufacturing industry (NAICS 325412), the size standard is
750 or fewer employees and $67.6 billion in annual sales (1997 business
census). For biological products (except diagnostic) (NAICS 325414),
with $5.7 billion in annual sales, and medical instruments (NAICS
339112), with $18.5 billion in annual sales, the standard is 50 or
fewer employees (see the standards Web site at http://www.sba.gov/regulations/siccodes/
). Individuals and States are not included in the
definition of a small entity.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. With
the exception of hospitals located in certain New England counties, for
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area (MSA) and has fewer than 100 beds (or New England
County Metropolitan Area (NECMA)). Section 601(g) of the Social
Security Amendments of 1983 (Pub. L. 98-21) designated hospitals in
certain New England counties as belonging to the adjacent NECMA. Thus,
for purposes of the OPPS, we classify these hospitals as urban
hospitals. We believe that the changes in this proposed rule would
affect both a substantial number of rural hospitals as well as other
classes of hospitals and that the effects on some may be significant.
Therefore, we conclude that this proposed rule would have a significant
impact on a substantial number of small entities.
Unfunded Mandates
Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4) also requires that agencies assess anticipated costs and
benefits before issuing any rule that may result in an expenditure in
any 1 year by State, local, or tribal governments, in the aggregate, or
by the private sector, of $110 million. This proposed rule would not
mandate any requirements for State,

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[[pp. 48015-48064]] Medicare Program; Changes to the Hospital Outpatient Prospective
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[[Page 48015]]

local, or tribal governments. This proposed rule would not impose
unfunded mandates on the private sector of more than $110 million
dollars.
Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it publishes a proposed rule (and subsequent
final rule) that imposes substantial direct costs on State and local
governments, preempts State law, or otherwise has Federalism
implications.
We have examined this proposed rule in accordance with Executive
Order 13132, Federalism, and have determined that it would not have an
impact on the rights, roles, and responsibilities of State, local or
tribal governments. The impact analysis (see Table 23) shows that
payments to governmental hospitals (including State, local, and tribal
governmental hospitals) would increase by 3.9 percent under the
proposed rule.

B. Changes in This Proposed Rule

We are proposing several changes to the OPPS that are required by
the statute. We are required under section 1833(t)(3)(C)(ii) of the Act
to update annually the conversion factor used to determine the APC
payment rates. We are also required under section 1833(t)(9)(A) of the
Act to revise, not less often than annually, the wage index and other
adjustments. In addition, we must review the clinical integrity of
payment groups and weights at least annually. Accordingly, in this
proposed rule, we are proposing to update the conversion factor and the
wage index adjustment for hospital outpatient services furnished
beginning January 1, 2004 as we discuss in sections IX and VII,
respectively, of this proposed rule. We are also proposing to revise
the relative APC payment weights based on claims data from April 1,
2002 through December 31, 2002. Finally, we are proposing to remove two
devices and eight drugs and biologicals from pass-through payment
status. Alternatives to the changes we are proposing and why we did not
accept them are discussed throughout this proposed rule. In particular,
see section V.B with regard to the expiration of pass-through payment
for devices; see section VI.B with regard to the expiration of pass-
through payment for drugs and biological agents.
Under this proposed rule, the change to the conversion factor as
provided by statute would increase total OPPS payments by 3.8 percent
in 2004. The changes to the wage index and to the APC weights (which
incorporate the cessation of pass-through payments for many drugs and
devices) would not increase OPPS payments because the OPPS is budget
neutral. However, the wage index and APC weight changes would change
the distribution of payments within the budget neutral system as shown
in Table 23 and described in more detail in this section.
Alternatives Considered
Alternatives to the changes we are proposing and the reasons that
we are proposing not to make them are discussed throughout this final
rule. Below we discuss options we considered when analyzing
methodologies to appropriately recognize the costs of former pass-
through items. For a more detailed discussion, see section V.B of this
proposed rule regarding the expiration of pass-through payment for
devices and section VI.B of this proposed rule regarding the expiration
of pass-through payment for drugs and biological agents.
Payment for the Administration of Drugs
As discussed in detail in section VI.B of this proposed rule, we
considered the following alternatives with regard to payment for
administration of packaged and separately paid drugs:
[sbull] Continue to pay under the current drug administration codes
(Q0081, Q0083, Q0084, and Q0085). This alternative would pay the same
amount for administration of packaged or separately paid drugs,
although the data show that the costs are considerably more when
packaged drugs are administered and considerably less if separately
paid drugs are administered.
[sbull] Create eight new HCPCS codes (based on the existing Q codes
listed above), with one set of codes for packaged drugs and one set for
separately paid drugs. Establish an APC for each. This alternative
permits more accurate payment for packaged and separately paid drugs
than use of the current codes but imposes a significant burden on
hospitals to bill correctly.
[sbull] Create six new HCPCS codes (based on the existing Q codes
with deletion of Q0085). Establish an APC for each. This alternative
permits more accurate payment for packaged and separately paid drugs
than use of the current codes and imposes slightly less burden on
hospital billing than the eight-code alternative.
[sbull] Delete Q0085 and revise the definitions of the other Q
codes to once per day. Crosswalk each code billed to one of two APCs
that would be paid dependent on the drugs billed on the same date of
service. This alternative permits more accurate payment for packaged
and separately paid drugs. It also simplifies hospital billing for drug
administration. Under this option, however, hospitals would be required
to bill for all drugs they administer, whether packaged or separately
paid so that the outpatient code editor (OCE) could properly assign the
APC that applies in the case. The systems changes required for this
alternative are much more substantial than under any of the other
alternatives, and we are considering whether we can implement this
change before January 2005.
We modeled the second alternative for purposes of budget neutrality
and impact analysis. We await comments before determining what
alternative we will undertake for the 2004 OPPS.
Payment for Drugs That Are Not Packaged
As a result of marked and erratic fluctuations in median costs for
drugs, biologicals, and radiopharmaceutical agents that are paid
separately under the OPPS, we explored several options to determine how
best to provide accurate payment for CY 2004. One option was to pay
based on our 2002 claims data without any adjustment. We were certain
that this would not result in accurate payments because of the
magnitude of some of the fluctuations in median costs seen in the data.
Another option considered, to create cost bands similar to those
used for New Technology APCs, was rejected because unless very narrow
bands were created, this option also would result in inaccurate
payments.
Finally, we looked at using the same methodology for moderating
payment decreases that we used last year, to limit median cost
decreases of 15 percent or more to 50 percent of the difference between
the median cost and the amount of decrease greater than 15 percent.
This option would enable us to moderate the decreased payment amount on
an individual drug, biological, or radiopharmaceutical agent level,
which is important in light of the great variations in the data; but
the 50 percent adjustment level was not adequate for the level of
moderation we believed was required for CY 2004.
The adjustment we put forth in this proposed rule is a 75 percent
moderation of decreases of 15 percent or more. Thus, for separately
payable drugs, biologicals, and radiopharmaceutical agents for which
median costs decreased by 15 percent or more, we are proposing to limit
the reduction in median costs to 15 percent plus 25 percent of the
difference

[[Page 48016]]

between the value derived from claims data and any decrease of 15
percent or more.
Our analyses indicate that application of this method of adjustment
would result in payment levels that will be fair and accurate. However,
based on more complete claims data we expect to have for the final rule
and on the comments from the public, we will re-evaluate the
appropriateness of adjusting median costs for drugs for which median
costs would decline in 2004.
Conclusion
It is clear that the changes in this proposed rule would affect
both a substantial number of rural hospitals as well as other classes
of hospitals, and the effects on some may be significant. Therefore,
the discussion below, in combination with the rest of this proposed
rule, constitutes a regulatory impact analysis.
The OPPS rates for CY 2004 would have, overall, a positive effect
for every category of hospital with the exception of cancer hospitals
and children's hospitals, which are held harmless under the OPPS. These
changes in the OPPS for 2004 would result in an overall 3.8 percent
increase in Medicare payments to hospitals, exclusive of outlier and
transitional pass-through payments and transitional corridor payments.
As described in the preamble, budget neutrality adjustments are made to
the conversion factor and the relative weights to ensure that the
revisions in the wage index, APC groups, and relative weights do not
affect aggregate payments. The impact of the wage and recalibration
changes does vary somewhat by hospital group. Estimates of these
impacts are displayed on Table 23.
The overall projected increase in payments for urban hospitals is
slightly lower (3.7 percent) than the average increase for all
hospitals (3.8 percent) while the increase for rural hospitals is
slightly greater (4.0 percent) than the average increase. The
introduction of a new wage index combined with changes to the APC
structure would result in small distributional changes for all
categories of hospitals. Rural hospitals would gain 0.1 percent from
the wage index change but show no gains from APC changes. Large urban
hospitals would lose 0.1 percent from the wage index change, whereas
``other'' urban hospitals show a decrease of -0.2 percent from the APC
changes. A discussion of the distribution of outlier payments that we
project under this proposed rule can be found under section XV.E below.
Table 24 presents the outlier distribution that we expect to see under
this proposed rule.

C. Limitations of Our Analysis

The distributional impacts represent the projected effects of the
policy changes, as well as statutory changes effective for 2004, on
various hospital groups. We estimate the effects of individual policy
changes by estimating payments per service while holding all other
payment policies constant. We use the best data available but do not
attempt to predict behavioral responses to our policy changes. In
addition, we are not proposing to make adjustments for future changes
in variables such as service volume, service mix, or number of
encounters.

D. Estimated Impacts of This Proposed Rule on Hospitals

The OPPS is a budget neutral payment system under which the
increase to the total payments made under OPPS is limited by the
increase to the conversion factor set under the methodology in the
statute. The impact tables show the redistribution of hospital payments
among providers as a result of a new wage index and APC structure. In
some cases, under this proposed rule, hospitals would receive more
total payment than in 2003 while in other cases they would receive less
total payment than they received in 2003. The impact of this proposed
rule would depend on a number of factors, most significant of which are
the mix of services furnished by a hospital (for example, how the APCs
for the hospital's most frequently furnished services would change) and
the impact of the wage index changes on the hospital.
Column 4 in Table 23 represents the full impact on each hospital
group of all the changes for 2004. Columns 2 and 3 in the table reflect
the independent effects of the proposed change in the wage index and
the APC reclassification and recalibration changes, respectively. We
excluded critical access hospitals (CAHs) from the analysis of the
impact of the proposed 2004 OPPS rates that is summarized in Table 23.
For that reason, the total number of hospitals included in Table 23
(4,352) is lower than in previous years. CAHs are excluded from the
OPPS.
To a very limited extent, wage index changes favor all hospital
categories with the exception of large urban hospitals with 500 or more
beds that show a -0.3 percentage change. Rural hospitals show modest
increases of 0.1 percent for most bed sizes but show the largest gains
for categories with 200 or more beds, a 0.3 percent increase. Rural
hospitals located in Puerto Rico show the largest negative impact (-2.2
percent) due to changes in the wage index. Hospitals located in the
Middle Atlantic, South Atlantic, and in the East North Central part of
the country experience a negative impact due to wage index changes
regardless of urban or rural designation. However, this effect is
somewhat lessened by the distribution of outlier payments as discussed
in more detail below.
The APC reclassification and recalibration changes also favor rural
hospitals with the exception of rural hospitals with 200 or more beds
that show a negative effect (-1.2 percent). Conversely, urban hospitals
with 200 to 299 beds (-0.1 percent decrease), and urban hospitals with
300 to 499 beds (-0.5 percent) show a decrease attributed to APC
recalibration. Urban hospitals in excess of 500 beds show a 0.1 percent
increase as a result of APC recalibration. In general, APC changes are
small and result in very few distributional changes among hospital
categories.
In both urban and rural areas, hospitals that provide a lower
volume of outpatient services are projected to receive a larger
increase in payments than higher volume hospitals. In rural areas,
hospitals with volumes of fewer than 5,000 services are projected to
experience an increase in payments (4.4 percent). Urban hospitals that
provide low-volume services experience an even larger increase (5.0
percent) in payments attributable to both wage index and APC changes.
Conversely, urban and rural hospitals providing more than 21,000
services are projected to lose as a result of APC recalibration but
gain from the introduction of the new wage index for a combined effect
in the range of 3.4 to 3.9 percent.
Major teaching hospitals are projected to experience a smaller
increase in payments (3.4 percent) than the aggregate for all hospitals
(3.8 percent) due to negative impacts of the wage index (-0.4 percent).
Hospitals with less intensive teaching programs are projected to
experience an overall increase (3.7 percent) that is smaller than the
average for all hospitals. There is little difference in impact among
hospitals that serve low-income patients where increases in payments
range from 3.4 to 4.2 percent higher than in 2003.

[[Page 48017]]

Table 23.--Impact of Changes for CY2004 Hospital Outpatient Prospective Payment System
(Percent change in total payments to hospitals (program and beneficiary); does not include hold harmless,
corridor, outlier, or transitional pass-through payments)
----------------------------------------------------------------------------------------------------------------
Number of New wage index APC changes All CY2003
hospitals (1) (2) (3) changes (4)
----------------------------------------------------------------------------------------------------------------
ALL HOSPITALS................................... 4,352 0.0 0.0 3.8
NON-TEFRA HOSPITALS............................. 3,849 0.0 0.0 3.8
URBAN HOSPS..................................... 2,390 0.0 0.0 3.7
LARGE URBAN (GT 1 MILL.)........................ 1,377 -0.1 0.0 3.8
OTHER URBAN (LE 1 MILL.)........................ 1,013 0.0 -0.2 3.7
RURAL HOSPS..................................... 1,459 0.1 0.0 4.0
BEDS (URBAN):
0-99 BEDS................................... 546 0.2 0.4 4.4
100-199 BEDS................................ 875 0.0 0.2 4.1
200-299 BEDS................................ 456 0.0 -0.1 3.7
300-499 BEDS................................ 364 0.1 -0.5 3.4
500 + BEDS.................................. 149 -0.3 0.1 3.6
BEDS (RURAL):
0-49 BEDS................................... 694 0.1 1.0 4.9
50-99 BEDS.................................. 449 0.1 0.2 4.1
100-149 BEDS................................ 190 0.1 0.0 3.9
150-199 BEDS................................ 65 0.1 0.1 4.0
200 + BEDS.................................. 61 0.3 -1.2 2.9
VOLUME (URBAN):
LT 5,000.................................... 225 0.0 1.1 5.0
5,000-10,999................................ 396 0.0 1.0 4.9
11,000-20,999............................... 529 -0.2 0.8 4.5
21,000-42,999............................... 736 0.1 -0.1 3.9
GT 42,999................................... 504 -0.1 -0.3 3.4
VOLUME (RURAL):
LT 5,000.................................... 419 0.1 0.4 4.4
5,000-10,999................................ 483 0.1 0.9 4.9
11,000-20,999............................... 318 0.0 0.4 4.3
21,000-42,999............................... 191 0.2 -0.6 3.5
GT 42,999................................... 48 0.3 -0.7 3.4
REGION (URBAN):
NEW ENGLAND................................. 128 0.0 -0.7 3.1
MIDDLE ATLANTIC............................. 367 -0.6 -0.5 2.7
SOUTH ATLANTIC.............................. 355 -0.1 -0.1 3.7
EAST NORTH CENT............................. 401 -0.1 0.4 4.1
EAST SOUTH CENT............................. 152 0.6 -0.2 4.3
WEST NORTH CENT............................. 166 0.3 0.1 4.2
WEST SOUTH CENT............................. 293 -0.1 0.1 3.9
MOUNTAIN.................................... 122 0.6 0.0 4.5
PACIFIC..................................... 366 0.1 0.0 3.9
PUERTO RICO................................. 40 0.3 2.1 6.3
REGION (RURAL):
NEW ENGLAND................................. 36 0.8 -0.1 4.6
MIDDLE ATLANTIC............................. 66 -0.2 0.2 3.8
SOUTH ATLANTIC.............................. 213 -0.2 -0.1 3.5
EAST NORTH CENT............................. 192 -0.1 -0.5 3.3
EAST SOUTH CENT............................. 225 0.4 0.2 4.4
WEST NORTH CENT............................. 244 0.6 0.0 4.4
WEST SOUTH CENT............................. 267 0.2 0.5 4.6
MOUNTAIN.................................... 123 0.1 0.0 3.9
PACIFIC..................................... 88 0.3 0.7 4.8
PUERTO RICO................................. 5 -2.2 1.4 3.0
TEACHING STATUS:
NON-TEACHING................................ 2,803 0.1 0.1 4.0
MINOR....................................... 758 0.1 -0.2 3.7
MAJOR....................................... 288 -0.4 0.0 3.4
DSH PATIENT PERCENT:
0........................................... 11 2.7 3.0 9.8
GT 0-0.10................................... 862 -0.1 -0.3 3.4
0.10-0.16................................... 845 0.0 -0.2 3.6
0.16-0.23................................... 778 0.1 0.4 4.2
0.23-0.35................................... 757 0.0 0.0 3.8
GE 0.35..................................... 596 0.0 0.2 4.0
URBAN IME/DSH:
IME & DSH................................... 963 -0.1 -0.1 3.6
IME/NO DSH.................................. 1 0.0 -1.3 2.4
NO IME/DSH.................................. 1,417 0.0 0.1 3.9
NO IME/NO DSH............................... 9 2.8 3.0 10.0
RURAL HOSP. TYPES:

[[Page 48018]]

NO SPECIAL STATUS........................... 481 -0.2 0.3 4.0
RRC......................................... 159 0.3 -0.6 3.5
SCH/EACH.................................... 483 0.2 0.6 4.7
MDH......................................... 249 0.1 0.7 4.7
SCH AND RRC................................. 78 0.3 -0.5 3.6
TYPE OF OWNERSHIP:
VOLUNTARY................................... 2,362 0.0 -0.1 3.6
PROPRIETARY................................. 696 0.1 0.6 4.6
GOVERNMENT.................................. 791 0.1 0.0 3.9
SPECIALTY HOSPITALS:
EYE AND EAR................................. 13 -0.4 1.7 5.2
CANCER...................................... 11 -0.3 -4.7 -1.3
TEFRA HOSPITALS (NOT INCLUDED ON OTHER LINES):
REHAB....................................... 159 0.5 0.3 4.6
PSYCH....................................... 167 0.8 7.2 12.2
LTC......................................... 135 1.8 4.3 10.3
CHILDREN.................................... 42 0.0 -1.1 2.7
----------------------------------------------------------------------------------------------------------------
1. Some data necessary to classify hospitals by category were missing; thus, the total number of hospitals in
each category may not equal the national total.
2. This column shows the impact of updating the wage index used to calculate payment by applying the FY2004
hospital inpatient wage index after geographic reclassification by the Medicare Geographic Classification
Review Board. The hospital inpatient proposed rule for FY2004 was published in the Federal Register on May 19,
2003.
3. This column shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups
and the recalibration of APC weights based on 2002 hospital claims data.
4. This column shows changes in total payment from CY2003 to CY2004, excluding outlier and pass-through
payments. It incorporates all of the changes reflected in columns 2 and 3. In addition, it shows the impact of
the FY 2004 payment update. The sum of the columns may be different from the percentage changes shown here due
to rounding.

E. Projected Distribution of Outlier Payments

As stated elsewhere in this preamble, we have allocated 2 percent
of the estimated 2004 expenditures to outlier payments. In Table 24
below, we provide a table that illustrates the percentage of outlier
payments relative to the total projected payments for the categories of
hospitals that we show in the impact table.
We project, based on the mix of services for the hospitals that
would be paid under the OPPS in 2004, that most hospitals would receive
outlier payments--approximately 94 percent would receive outlier
payments. The anticipated outlier payments for urban hospitals can be
expected to ameliorate the impact of the wage index and APC changes on
payments to urban hospitals.

Table 24.--Distribution of Outlier Payments for CY 2004 Hospital Outpatient Prospective Payment
----------------------------------------------------------------------------------------------------------------
Outlier payments
Number of Percent of total Number of as a percent of
hospitals hospitals hospitals with total payments
outliers (percent)
----------------------------------------------------------------------------------------------------------------
ALL HOSPITALS....................... 4,352 96.4 4,097 2.0
NON-TEFRA HOSPITALS................. 3,849 85.2 3,831 2.0
URBAN HOSPS......................... 2,390 52.8 2,376 2.1
LARGE URBAN (GT 1 MILL.)............ 1,377 30.4 1,368 2.3
OTHER URBAN (LE 1 MILL.)............ 1,013 22.4 1,008 1.9
RURAL HOSPS......................... 1,459 32.2 1,455 1.7
BEDS (URBAN):
0-99 BEDS....................... 546 12.0 534 2.6
100-199 BEDS.................... 875 19.4 874 1.8
200-299 BEDS.................... 456 10.0 455 2.0
300-499 BEDS.................... 364 8.0 364 2.0
500 + BEDS...................... 149 3.2 149 2.6
BEDS (RURAL):
0-49 BEDS....................... 694 15.4 691 2.2
50-99 BEDS...................... 449 10.0 448 1.8
100-149 BEDS.................... 190 4.2 190 1.4
150-199 BEDS.................... 65 1.4 65 1.7
200 + BEDS...................... 61 1.4 61 1.4
VOLUME (URBAN):
LT 5,000........................ 225 5.0 212 3.0
5,000-10,999.................... 396 8.8 395 3.4
11,000-20,999................... 529 11.8 529 2.1
21,000-42,999................... 736 16.2 736 1.9
GT 42,999....................... 504 11.2 504 2.1

[[Page 48019]]

VOLUME (RURAL):
LT 5,000........................ 419 9.2 416 2.7
5,000-10,999.................... 483 10.6 482 2.1
11,000-20,999................... 318 7.0 318 1.7
21,000-42,999................... 191 4.2 191 1.4
GT 42,999....................... 48 1.0 48 1.5
REGION (URBAN):
NEW ENGLAND..................... 128 2.8 127 1.9
MIDDLE ATLANTIC................. 367 8.2 367 3.2
SOUTH ATLANTIC.................. 355 7.8 355 1.9
EAST NORTH CENT................. 401 8.8 398 1.7
EAST SOUTH CENT................. 152 3.4 150 1.4
WEST NORTH CENT................. 166 3.6 166 1.8
WEST SOUTH CENT................. 293 6.4 292 2.6
MOUNTAIN........................ 122 2.6 120 1.8
PACIFIC......................... 366 8.0 363 2.0
PUERTO RICO..................... 40 0.8 38 0.6
REGION (RURAL):
NEW ENGLAND..................... 36 0.8 36 2.4
MIDDLE ATLANTIC................. 66 1.4 66 1.4
SOUTH ATLANTIC.................. 213 4.8 212 1.6
EAST NORTH CENT................. 192 4.2 192 1.5
EAST SOUTH CENT................. 225 5.0 225 1.2
WEST NORTH CENT................. 244 5.4 243 1.8
WEST SOUTH CENT................. 267 6.0 266 1.7
MOUNTAIN........................ 123 2.8 123 2.8
PACIFIC......................... 88 2.0 87 2.2
PUERTO RICO..................... 5 0.2 5 0.9
TEACHING STATUS:
NON-TEACHING.................... 2,803 62.0 2,786 1.8
MINOR........................... 758 16.8 757 1.7
MAJOR........................... 288 6.4 288 3.1
DSH PATIENT PERCENT:
0............................... 11 0.2 10 6.7
GT 0-0.10....................... 862 19.0 853 1.9
0.10-0.16....................... 845 18.6 845 1.7
0.16-0.23....................... 778 17.2 777 1.8
0.23-0.35....................... 757 16.8 752 2.2
GE 0.35......................... 596 13.2 594 3.1
URBAN IME/DSH:
IME & DSH....................... 963 21.4 963 2.3
IME/NO DSH...................... 1 0.0 0 0.0
NO IME/DSH...................... 1,417 31.4 1,404 1.9
NO IME/NO DSH................... 9 0.2 9 6.8
RURAL HOSP. TYPES:
NO SPECIAL STATUS............... 481 10.6 478 1.8
RRC............................. 159 3.6 159 1.4
SCH/EACH........................ 483 10.6 483 2.1
MDH............................. 249 5.6 249 1.8
SCH AND RRC..................... 78 1.8 78 1.4
TYPE OF OWNERSHIP:
VOLUNTARY....................... 2,362 52.2 2,359 1.9
PROPRIETARY..................... 696 15.4 685 2.4
GOVERNMENT...................... 791 17.6 787 2.5
SPECIALTY HOSPITALS:
EYE AND EAR..................... 13 0.2 13 2.5
TRAUMA.......................... 151 3.4 151 2.6
CANCER.......................... 11 0.2 11 5.2
TEFRA HOSPITALS (NOT INCLUDED ON
OTHER LINES):
REHAB........................... 159 3.6 94 5.8
PSYCH........................... 167 3.6 46 0.6
LTC............................. 135 3.0 88 2.7
CHILDREN........................ 42 1.0 38 11.8
----------------------------------------------------------------------------------------------------------------

[[Page 48020]]

F. Estimated Impacts of This Proposed Rule on Beneficiaries

For services for which the beneficiary pays a coinsurance of 20
percent of the payment rate, the beneficiary share of payment would
increase for services for which OPPS payments would rise and would
decrease for services for which OPPS payments would fall. For example,
for a mid level office visit (APC 0601), the minimum unadjusted
copayment in 2003 was $10.11; under this proposed rule, the minimum
unadjusted copayment for APC 601 would be $10.89 because the OPPS
payment for the service would increase under this proposed rule. For
some services (those services for which a national unadjusted copayment
amount is shown in Addendum B), however, the beneficiary copayment is
frozen based on historic data and would not change, therefore not
presenting any potential impact on beneficiaries.
However, in all cases, the statute limits beneficiary liability for
copayment for a service to the inpatient hospital deductible for the
applicable year. This amount was $840 for 2003, but is not yet
determined for 2004. In general, the impact of this proposed rule on
beneficiaries would vary based on the service the beneficiary receives
and whether the copayment for the service is one that is frozen under
the OPPS.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.

Dated: July 16, 2003.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
Approved: July 22, 2003.
Tommy G. Thompson,
Secretary.

Addendum A.--List of Ambulatory Payment Classifications (APCs) With Status Indicators, Relative Weights, Payment
Rates, and Copayment Amounts Calendar Year 2004
----------------------------------------------------------------------------------------------------------------
National Minimum
APC Group title Status indicator Relative Payment unadjusted unadjusted
weight rate copayment copayment
----------------------------------------------------------------------------------------------------------------
0001............. Level I S................. 0.3940 $21.39 $7.09 $4.28
Photochemotherapy.
0002............. Fine needle Biopsy/ T................. 1.0937 $59.38 ........... $11.88
Aspiration.
0003............. Bone Marrow Biopsy/ T................. 2.2627 $122.84 ........... $24.57
Aspiration.
0004............. Level I Needle Biopsy/ T................. 1.5774 $85.64 $22.10 $17.13
Aspiration Except
Bone Marrow.
0005............. Level II Needle T................. 3.3675 $182.82 $71.59 $36.56
Biopsy /Aspiration
Except Bone Marrow.
0006............. Level I Incision & T................. 1.7487 $94.94 $24.12 $18.99
Drainage.
0007............. Level II Incision & T................. 11.4943 $624.01 ........... $124.80
Drainage.
0008............. Level III Incision T................. 16.8303 $913.70 ........... $182.74
and Drainage.
0009............. Nail Procedures...... T................. 0.6597 $35.81 $8.34 $7.16
0010............. Level I Destruction T................. 0.6806 $36.95 $10.08 $7.39
of Lesion.
0011............. Level II Destruction T................. 2.1800 $118.35 $27.88 $23.67
of Lesion.
0012............. Level I Debridement & T................. 0.8203 $44.53 $11.18 $8.91
Destruction.
0013............. Level II Debridement T................. 1.1420 $62.00 $14.20 $12.40
& Destruction.
0015............. Level III Debridement T................. 1.5832 $85.95 $20.35 $17.19
& Destruction.
0016............. Level IV Debridement T................. 2.7343 $148.44 $57.31 $29.69
& Destruction.
0017............. Level VI Debridement T................. 16.7332 $908.43 $227.84 $181.69
& Destruction.
0018............. Biopsy of Skin/ T................. 0.9567 $51.94 $16.04 $10.39
Puncture of Lesion.
0019............. Level I Excision/ T................. 3.9807 $216.11 $71.87 $43.22
Biopsy.
0020............. Level II Excision/ T................. 7.3105 $396.88 $113.25 $79.38
Biopsy.
0021............. Level III Excision/ T................. 14.5749 $791.26 $219.48 $158.25
Biopsy.
0022............. Level IV Excision/ T................. 18.6725 $1,013.71 $354.45 $202.74
Biopsy.
0023............. Exploration T................. 3.1587 $171.48 $40.37 $34.30
Penetrating Wound.
0024............. Level I Skin Repair.. T................. 1.7847 $96.89 $34.75 $19.38
0025............. Level II Skin Repair. T................. 6.2703 $340.41 $115.49 $68.08
0027............. Level IV Skin Repair. T................. 15.8319 $859.50 $329.72 $171.90
0028............. Level I Breast T................. 17.7459 $963.41 $303.74 $192.68
Surgery.
0029............. Level II Breast T................. 29.2783 $1,589.49 $632.64 $317.90
Surgery.
0030............. Level III Breast T................. 37.2809 $2,023.94 $763.55 $404.79
Surgery.
0032............. Insertion of Central T................. 11.5584 $627.49 ........... $125.50
Venous/Arterial
Catheter.
0033............. Partial P................. 3.8397 $208.45 $41.83 $41.69
Hospitalization.
0035............. Placement of Arterial T................. 0.2236 $12.14 $3.51 $2.43
or Central Venous
Catheter.
0041............. Level I Arthroscopy.. T................. 27.2538 $1,479.58 ........... $295.92
0042............. Level II Arthroscopy. T................. 42.8551 $2,326.56 $804.74 $465.31
0043............. Closed Treatment T................. 1.9233 $104.41 ........... $20.88
Fracture Finger/Toe/
Trunk.
0045............. Bone/Joint T................. 13.5546 $735.87 $268.47 $147.17
Manipulation Under
Anesthesia.
0046............. Open/Percutaneous T................. 31.9719 $1,735.72 $535.76 $347.14
Treatment Fracture
or Dislocation.
0047............. Arthroplasty without T................. 30.3786 $1,649.22 $537.03 $329.84
Prosthesis.
0048............. Arthroplasty with T................. 47.4707 $2,577.14 $695.60 $515.43
Prosthesis.
0049............. Level I T................. 19.9376 $1,082.39 ........... $216.48
Musculoskeletal
Procedures Except
Hand and Foot.
0050............. Level II T................. 25.1166 $1,363.56 ........... $272.71
Musculoskeletal
Procedures Except
Hand and Foot.
0051............. Level III T................. 34.9381 $1,896.75 ........... $379.35
Musculoskeletal
Procedures Except
Hand and Foot.
0052............. Level IV T................. 42.6430 $2,315.05 ........... $463.01
Musculoskeletal
Procedures Except
Hand and Foot.
0053............. Level I Hand T................. 14.8188 $804.50 $253.49 $160.90
Musculoskeletal
Procedures.
0054............. Level II Hand T................. 24.2685 $1,317.51 ........... $263.50
Musculoskeletal
Procedures.
0055............. Level I Foot T................. 18.8851 $1,025.25 $355.34 $205.05
Musculoskeletal
Procedures.
0056............. Level II Foot T................. 25.1591 $1,365.86 $405.81 $273.17
Musculoskeletal
Procedures.
0057............. Bunion Procedures.... T................. 25.4248 $1,380.29 $475.91 $276.06
0058............. Level I Strapping and S................. 1.0785 $58.55 ........... $11.71
Cast Application.

[[Page 48021]]

0060............. Manipulation Therapy. S................. 0.3151 $17.11 $3.43 $3.42
0068............. CPAP Initiation...... S................. 1.1234 $60.99 $30.49 $12.20
0069............. Thoracoscopy......... T................. 28.6334 $1,554.48 $591.64 $310.90
0070............. Thoracentesis/Lavage T................. 3.1393 $170.43 ........... $34.09
Procedures.
0071............. Level I Endoscopy T................. 0.9012 $48.93 $12.89 $9.79
Upper Airway.
0072............. Level II Endoscopy T................. 1.6987 $92.22 $26.68 $18.44
Upper Airway.
0073............. Level III Endoscopy T................. 3.4396 $186.73 $73.38 $37.35
Upper Airway.
0074............. Level IV Endoscopy T................. 14.4952 $786.93 $295.70 $157.39
Upper Airway.
0075............. Level V Endoscopy T................. 20.4113 $1,108.11 $445.92 $221.62
Upper Airway.
0076............. Level I Endoscopy T................. 9.3560 $507.93 $189.82 $101.59
Lower Airway.
0077............. Level I Pulmonary S................. 0.2772 $15.05 $7.52 $3.01
Treatment.
0078............. Level II Pulmonary S................. 0.7731 $41.97 $14.55 $8.39
Treatment.
0079............. Ventilation S................. 2.2837 $123.98 ........... $24.80
Initiation and
Management.
0080............. Diagnostic Cardiac T................. 36.0982 $1,959.74 $838.92 $391.95
Catheterization.
0081............. Non-Coronary T................. 34.8355 $1,891.18 ........... $378.24
Angioplasty or
Atherectomy.
0082............. Coronary Atherectomy. T................. 100.3996 $5,450.59 $1,293.59 $1,090.12
0083............. Coronary Angioplasty T................. 59.3417 $3,221.60 ........... $644.32
and Percutaneous
Valvuloplasty.
0084............. Level I S................. 10.3392 $561.30 ........... $112.26
Electrophysiologic
Evaluation.
0085............. Level II T................. 36.3284 $1,972.23 $435.09 $394.45
Electrophysiologic
Evaluation.
0086............. Ablate Heart T................. 44.5652 $2,419.40 $822.28 $483.88
Dysrhythm Focus.
0087............. Cardiac T................. 40.4579 $2,196.42 ........... $439.28
Electrophysiologic
Recording/Mapping.
0088............. Thrombectomy......... T................. 34.6065 $1,878.75 $655.22 $375.75
0089............. Insertion/Replacement T................. 116.1611 $6,306.27 $1,722.59 $1,261.25
of Permanent
Pacemaker and
Electrodes.
0090............. Insertion/Replacement T................. 87.2850 $4,738.62 $1,705.90 $947.72
of Pacemaker Pulse
Generator.
0091............. Level II Vascular T................. 28.5187 $1,548.25 $348.23 $309.65
Ligation.
0092............. Level I Vascular T................. 25.1347 $1,364.54 $505.37 $272.91
Ligation.
0093............. Vascular T................. 20.6662 $1,121.95 $277.34 $224.39
Reconstruction/
Fistula Repair
without Device.
0094............. Level I Resuscitation S................. 2.6412 $143.39 $48.46 $28.68
and Cardioversion.
0095............. Cardiac S................. 0.5984 $32.49 $16.24 $6.50
Rehabilitation.
0096............. Non-Invasive Vascular S................. 1.7332 $94.09 $47.05 $18.82
Studies.
0097............. Cardiac and X................. 1.0565 $57.36 $23.80 $11.47
Ambulatory Blood
Pressure Monitoring.
0098............. Injection of T................. 1.1630 $63.14 $15.17 $12.63
Sclerosing Solution.
0099............. Electrocardiograms... S................. 0.3708 $20.13 ........... $4.03
0100............. Cardiac Stress Tests. X................. 1.6726 $90.80 $41.44 $18.16
0101............. Tilt Table Evaluation S................. 4.3675 $237.11 $105.27 $47.42
0103............. Miscellaneous T................. 12.1256 $658.29 $223.63 $131.66
Vascular Procedures.
0104............. Transcatheter T................. 80.8877 $4,391.31 ........... $878.26
Placement of
Intracoronary Stents.
0105............. Revision/Removal of T................. 18.9084 $1,026.52 $370.40 $205.30
Pacemakers, AICD, or
Vascular.
0106............. Insertion/Replacement/ T................. 49.9534 $2,711.92 $542.39 $542.38
Repair of Pacemaker
and/or Electrodes.
0107............. Insertion of T................. 290.5429 $15,773.28 $3,429.62 $3,154.66
Cardioverter-
Defibrillator.
0108............. Insertion/Replacement/ T................. 489.5275 $26,575.96 ........... $5,315.19
Repair of
Cardioverter-
Defibrillator Leads.
0109............. Removal of Implanted T................. 7.7075 $418.43 $131.49 $83.69
Devices.
0110............. Transfusion.......... S................. 3.7128 $201.56 ........... $40.31
0111............. Blood Product S................. 14.0169 $760.96 $211.96 $152.19
Exchange.
0112............. Apheresis, S................. 34.8318 $1,890.98 $609.71 $378.20
Photopheresis, and
Plasmapheresis.
0113............. Excision Lymphatic T................. 19.9529 $1,083.22 ........... $216.64
System.
0114............. Thyroid/ T................. 37.3583 $2,028.14 $485.91 $405.63
Lymphadenectomy
Procedures.
0115............. Cannula/Access Device T................. 25.6233 $1,391.06 $459.35 $278.21
Procedures.
0119............. Implantation of T................. 129.8988 $7,052.08 ........... $1,410.42
Infusion Pump.
0121............. Level I Tube changes T................. 2.2058 $119.75 $43.80 $23.95
and Repositioning.
0122............. Level II Tube changes T................. 8.4398 $458.19 $93.97 $91.64
and Repositioning.
0123............. Bone Marrow S................. 4.0076 $217.57 ........... $43.51
Harvesting and Bone
Marrow/Stem Cell
Transplant.
0124............. Revision of Implanted T................. 27.4545 $1,490.48 $298.10 $298.10
Infusion Pump.
0125............. Refilling of Infusion T................. 2.5105 $136.29 ........... $27.26
Pump.
0130............. Level I Laparoscopy.. T................. 32.5959 $1,769.60 $659.53 $353.92
0131............. Level II Laparoscopy. T................. 40.8955 $2,220.18 $1,001.89 $444.04
0132............. Level III Laparoscopy T................. 56.6318 $3,074.48 $1,239.22 $614.90
0140............. Esophageal Dilation T................. 6.3480 $344.63 $107.24 $68.93
without Endoscopy.
0141............. Upper GI Procedures.. T................. 7.8542 $426.40 $143.38 $85.28
0142............. Small Intestine T................. 9.0138 $489.35 $152.78 $97.87
Endoscopy.
0143............. Lower GI Endoscopy... T................. 8.3227 $451.83 $186.06 $90.37
0146............. Level I Sigmoidoscopy T................. 3.9986 $217.08 $64.40 $43.42
0147............. Level II T................. 7.5876 $411.92 ........... $82.38
Sigmoidoscopy.
0148............. Level I Anal/Rectal T................. 4.1171 $223.51 $63.38 $44.70
Procedure.
0149............. Level III Anal/Rectal T................. 16.8557 $915.08 $293.06 $183.02
Procedure.

[[Page 48022]]

0150............. Level IV Anal/Rectal T................. 22.2565 $1,208.28 $437.12 $241.66
Procedure.
0151............. Endoscopic Retrograde T................. 18.8763 $1,024.78 $245.46 $204.96
Cholangio-
Pancreatography
(ERCP).
0152............. Percutaneous T................. 8.2940 $450.27 $113.02 $90.05
Abdominal and
Biliary Procedures.
0153............. Peritoneal and T................. 21.2745 $1,154.97 $410.87 $230.99
Abdominal Procedures.
0154............. Hernia/Hydrocele T................. 26.8861 $1,459.62 $464.85 $291.92
Procedures.
0155............. Level II Anal/Rectal T................. 9.9148 $538.26 $188.89 $107.65
Procedure.
0156............. Level II Urinary and T................. 3.1438 $170.67 $46.55 $34.13
Anal Procedures.
0157............. Colorectal Cancer S................. 2.4771 $134.48 ........... $26.90
Screening: Barium
Enema.
0158............. Colorectal Cancer T................. 7.4187 $402.75 $100.69 $80.55
Screening:
Colonoscopy.
0159............. Colorectal Cancer S................. 2.7168 $147.49 $36.87 $29.50
Screening: Flexible
Sigmoidoscopy.
0160............. Level I T................. 6.8152 $369.99 $105.06 $74.00
Cystourethroscopy
and other
Genitourinary
Procedures.
0161............. Level II T................. 16.5822 $900.23 $249.36 $180.05
Cystourethroscopy
and other
Genitourinary
Procedures.
0162............. Level III T................. 21.8578 $1,186.64 ........... $237.33
Cystourethroscopy
and other
Genitourinary
Procedures.
0163............. Level IV T................. 33.6435 $1,826.47 ........... $365.29
Cystourethroscopy
and other
Genitourinary
Procedures.
0164............. Level I Urinary and T................. 1.2115 $65.77 $17.59 $13.15
Anal Procedures.
0165............. Level III Urinary and T................. 14.0780 $764.28 ........... $152.86
Anal Procedures.
0166............. Level I Urethral T................. 16.8401 $914.23 $218.73 $182.85
Procedures.
0167............. Level III Urethral T................. 30.1066 $1,634.46 $555.84 $326.89
Procedures.
0168............. Level II Urethral T................. 30.3485 $1,647.59 $405.60 $329.52
Procedures.
0169............. Lithotripsy.......... T................. 44.5329 $2,417.65 $1,115.69 $483.53
0170............. Dialysis............. S................. 5.9427 $322.62 ........... $64.52
0180............. Circumcision......... T................. 18.4967 $1,004.17 $304.87 $200.83
0181............. Penile Procedures.... T................. 29.0094 $1,574.89 $621.82 $314.98
0183............. Testes/Epididymis T................. 21.7612 $1,181.39 ........... $236.28
Procedures.
0184............. Prostate Biopsy...... T................. 3.8073 $206.69 $96.27 $41.34
0187............. Miscellaneous X................. 4.4274 $240.36 $90.71 $48.07
Placement/
Repositioning.
0188............. Level II Female T................. 1.1079 $60.15 ........... $12.03
Reproductive Proc.
0189............. Level III Female T................. 1.3207 $71.70 $16.70 $14.34
Reproductive Proc.
0190............. Level I Hysteroscopy. T................. 19.8088 $1,075.40 $424.28 $215.08
0191............. Level I Female T................. 0.1679 $9.12 $2.65 $1.82
Reproductive Proc.
0192............. Level IV Female T................. 2.6966 $146.40 $39.11 $29.28
Reproductive Proc.
0193............. Level V Female T................. 15.7365 $854.32 $171.13 $170.86
Reproductive Proc.
0194............. Level VI Female T................. 18.8194 $1,021.69 $397.84 $204.34
Reproductive Proc.
0195............. Level VII Female T................. 25.3207 $1,374.64 $483.80 $274.93
Reproductive Proc.
0196............. Dilation and T................. 16.1823 $878.52 $338.23 $175.70
Curettage.
0197............. Infertility T................. 5.1958 $282.07 ........... $56.41
Procedures.
0198............. Pregnancy and T................. 1.3718 $74.47 $32.19 $14.89
Neonatal Care
Procedures.
0199............. Obstetrical Care T................. 16.8630 $915.48 ........... $183.10
Service.
0200............. Therapeutic Abortion. T................. 18.3633 $996.93 $307.83 $199.39
0201............. Spontaneous Abortion. T................. 17.2803 $938.13 $329.65 $187.63
0202............. Level VIII Female T................. 38.8053 $2,106.70 $1,032.28 $421.34
Reproductive Proc.
0203............. Level IV Nerve T................. 11.8511 $643.38 $276.76 $128.68
Injections.
0204............. Level I Nerve T................. 2.2209 $120.57 $40.13 $24.11
Injections.
0206............. Level II Nerve T................. 5.2584 $285.47 $75.55 $57.09
Injections.
0207............. Level III Nerve T................. 6.5998 $358.30 $123.69 $71.66
Injections.
0208............. Laminotomies and T................. 40.6521 $2,206.96 ........... $441.39
Laminectomies.
0209............. Extended EEG Studies S................. 11.5352 $626.23 $280.58 $125.25
and Sleep Studies,
Level II.
0212............. Nervous System T................. 2.9989 $162.81 $74.92 $32.56
Injections.
0213............. Extended EEG Studies S................. 3.2422 $176.02 $70.41 $35.20
and Sleep Studies,
Level I.
0214............. Electroencephalogram. S................. 2.2459 $121.93 $58.12 $24.39
0215............. Level I Nerve and S................. 0.6390 $34.69 $15.76 $6.94
Muscle Tests.
0216............. Level III Nerve and S................. 2.8332 $153.81 $67.98 $30.76
Muscle Tests.
0218............. Level II Nerve and S................. 1.1296 $61.32 ........... $12.26
Muscle Tests.
0220............. Level I Nerve T................. 16.5293 $897.36 ........... $179.47
Procedures.
0221............. Level II Nerve T................. 25.8194 $1,401.71 $463.62 $280.34
Procedures.
0222............. Implantation of T................. 188.7735 $10,248.32 ........... $2,049.66
Neurological Device.
0223............. Implantation or T................. 26.0352 $1,413.42 ........... $282.68
Revision of Pain
Management Catheter.
0224............. Implantation of T................. 34.0161 $1,846.70 $453.41 $369.34
Reservoir/Pump/Shunt.
0225............. Implantation of S................. 56.0375 $3,042.22 ........... $608.44
Neurostimulator
Electrodes.
0226............. Implantation of Drug T................. 159.6795 $8,668.84 ........... $1,733.77
Infusion Reservoir.
0227............. Implantation of Drug T................. 163.6124 $8,882.35 ........... $1,776.47
Infusion Device.
0228............. Creation of Lumbar T................. 51.1329 $2,775.95 $621.80 $555.19
Subarachnoid Shunt.
0229............. Transcatherter T................. 59.4977 $3,230.07 $771.23 $646.01
Placement of
Intravascular Shunts.
0230............. Level I Eye Tests & S................. 0.7379 $40.06 $14.97 $8.01
Treatments.
0231............. Level III Eye Tests & S................. 2.0880 $113.36 $50.94 $22.67
Treatments.

[[Page 48023]]

0232............. Level I Anterior T................. 4.9739 $270.03 $103.17 $54.01
Segment Eye
Procedures.
0233............. Level II Anterior T................. 14.5435 $789.55 $266.33 $157.91
Segment Eye
Procedures.
0234............. Level III Anterior T................. 21.5482 $1,169.83 $511.31 $233.97
Segment Eye
Procedures.
0235............. Level I Posterior T................. 4.9900 $270.90 $72.04 $54.18
Segment Eye
Procedures.
0236............. Level II Posterior T................. 19.6866 $1,068.77 ........... $213.75
Segment Eye
Procedures.
0237............. Level III Posterior T................. 34.0324 $1,847.58 $818.54 $369.52
Segment Eye
Procedures.
0238............. Level I Repair and T................. 3.2016 $173.81 $58.96 $34.76
Plastic Eye
Procedures.
0239............. Level II Repair and T................. 6.2432 $338.94 $110.62 $67.79
Plastic Eye
Procedures.
0240............. Level III Repair and T................. 17.3397 $941.35 $315.31 $188.27
Plastic Eye
Procedures.
0241............. Level IV Repair and T................. 21.9830 $1,193.44 $384.47 $238.69
Plastic Eye
Procedures.
0242............. Level V Repair and T................. 29.2193 $1,586.29 $597.36 $317.26
Plastic Eye
Procedures.
0243............. Strabismus/Muscle T................. 21.1035 $1,145.69 $431.39 $229.14
Procedures.
0244............. Corneal Transplant... T................. 37.4885 $2,035.21 $803.26 $407.04
0245............. Level I Cataract T................. 12.5751 $682.69 $226.11 $136.54
Procedures without
IOL Insert.
0246............. Cataract Procedures T................. 22.8428 $1,240.11 $495.96 $248.02
with IOL Insert.
0247............. Laser Eye Procedures T................. 5.0192 $272.49 $104.31 $54.50
Except Retinal.
0248............. Laser Retinal T................. 4.7544 $258.11 $95.08 $51.62
Procedures.
0249............. Level II Cataract T................. 28.3307 $1,538.05 $524.67 $307.61
Procedures without
IOL Insert.
0250............. Nasal Cauterization/ T................. 1.5381 $83.50 $29.23 $16.70
Packing.
0251............. Level I ENT T................. 1.8643 $101.21 ........... $20.24
Procedures.
0252............. Level II ENT T................. 6.5416 $355.14 $113.41 $71.03
Procedures.
0253............. Level III ENT T................. 15.1698 $823.55 $282.29 $164.71
Procedures.
0254............. Level IV ENT T................. 21.4368 $1,163.78 $321.35 $232.76
Procedures.
0256............. Level V ENT T................. 35.0866 $1,904.82 ........... $380.96
Procedures.
0258............. Tonsil and Adenoid T................. 21.0273 $1,141.55 $437.25 $228.31
Procedures.
0259............. Level VI ENT T................. 389.1764 $21,128.00 $9,394.83 $4,225.60
Procedures.
0260............. Level I Plain Film X................. 0.7845 $42.59 $21.29 $8.52
Except Teeth.
0261............. Level II Plain Film X................. 1.3238 $71.87 ........... $14.37
Except Teeth
Including Bone
Density Measurement.
0262............. Plain Film of Teeth.. X................. 0.7851 $42.62 $9.82 $8.52
0263............. Level I Miscellaneous X................. 2.1875 $118.76 $43.58 $23.75
Radiology Procedures.
0264............. Level II X................. 3.0022 $162.99 $79.41 $32.60
Miscellaneous
Radiology Procedures.
0265............. Level I Diagnostic S................. 1.0245 $55.62 $27.81 $11.12
Ultrasound Except
Vascular.
0266............. Level II Diagnostic S................. 1.6234 $88.13 $44.07 $17.63
Ultrasound Except
Vascular.
0267............. Level III Diagnostic S................. 2.4805 $134.66 $65.52 $26.93
Ultrasound Except
Vascular.
0268............. Ultrasound Guidance S................. 1.2640 $68.62 ........... $13.72
Procedures.
0269............. Level III S................. 3.2517 $176.53 $87.24 $35.31
Echocardiogram
Except
Transesophageal.
0270............. Transesophageal S................. 5.9057 $320.61 $146.79 $64.12
Echocardiogram.
0271............. Mammography.......... S................. 0.6548 $35.55 $16.80 $7.11
0272............. Level I Fluoroscopy.. X................. 1.4086 $76.47 $38.24 $15.29
0274............. Myelography.......... S................. 3.5837 $194.56 $92.92 $38.91
0275............. Arthrography......... S................. 3.2967 $178.97 $69.09 $35.79
0276............. Level I Digestive S................. 1.6025 $87.00 $41.72 $17.40
Radiology.
0277............. Level II Digestive S................. 2.4462 $132.80 $60.47 $26.56
Radiology.
0278............. Diagnostic Urography. S................. 2.7365 $148.56 $66.07 $29.71
0279............. Level II Angiography S................. 11.0678 $600.86 $174.57 $120.17
and Venography
except Extremity.
0280............. Level III Angiography S................. 19.0237 $1,032.78 $353.85 $206.56
and Venography
except Extremity.
0281............. Venography of S................. 6.6888 $363.13 $115.16 $72.63
Extremity.
0282............. Miscellaneous S................. 1.6813 $91.28 $44.51 $18.26
Computerized Axial
Tomography.
0283............. Computerized Axial S................. 4.6121 $250.39 $125.19 $50.08
Tomography with
Contrast Material.
0284............. Magnetic Resonance S................. 7.0207 $381.15 $190.57 $76.23
Imaging and Magnetic
Resonance
Angiography with
Contras.
0285............. Myocardial Positron S................. 19.5044 $1,058.87 $409.56 $211.77
Emission Tomography
(PET).
0287............. Complex Venography... S................. 6.2829 $341.09 $107.20 $68.22
0288............. Bone Density:Axial S................. 1.2854 $69.78 ........... $13.96
Skeleton.
0289............. Needle Localization X................. 3.6386 $197.54 $44.80 $39.51
for Breast Biopsy.
0296............. Level I Therapeutic S................. 3.1381 $170.36 $69.20 $34.07
Radiologic
Procedures.
0297............. Level II Therapeutic S................. 8.1532 $442.63 $172.51 $88.53
Radiologic
Procedures.
0299............. Miscellaneous S................. 5.7427 $311.77 $62.36 $62.35
Radiation Treatment.
0300............. Level I Radiation S................. 1.5112 $82.04 ........... $16.41
Therapy.
0301............. Level II Radiation S................. 2.1337 $115.84 $23.17 $23.17
Therapy.
0302............. Level III Radiation S................. 6.1992 $336.55 $127.49 $67.31
Therapy.
0303............. Treatment Device X................. 2.8636 $155.46 $66.95 $31.09
Construction.
0304............. Level I Therapeutic X................. 1.6599 $90.11 $41.52 $18.02
Radiation Treatment
Preparation.
0305............. Level II Therapeutic X................. 3.6649 $198.96 $91.38 $39.79
Radiation Treatment
Preparation.
0310............. Level III Therapeutic X................. 13.7085 $744.22 $325.27 $148.84
Radiation Treatment
Preparation.
0312............. Radioelement S................. 3.6892 $200.28 $40.06 $40.06
Applications.
0313............. Brachytherapy........ S................. 13.1258 $712.59 ........... $142.52
0314............. Hyperthermic S................. 5.0930 $276.49 $101.77 $55.30
Therapies.

[[Page 48024]]

0320............. Electroconvulsive S................. 5.4480 $295.77 $80.06 $59.15
Therapy.
0321............. Biofeedback and Other S................. 1.2462 $67.65 $21.78 $13.53
Training.
0322............. Brief Individual S................. 1.3091 $71.07 ........... $14.21
Psychotherapy.
0323............. Extended Individual S................. 1.7955 $97.48 $21.26 $19.50
Psychotherapy.
0324............. Family Psychotherapy. S................. 2.8219 $153.20 ........... $30.64
0325............. Group Psychotherapy.. S................. 1.5820 $85.89 $18.27 $17.18
0330............. Dental Procedures.... S................. 0.5609 $30.45 $6.09 $6.09
0332............. Computerized Axial S................. 3.3916 $184.13 $91.27 $36.83
Tomography and
Computerized
Angiography without
Contras.
0333............. Computerized Axial S................. 5.4299 $294.78 $146.98 $58.96
Tomography and
Computerized Angio.
w/o Contrast
Material.
0335............. Magnetic Resonance S................. 6.4453 $349.91 $151.46 $69.98
Imaging,
Miscellaneous.
0336............. Magnetic Resonance S................. 6.4817 $351.89 $175.94 $70.38
Imaging and Magnetic
Resonance
Angiography without
Cont.
0337............. MRI and Magnetic S................. 9.3215 $506.05 $240.77 $101.21
Resonance
Angiography without
Contrast Material
followed.
0339............. Observation.......... S................. 7.2016 $390.97 ........... $78.19
0340............. Minor Ancillary X................. 0.6232 $33.83 ........... $6.77
Procedures.
0341............. Skin Tests........... X................. 0.1468 $7.97 $3.08 $1.59
0342............. Level I Pathology.... X................. 0.2169 $11.78 $5.88 $2.36
0343............. Level II Pathology... X................. 0.4662 $25.31 $12.55 $5.06
0344............. Level III Pathology.. X................. 0.6278 $34.08 $17.04 $6.82
0345............. Level I Transfusion X................. 0.2589 $14.06 $3.10 $2.81
Laboratory
Procedures.
0346............. Level II Transfusion X................. 0.3877 $21.05 $5.31 $4.21
Laboratory
Procedures.
0347............. Level III Transfusion X................. 0.9646 $52.37 $13.19 $10.47
Laboratory
Procedures.
0348............. Fertility Laboratory X................. 1.2207 $66.27 ........... $13.25
Procedures.
0352............. Level I Injections... X................. 0.1076 $5.84 ........... $1.17
0353............. Level II Allergy X................. 0.4106 $22.29 ........... $4.46
Injections.
0355............. Level III K................. 0.2667 $14.48 ........... $2.90
Immunizations.
0356............. Level IV K................. 0.4353 $23.63 ........... $4.73
Immunizations.
0359............. Level II Injections.. X................. 0.8794 $47.74 ........... $9.55
0360............. Level I Alimentary X................. 1.7088 $92.77 $42.45 $18.55
Tests.
0361............. Level II Alimentary X................. 3.5574 $193.13 $83.23 $38.63
Tests.
0362............. Level III X................. 2.5384 $137.81 ........... $27.56
Otorhinolaryngologic
Function Tests.
0363............. Level I X................. 0.8536 $46.34 $17.15 $9.27
Otorhinolaryngologic
Function Tests.
0364............. Level I Audiometry... X................. 0.4415 $23.97 $9.06 $4.79
0365............. Level II Audiometry.. X................. 1.1915 $64.69 $18.95 $12.94
0367............. Level I Pulmonary X................. 0.5828 $31.64 $15.16 $6.33
Test.
0368............. Level II Pulmonary X................. 0.9321 $50.60 $25.30 $10.12
Tests.
0369............. Level III Pulmonary X................. 2.5282 $137.25 $44.18 $27.45
Tests.
0370............. Allergy Tests........ X................. 0.8858 $48.09 $11.58 $9.62
0371............. Level I Allergy X................. 0.4084 $22.17 $4.44 $4.43
Injections.
0372............. Therapeutic X................. 0.5529 $30.02 $10.09 $6.00
Phlebotomy.
0373............. Neuropsychological X................. 2.1165 $114.90 $22.98 $22.98
Testing.
0374............. Monitoring X................. 1.1062 $60.05 ........... $12.01
Psychiatric Drugs.
0375............. Ancillary Outpatient T................. ........... $1,150.00 ........... $230.00
Services when
Patient Expires.
0376............. Pkgd cancer chemo, S................. 2.1479 $116.61 ........... $23.32
other.
0377............. Sep cancer chemo, S................. 0.6673 $36.23 ........... $7.25
other.
0378............. Infusion of pkgd S................. 4.3955 $238.63 ........... $47.73
cancer.
0379............. Infusion, separate S................. 2.4298 $131.91 ........... $26.38
cancer.
0380............. Pkgd cancer chemo, S................. 5.1857 $281.53 ........... $56.31
both.
0381............. Sep cancer chemo, S................. 2.1596 $117.24 ........... $23.45
both.
0382............. Infusion, pkgd S................. 4.6839 $254.28 ........... $50.86
noncancer.
0383............. Infusion, separate S................. 1.8419 $99.99 ........... $20.00
noncancer.
0384............. GI Procedures with T................. 36.0040 $1,954.62 $424.53 $390.92
Stents.
0385............. Level I Prosthetic T................. 66.4829 $3,609.29 ........... $721.86
Urological
Procedures.
0386............. Level II Prosthetic T................. 118.8122 $6,450.20 ........... $1,290.04
Urological
Procedures.
0387............. Level II Hysteroscopy T................. 28.5174 $1,548.18 $660.84 $309.64
0388............. Discography.......... S................. 11.7450 $637.62 $304.54 $127.52
0389............. Non-imaging Nuclear S................. 1.6475 $89.44 $44.72 $17.89
Medicine.
0390............. Level I Thyroid S................. 2.8434 $154.37 $77.18 $30.87
Imaging.
0391............. Level II Thyroid S................. 3.7174 $201.81 $100.91 $40.36
Imaging.
0392............. Adrenal Imaging...... S................. 6.7081 $364.18 $182.09 $72.84
0393............. Red Cell/Plasma S................. 4.0720 $221.06 $110.53 $44.21
Studies.
0394............. Hepatobiliary Imaging S................. 4.4370 $240.88 $120.44 $48.18
0395............. GI Tract and B12 S................. 3.9372 $213.75 $106.87 $42.75
Studies.
0396............. Bone Imaging......... S................. 4.2445 $230.43 $115.21 $46.09
0397............. Vascular Imaging..... S................. 2.4737 $134.29 $67.15 $26.86
0398............. Cardiac Imaging...... S................. 6.6521 $361.14 $180.57 $72.23

[[Page 48025]]

0399............. Cardiac Add-on S................. 1.6033 $87.04 $43.52 $17.41
Imaging.
0400............. Hematopoietic Imaging S................. 3.8691 $210.05 $105.02 $42.01
0401............. Pulmonary Imaging.... S................. 4.9130 $266.72 $133.36 $53.34
0402............. Brain Imaging........ S................. 5.4818 $297.60 $148.80 $59.52
0403............. CSF Imaging.......... S................. 3.9265 $213.17 $106.58 $42.63
0404............. Renal Imaging........ S................. 5.1538 $279.79 $139.90 $55.96
0405............. Non-renal GU Studies. S................. 0.7739 $42.01 $21.01 $8.40
0406............. Tumor/Infection S................. 4.7542 $258.10 ........... $51.62
Imaging.
0407............. Thyroid Radionucliide S................. 4.2797 $232.34 $116.17 $46.47
treatment.
0408............. Non-thyroid S................. 4.0000 $217.16 ........... $43.43
Radionucliide
treatment.
0409............. Red Blood Cell Tests. X................. 0.1385 $7.52 $2.31 $1.50
0410............. Mammogram Add On..... S................. 0.1473 $8.00 ........... $1.60
0411............. Respiratory S................. 0.4207 $22.84 ........... $4.57
Procedures.
0412............. IMRT Treatment S................. 5.2832 $286.82 ........... $57.36
Delivery.
0413............. IMRT Treatment Plan.. S................. 6.0369 $327.74 ........... $65.55
0414............. Reconstruction CT S................. 4.8012 $260.65 ........... $52.13
Angiography of Aorta.
0415............. Level II Endoscopy T................. 20.9920 $1,139.63 $463.30 $227.93
Lower Airway.
0600............. Low Level Clinic V................. 0.9376 $50.90 ........... $10.18
Visits.
0601............. Mid Level Clinic V................. 1.0031 $54.46 ........... $10.89
Visits.
0602............. High Level Clinic V................. 1.5603 $84.71 ........... $16.94
Visits.
0610............. Low Level Emergency V................. 1.4146 $76.80 $19.57 $15.36
Visits.
0611............. Mid Level Emergency V................. 2.4881 $135.08 $36.47 $27.02
Visits.
0612............. High Level Emergency V................. 4.3235 $234.72 $54.14 $46.94
Visits.
0620............. Critical Care........ S................. 9.2657 $503.03 $145.78 $100.61
0648............. Breast Reconstruction T................. 55.5345 $3,014.91 ........... $602.98
with Prosthesis.
0649............. Prostate T................. 119.0281 $6,461.92 ........... $1,292.38
Brachytherapy
Palladium Seeds.
0651............. Complex Interstitial S................. 10.0459 $545.38 $109.08 $109.08
Radiation Source
Application.
0652............. Insertion of T................. 28.0692 $1,523.85 ........... $304.77
Intraperitoneal
Catheters.
0653............. Vascular T................. 32.4880 $1,763.74 ........... $352.75
Reconstruction/
Fistula Repair with
Device.
0654............. Insertion/Replacement T................. 103.8544 $5,638.15 ........... $1,127.63
of a permanent dual
chamber pacemaker.
0655............. Insertion/Replacement/ T................. 142.2244 $7,721.22 ........... $1,544.24
Conversion of a
permanent dual
chamber pacemaker.
0656............. Transcatheter T................. 101.3662 $5,503.07 ........... $1,100.61
Placement of
Intracoronary Drug-
Eluting Stents.
0657............. Placement of Tissue S................. 1.5630 $84.85 ........... $16.97
Clips.
0658............. Percutaneous Breast T................. 5.6035 $304.21 ........... $60.84
Biopsies.
0659............. Hyperbaric Oxygen.... S................. 3.2220 $174.92 ........... $34.98
0660............. Level II X................. 1.7330 $94.08 $30.66 $18.82
Otorhinolaryngologic
Function Tests.
0661............. Level IV Pathology... X................. 3.3215 $180.32 $90.16 $36.06
0662............. CT Angiography....... S................. 5.8751 $318.95 $156.47 $63.79
0664............. Proton Beam Radiation S................. 9.6828 $525.67 ........... $105.13
Therapy.
0665............. Bone S................. 0.7225 $39.22 ........... $7.84
Density:Appendicular
Skeleton.
0668............. Level I Angiography S................. 10.4896 $569.47 $237.76 $113.89
and Venography
except Extremity.
0669............. Digital Mammography.. S................. 0.9111 $49.46 ........... $9.89
0670............. Intravenous and S................. 26.5472 $1,441.22 $521.95 $288.24
Intracardiac
Ultrasound.
0671............. Level II S................. 1.6392 $88.99 $44.50 $17.80
Echocardiogram
Except
Transesophageal.
0672............. Level IV Posterior T................. 39.1363 $2,124.67 $988.43 $424.93
Segment Procedures.
0673............. Level IV Anterior T................. 26.7626 $1,452.91 $649.56 $290.58
Segment Eye
Procedures.
0674............. Prostate Cryoablation T................. 101.1198 $5,489.69 ........... $1,097.94
0675............. Prostatic T................. 49.3613 $2,679.78 ........... $535.96
Thermotherapy.
0676............. Level II T................. 3.7505 $203.61 $55.06 $40.72
Transcatheter
Thrombolysis.
0677............. Level I Transcatheter T................. 3.0769 $167.04 ........... $33.41
Thrombolysis.
0678............. External T................. 2.0622 $111.95 ........... $22.39
Counterpulsation.
0679............. Level II S................. 5.4862 $297.84 $95.30 $59.57
Resuscitation and
Cardioversion.
0680............. Insertion of Patient S................. 61.4222 $3,334.55 ........... $666.91
Activated Event
Recorders.
0681............. Knee Arthroplasty.... T................. 96.7483 $5,252.37 $2,090.21 $1,050.47
0682............. Level V Debridement & T................. 7.6815 $417.02 $174.57 $83.40
Destruction.
0683............. Level II S................. 1.7915 $97.26 $35.01 $19.45
Photochemotherapy.
0684............. Prostate T................. 104.7194 $5,685.11 ........... $1,137.02
Brachytherapy Iodine
Seeds.
0685............. Level III Needle T................. 4.8912 $265.54 $116.83 $53.11
Biopsy/Aspiration
Except Bone Marrow.
0686............. Level III Skin Repair T................. 17.0868 $927.63 $341.70 $185.53
0687............. Revision/Removal of T................. 19.9913 $1,085.31 $499.24 $217.06
Neurostimulator
Electrodes.
0688............. Revision/Removal of T................. 42.5880 $2,312.06 $1,132.91 $462.41
Neurostimulator
Pulse Generator
Receiver.
0689............. Electronic Analysis S................. 0.5427 $29.46 ........... $5.89
of Cardioverter-
defibrillators.
0690............. Electronic Analysis S................. 0.3986 $21.64 $10.35 $4.33
of Pacemakers and
other Cardiac
Devices.
0691............. Electronic Analysis S................. 2.9894 $162.29 $81.15 $32.46
of Programmable
Shunts/Pumps.
0692............. Electronic Analysis S................. 0.9625 $52.25 $26.13 $10.45
of Neurostimulator
Pulse Generators.
0693............. Level II Breast T................. 38.6469 $2,098.10 $798.17 $419.62
Reconstruction.

[[Page 48026]]

0694............. Mohs Surgery......... T................. 3.3272 $180.63 $72.25 $36.13
0695............. Level VII Debridement T................. 19.1377 $1,038.97 $266.59 $207.79
& Destruction.
0697............. Level I S................. 1.4621 $79.38 $39.69 $15.88
Echocardiogram
Except
Transesophageal.
0698............. Level II Eye Tests & S................. 0.9355 $50.79 $18.72 $10.16
Treatments.
0699............. Level IV Eye Tests & T................. 2.2211 $120.58 $54.26 $24.12
Treatments.
0700............. Antepartum T................. 2.4359 $132.24 $37.03 $26.45
Manipulation.
0701............. SR 89 chloride, per K................. 7.4586 $404.92 ........... $80.98
mCi.
0702............. SM 153 lexidronam, 50 K................. 16.1415 $876.31 ........... $175.26
mCi.
0704............. IN 111 Satumomab K................. 2.9212 $158.59 ........... $31.72
pendetide per dose.
0726............. Dexrazoxane hcl K................. 1.9860 $107.82 ........... $21.56
injection, 250 mg.
0728............. Filgrastim 300 mcg K................. 2.2544 $122.39 ........... $24.48
injection.
0730............. Pamidronate disodium K................. 1.5359 $83.38 ........... $16.68
, 30 mg.
0732............. Mesna injection 200 K................. 0.4908 $26.65 ........... $5.33
mg.
0733............. Non esrd epoetin K................. 0.1782 $9.67 ........... $1.93
alpha inj, 1000 u.
0734............. Injection, K................. 0.0463 $2.51 ........... $.50
darbepoetin alfa
(for non-ESRD use),
pre 1 mcg.
0800............. Leuprolide acetate, K................. 3.3020 $179.26 ........... $35.85
3.75 mg.
0802............. Etoposide oral 50 mg. K................. 0.4830 $26.22 ........... $5.24
0807............. Aldesleukin/single K................. 7.0936 $385.10 ........... $77.02
use vial.
0810............. Goserelin acetate K................. 4.9549 $269.00 ........... $53.80
implant 3.6 mg.
0811............. Carboplatin injection K................. 1.5475 $84.01 ........... $16.80
50 mg.
0812............. Carmustine, 100 mg... K................. 0.9972 $54.14 ........... $10.83
0813............. Cisplatin 10 mg K................. 0.3594 $19.51 ........... $3.90
injection.
0820............. Daunorubicin 10 mg... K................. 0.60 $32.86 ........... $6.57
0821............. Daunorubicin citrate K................. 2.9697 $161.22 ........... $32.24
liposom 10 mg.
0822............. Diethylstilbestrol K................. 1.3274 $72.06 ........... $14.41
injection 250 mg.
0823............. Docetaxel, 20 mg..... K................. 4.0041 $217.38 ........... $43.48
0827............. Floxuridine injection K................. 2.1836 $118.55 ........... $23.71
500 mg.
0828............. Gemcitabine HCL 200 K................. 1.4523 $78.84 ........... $15.77
mg.
0830............. Irinotecan injection K................. 1.8626 $101.12 ........... $20.22
20 mg.
0831............. Ifosfomide injection K................. 1.1616 $63.06 ........... $12.61
1 gm.
0832............. Idarubicin hcl K................. 3.2438 $176.10 ........... $35.22
injection 5 mg.
0836............. Interferon alfa-2b K................. 0.2000 $10.86 ........... $2.17
inj recombinant, 1
million.
0838............. Interferon gamma 1-b K................. 2.4742 $134.32 ........... $26.86
inj, 3 million u.
0840............. Melphalan hydrochl 50 K................. 4.4072 $239.26 ........... $47.85
mg.
0842............. Fludarabine phosphate K................. 3.6854 $200.08 ........... $40.02
inj 50 mg.
0843............. Pegaspargase, singl K................. 5.7621 $312.82 ........... $62.56
dose vial.
0844............. Pentostatin K................. 17.4201 $945.72 ........... $189.14
injection, 10 mg.
0849............. Rituximab, 100 mg.... K................. 5.5636 $302.04 ........... $60.41
0850............. Streptozocin K................. 1.3942 $75.69 ........... $15.14
injection, 1 gm.
0852............. Topotecan, 4 mg...... K................. 7.9075 $429.29 ........... $85.86
0855............. Vinorelbine tartrate, K................. 1.1683 $63.43 ........... $12.69
10 mg.
0856............. Porfimer sodium, 75 K................. 25.3788 $1,377.79 ........... $275.56
mg.
0857............. Bleomycin sulfate K................. 2.2352 $121.35 ........... $24.27
injection 15 u.
0858............. Cladribine, 1mg...... K................. 0.7031 $38.17 ........... $7.63
0861............. Leuprolide acetate K................. 0.8223 $44.64 ........... $8.93
injection 1 mg.
0862............. Mitomycin 5 mg inj... K................. 0.9557 $51.88 ........... $10.38
0863............. Paclitaxel injection, K................. 1.2674 $68.81 ........... $13.76
30 mg.
0864............. Mitoxantrone hcl, 5 K................. 3.1513 $171.08 ........... $34.22
mg.
0865............. Interferon alfa-n3 K................. 1.5823 $85.90 ........... $17.18
inj, human leukocyte
derived, 2.
0884............. Rho d immune globulin K................. 0.2312 $12.55 ........... $2.51
inj, 1 dose pkg.
0888............. Cyclosporine oral 100 K................. 0.0482 $2.62 ........... $.52
mg.
0890............. Lymphocyte immune K................. 2.1958 $119.21 ........... $23.84
globulin 250 mg.
0891............. Tacrolimus oral per 1 K................. 0.0236 $1.28 ........... $.26
mg.
0900............. Alglucerase K................. 0.5473 $29.71 ........... $5.94
injection, per 10 u.
0901............. Alpha 1 proteinase K................. 0.0214 $1.16 ........... $.23
inhibitor, 10 mg.
0902............. Botulinum toxin a, K................. 0.0460 $2.50 ........... $.50
per unit.
0903............. Cytomegalovirus imm K................. 5.0754 $275.54 ........... $55.11
IV/vial.
0905............. Immune globulin, 1g.. K................. 0.8103 $43.99 ........... $8.80
0906............. RSV-ivig, 50 mg...... K................. 6.0142 $326.50 ........... $65.30
0909............. Interferon beta-1a, K................. 2.8010 $152.06 ........... $30.41
33 mcg.
0910............. Interferon beta-1b / K................. 1.9843 $107.73 ........... $21.55
0.25 mg.
0911............. Streptokinase per K................. 1.6055 $87.16 ........... $17.43
250,000 iu.
0916............. Imiglucerase K................. 0.0531 $2.88 ........... $.58
injection/unit.
0917............. Inj, Adenosine, 90 mg K................. 2.3474 $127.44 ........... $25.49
0925............. Factor viii per iu... K................. 0.0085 $.46 ........... $.09
0926............. Factor VIII (porcine) K................. 0.0253 $1.37 ........... $.27
per iu.
0927............. Factor viii K................. 0.0168 $.91 ........... $.18
recombinant per iu.
0928............. Factor ix complex per K................. 0.0085 $.46 ........... $.09
iu.
0929............. Anti-inhibitor per iu K................. 0.0168 $.91 ........... $.18

[[Page 48027]]

0930............. Antithrombin iii K................. 0.0117 $.64 ........... $.13
injection per iu.
0931............. Factor IX non- K................. 0.0104 $.56 ........... $.11
recombinant, per iu.
0932............. Factor IX K................. 0.0168 $.91 ........... $.18
recombinant, per iu.
0949............. Plasma, Pooled K................. 2.0608 $111.88 ........... $22.38
Multiple Donor,
Solvent/Detergent T.
0950............. Blood (Whole) For K................. 1.4575 $79.13 ........... $15.83
Transfusion.
0952............. Cryoprecipitate...... K................. 0.4860 $26.38 ........... $5.28
0954............. RBC leukocytes K................. 1.9770 $107.33 ........... $21.47
reduced.
0955............. Plasma, Fresh Frozen. K................. 1.5750 $85.51 ........... $17.10
0956............. Plasma Protein K................. 1.5414 $83.68 ........... $16.74
Fraction.
0957............. Platelet Concentrate. K................. 0.6870 $37.30 ........... $7.46
0958............. Platelet Rich Plasma. K................. 1.1296 $61.32 ........... $12.26
0959............. Red Blood Cells...... K................. 1.4326 $77.77 ........... $15.55
0960............. Washed Red Blood K................. 2.6638 $144.62 ........... $28.92
Cells.
0961............. Infusion, Albumin K................. 0.7319 $39.73 ........... $7.95
(Human) 5%, 50 ml.
0963............. Albumin (human), 5%, K................. 3.4713 $188.45 ........... $37.69
250 ml.
0964............. Albumin (human), 25%, K................. 0.7911 $42.95 ........... $8.59
20 ml.
0965............. Albumin (human), 25%, K................. 1.9432 $105.49 ........... $21.10
50ml.
0966............. Plasmaprotein K................. 7.7071 $418.41 ........... $83.68
fract,5%,250ml.
1009............. Cryoprecip reduced K................. 0.9447 $51.29 ........... $10.26
plasma.
1010............. Blood, L/R, CMV-neg.. K................. 2.1361 $115.97 ........... $23.19
1011............. Platelets, HLA-m, L/ K................. 8.2851 $449.79 ........... $89.96
R, unit.
1013............. Platelet concentrate, K................. 0.9101 $49.41 ........... $9.88
L/R, unit.
1016............. Blood, L/R, froz/ K................. 5.0012 $271.51 ........... $54.30
deglycerol/washed.
1017............. Platelets, aph/pher, K................. 6.5175 $353.83 ........... $70.77
L/R, CMV-neg, unit.
1018............. Blood, L/R, K................. 2.1950 $119.16 ........... $23.83
irradiated.
1019............. Platelets, aph/pher, K................. 6.7353 $365.65 ........... $73.13
L/R, irradiated,
unit.
1020............. Pit, pher,L/ K................. 9.6266 $522.62 ........... $104.52
R,CMV,irrad.
1021............. RBC, frz/deg/wsh, L/ K................. 6.5287 $354.44 ........... $70.89
R, irrad.
1022............. RBC, L/R, CMV neg, K................. 3.9139 $212.48 ........... $42.50
irrad.
1045............. Iobenguane sulfate I- K................. 2.9293 $159.03 ........... $31.81
131per 0.5 mCi.
1064............. I-131 sodium iodide K................. 0.1007 $5.47 ........... $1.09
capsule.
1065............. I-131 sodium iodide K................. 0.0002 $.01 ........... $.00
solution.
1084............. Denileukin diftitox, K................. 15.0913 $819.29 ........... $163.86
300 MCG.
1086............. Temozolomide,oral 5 K................. 0.0643 $3.49 ........... $.70
mg.
1091............. IN 111 Oxyquinoline, K................. 4.0535 $220.06 ........... $44.01
per .5 mCi.
1092............. IN 111 Pentetate, per K................. 4.0824 $221.63 ........... $44.33
0.5 mCi.
1095............. Technetium TC 99M K................. 3.7042 $201.10 ........... $40.22
Depreotide.
1096............. TC 99M Exametazime, K................. 3.8103 $206.86 ........... $41.37
per dose.
1122............. TC 99M arcitumomab, K................. 9.6556 $524.19 ........... $104.84
per vial.
1167............. Epirubicin hcl, 2 mg. K................. 0.3597 $19.53 ........... $3.91
1178............. Busulfan IV, 6 mg.... K................. 6.0245 $327.06 ........... $65.41
1203............. Verteporfin for K................. 16.1946 $879.19 ........... $175.84
injection.
1207............. Octreotide injection, K................. 1.1849 $64.33 ........... $12.87
depot.
1305............. Apligraf............. K................. 11.2075 $608.44 ........... $121.69
1409............. Factor viia K................. 17.9693 $975.54 ........... $195.11
recombinant, per 1.2
mg.
1501............. New Technology - S................. ........... $25.00 ........... $5.00
Level I ($0 - $50).
1502............. New Technology - S................. ........... $75.00 ........... $15.00
Level II ($50 -
$100).
1503............. New Technology - S................. ........... $150.00 ........... $30.00
Level III ($100 -
$200).
1504............. New Technology - S................. ........... $250.00 ........... $50.00
Level IV ($200 -
$300).
1505............. New Technology - S................. ........... $350.00 ........... $70.00
Level V ($300 -
$400).
1506............. New Technology - S................. ........... $450.00 ........... $90.00
Level VI ($400 -
$500).
1507............. New Technology - S................. ........... $550.00 ........... $110.00
Level VII ($500 -
$600).
1508............. New Technology - S................. ........... $650.00 ........... $130.00
Level VIII ($600 -
$700).
1509............. New Technology - S................. ........... $750.00 ........... $150.00
Level IX ($700 -
$800).
1510............. New Technology - S................. ........... $850.00 ........... $170.00
Level X ($800 -
$900).
1511............. New Technology - S................. ........... $950.00 ........... $190.00
Level XI ($900 -
$1000).
1512............. New Technology - S................. ........... $1,050.00 ........... $210.00
Level XII ($1000 -
$1100).
1513............. New Technology - S................. ........... $1,150.00 ........... $230.00
Level XIII ($1100 -
$1200).
1514............. New Technology - S................. ........... $1,250.00 ........... $250.00
Level XIV ($1200 -
$1300).
1515............. New Technology - S................. ........... $1,350.00 ........... $270.00
Level XV ($1300 -
$1400).
1516............. New Technology - S................. ........... $1,450.00 ........... $290.00
Level XVI ($1400 -
$1500).
1517............. New Technology - S................. ........... $1,550.00 ........... $310.00
Level XX ($1500-
$1600).
1518............. New Technology - S................. ........... $1,650.00 ........... $330.00
Level XX ($1600-
$1700).
1519............. New Technology - S................. ........... $1,750.00 ........... $350.00
Level XX ($1700-
$1800).
1520............. New Technology - S................. ........... $1,850.00 ........... $370.00
Level XX ($1800-
$1900).
1521............. New Technology - S................. ........... $1,950.00 ........... $390.00
Level XX ($1900-
$2000).
1522............. New Technology - S................. ........... $2,250.00 ........... $450.00
Level XX ($2000-
$2500).
1523............. New Technology - S................. ........... $2,750.00 ........... $550.00
Level XX ($2500-
$3000).
1524............. New Technology - S................. ........... $3,250.00 ........... $650.00
Level XX ($3000-
$3500).

[[Page 48028]]

1525............. New Technology - S................. ........... $3,750.00 ........... $750.00
Level XX ($3500-
$4000).
1526............. New Technology - S................. ........... $4,250.00 ........... $850.00
Level XX ($4000-
$4500).
1527............. New Technology - S................. ........... $4,750.00 ........... $950.00
Level XX ($4500-
$5000).
1528............. New Technology - S................. ........... $5,250.00 ........... $1,050.00
Level XX ($5000-
$5500).
1529............. New Technology - S................. ........... $5,750.00 ........... $1,150.00
Level XX ($5500-
$6000).
1530............. New Technology - S................. ........... $6,250.00 ........... $1,250.00
Level XX ($6000-
$6500).
1531............. New Technology - S................. ........... $6,750.00 ........... $1,350.00
Level XX ($6500-
$7000).
1532............. New Technology - S................. ........... $7,250.00 ........... $1,450.00
Level XX ($7000-
$7500).
1533............. New Technology - S................. ........... $7,750.00 ........... $1,550.00
Level XX ($7500-
$8000).
1534............. New Technology - S................. ........... $8,250.00 ........... $1,650.00
Level XX ($8000-
$8500).
1535............. New Technology - S................. ........... $8,750.00 ........... $1,750.00
Level XX ($8500-
$9000).
1536............. New Technology - S................. ........... $9,250.00 ........... $1,850.00
Level XX ($9000-
$9500).
1537............. New Technology - S................. ........... $9,750.00 ........... $1,950.00
Level XX ($9500-
$10000).
1538............. New Technology - T................. ........... $25.00 ........... $5.00
Level I ($0 - $50).
1539............. New Technology - T................. ........... $75.00 ........... $15.00
Level II ($50 -
$100).
1540............. New Technology - T................. ........... $150.00 ........... $30.00
Level III ($100 -
$200).
1541............. New Technology - T................. ........... $250.00 ........... $50.00
Level IV ($200 -
$300).
1542............. New Technology - T................. ........... $350.00 ........... $70.00
Level V ($300 -
$400).
1543............. New Technology - T................. ........... $450.00 ........... $90.00
Level VI ($400 -
$500).
1544............. New Technology - T................. ........... $550.00 ........... $110.00
Level VII ($500 -
$600).
1545............. New Technology - T................. ........... $650.00 ........... $130.00
Level VIII ($600 -
$700).
1546............. New Technology - T................. ........... $750.00 ........... $150.00
Level IX ($700 -
$800).
1547............. New Technology - T................. ........... $850.00 ........... $170.00
Level X ($800 -
$900).
1548............. New Technology - T................. ........... $950.00 ........... $190.00
Level XI ($900 -
$1000).
1549............. New Technology - T................. ........... $1,050.00 ........... $210.00
Level XII ($1000 -
$1100).
1550............. New Technology - T................. ........... $1,150.00 ........... $230.00
Level XIII ($1100 -
$1200).
1551............. New Technology - T................. ........... $1,250.00 ........... $250.00
Level XIV ($1200 -
$1300).
1552............. New Technology - T................. ........... $1,350.00 ........... $270.00
Level XV ($1300 -
$1400).
1553............. New Technology - T................. ........... $1,450.00 ........... $290.00
Level XVI ($1400 -
$1500).
1554............. New Technology - T................. ........... $1,550.00 ........... $310.00
Level XX ($1500-
$1600).
1555............. New Technology - T................. ........... $1,650.00 ........... $330.00
Level XX ($1600-
$1700).
1556............. New Technology - T................. ........... $1,750.00 ........... $350.00
Level XX ($1700-
$1800).
1557............. New Technology - T................. ........... $1,850.00 ........... $370.00
Level XX ($1800-
$1900).
1558............. New Technology - T................. ........... $1,950.00 ........... $390.00
Level XX ($1900-
$2000).
1559............. New Technology - T................. ........... $2,250.00 ........... $450.00
Level XX ($2000-
$2500).
1560............. New Technology - T................. ........... $2,750.00 ........... $550.00
Level XX ($2500-
$3000).
1561............. New Technology - T................. ........... $3,250.00 ........... $650.00
Level XX ($3000-
$3500).
1562............. New Technology - T................. ........... $3,750.00 ........... $750.00
Level XX ($3500-
$4000).
1563............. New Technology - T................. ........... $4,250.00 ........... $850.00
Level XX ($4000-
$4500).
1564............. New Technology - T................. ........... $4,750.00 ........... $950.00
Level XX ($4500-
$5000).
1565............. New Technology - T................. ........... $5,250.00 ........... $1,050.00
Level XX ($5000-
$5500).
1566............. New Technology - T................. ........... $5,750.00 ........... $1,150.00
Level XX ($5500-
$6000).
1567............. New Technology - T................. ........... $6,250.00 ........... $1,250.00
Level XX ($6000-
$6500).
1568............. New Technology - T................. ........... $6,750.00 ........... $1,350.00
Level XX ($6500-
$7000).
1569............. New Technology - T................. ........... $7,250.00 ........... $1,450.00
Level XX ($7000-
$7500).
1570............. New Technology - T................. ........... $7,750.00 ........... $1,550.00
Level XX ($7500-
$8000).
1571............. New Technology - T................. ........... $8,250.00 ........... $1,650.00
Level XX ($8000-
$8500).
1572............. New Technology - T................. ........... $8,750.00 ........... $1,750.00
Level XX ($8500-
$9000).
1573............. New Technology - T................. ........... $9,250.00 ........... $1,850.00
Level XX ($9000-
$9500).
1574............. New Technology - T................. ........... $9,750.00 ........... $1,950.00
Level XX ($9500-
$10000).
1604............. IN 111 capromab K................. 12.4029 $673.34 ........... $134.67
pendetide, per dose.
1605............. Abciximab injection, K................. 5.2806 $286.68 ........... $57.34
10 mg.
1606............. Anistreplase, 30 u... K................. 25.3116 $1,374.14 ........... $274.83
1607............. Eptifibatide K................. 0.1426 $7.74 ........... $1.55
injection, 5mg.
1609............. Rho(D) immune K................. 0.1863 $10.11 ........... $2.02
globulin h, sd, 100
iu.
1611............. Hylan G-F 20 K................. 2.1566 $117.08 ........... $23.42
injection, 16 mg.
1612............. Daclizumab, K................. 3.7304 $202.52 ........... $40.50
parenteral, 25 mg.
1613............. Trastuzumab, 10 mg... K................. 0.7384 $40.09 ........... $8.02
1614............. Valrubicin, 200 mg... K................. 9.6183 $522.17 ........... $104.43
1615............. Basiliximab, 20 mg... K................. 11.2007 $608.07 ........... $121.61
1618............. Vonwillebrandfactrcmp K................. 0.0168 $.91 ........... $.18
lx, per iu.
1620............. Technetium tc99m K................. 3.3106 $179.73 ........... $35.95
bicisate.
1625............. Indium 111-in K................. 6.8170 $370.09 ........... $74.02
pentetreotide.
1628............. Chromic phosphate p32 K................. 2.0103 $109.14 ........... $21.83
1716............. Brachytx source, Gold K................. 1.3399 $72.74 ........... $14.55
198.
1718............. Brachytx source, K................. 0.6695 $36.35 ........... $7.27
Iodine 125.
1719............. Brachytx source, Non- K................. 0.3053 $16.57 ........... $3.31
HDR Ir-192.
1720............. Brachytx source, K................. 0.8104 $44.00 ........... $8.80
Palladium 103.
1775............. FDG, per dose (4-40 K................. 5.8606 $318.17 ........... $63.63
mCi/ml).

[[Page 48029]]

1783............. Ocular implant, H................. ........... ........... ........... ...........
aqueous drain device.
1814............. Retinal Tamp, H................. ........... ........... ........... ...........
silicone oil.
1818............. Integrated H................. ........... ........... ........... ...........
keratoprosthesis.
1900............. Lead coronary venous. H................. ........... ........... ........... ...........
2614............. Probe, percutaneous H................. ........... ........... ........... ...........
lumbar disc.
2616............. Brachytx source, K................. 163.4011 $8,870.88 ........... $1,774.18
Yttrium-90.
2632............. Brachytx sol, I-125, H................. ........... ........... ........... ...........
per mCi.
7000............. Amifostine, 500 mg... K................. 3.9932 $216.79 ........... $43.36
7011............. Oprelvekin injection, K................. 2.7246 $147.92 ........... $29.58
5 mg.
7015............. Busulfan, oral, 2 mg. K................. 0.0263 $1.43 ........... $.29
7024............. Corticorelin ovine K................. 3.4880 $189.36 ........... $37.87
triflutat.
7025............. Digoxin immune FAB K................. 4.4789 $243.16 ........... $48.63
(ovine).
7027............. Fomepizole, 15mg..... K................. 0.2215 $12.03 ........... $2.41
7030............. Hemin, per 1 mg...... K................. 0.0119 $.65 ........... $.13
7031............. Octreotide acetate K................. 1.0339 $56.13 ........... $11.23
injection.
7034............. Somatropin injection. K................. 0.9206 $49.98 ........... $10.00
7035............. Teniposide, 50 mg.... K................. 1.5530 $84.31 ........... $16.86
7036............. Urokinase 250,000 iu K................. 5.1032 $277.05 ........... $55.41
inj.
7037............. Urofollitropin, 75 iu K................. 1.1321 $61.46 ........... $12.29
7038............. Muromonab-CD3, 5 mg.. K................. 5.8452 $317.33 ........... $63.47
7041............. Tirofiban K................. 4.2976 $233.31 ........... $46.66
hydrochloride 12.5
mg.
7042............. Capecitabine, oral, K................. 0.0290 $1.57 ........... $.31
150 mg.
7043............. Infliximab injection K................. 0.6841 $37.14 ........... $7.43
10 mg.
7045............. Trimetrexate K................. 1.2099 $65.68 ........... $13.14
glucoronate.
7046............. Doxorubicin hcl K................. 4.6362 $251.69 ........... $50.34
liposome inj 10 mg.
7049............. Filgrastim 480 mcg K................. 3.1998 $173.71 ........... $34.74
injection.
7051............. Leuprolide acetate K................. 68.9392 $3,742.64 ........... $748.53
implant, 65 mg.
9000............. Na chromate Cr51, per K................. 1.2631 $68.57 ........... $13.71
0.25mCi.
9002............. Tenecteplase, 50mg/ K................. 23.2303 $1,261.15 ........... $252.23
vial.
9003............. Palivizumab, per 50mg K................. 6.3850 $346.64 ........... $69.33
9004............. Gemtuzumab ozogamicin K................. 17.5020 $950.17 ........... $190.03
inj,5mg.
9005............. Reteplase injection.. K................. 10.1332 $550.12 ........... $110.02
9009............. Baclofen refill kit - K................. 0.7478 $40.60 ........... $8.12
per 2000 mcg.
9010............. Baclofen refill kit - K................. 0.7340 $39.85 ........... $7.97
per 4000 mcg.
9012............. Arsenic Trioxide..... K................. 0.4837 $26.26 ........... $5.25
9015............. Mycophenolate mofetil K................. 0.0373 $2.02 ........... $.40
oral 250 mg.
9018............. Botulinum toxin B, K................. 0.1272 $6.91 ........... $1.38
per 100 u.
9019............. Caspofungin acetate, K................. 0.5334 $28.96 ........... $5.79
5 mg.
9020............. Sirolimus tablet, K................. 0.0520 $2.82 ........... $.56
oral 1 mg.
9021............. Immune globulin 10 mg K................. 0.0080 $.43 ........... $.09
9022............. IM inj interferon K................. 0.9417 $51.12 ........... $10.22
beta 1-a.
9023............. Rho d immune globulin K................. 0.0523 $2.84 ........... $.57
50 mcg.
9024............. Amphotericin b lipid K................. 0.4174 $22.66 ........... $4.53
complex.
9025............. Rubidium-Rb-82....... K................. 2.5939 $140.82 ........... $28.16
9100............. Iodinated I- K................. 0.0071 $.39 ........... $.08
131albumin, per 5
uci.
9104............. Anti-thymocycte K................. 2.9801 $161.79 ........... $32.36
globulin rabbit.
9105............. Hep B imm glob, per 1 K................. 1.5621 $84.80 ........... $16.96
ml.
9108............. Thyrotropin alfa, per K................. 6.6059 $358.63 ........... $71.73
1.1 mg.
9109............. Tirofiban hcl, per K................. 2.2328 $121.22 ........... $24.24
6.25 mg.
9110............. Alemtuzumab, per 10 K................. 7.6422 $414.89 ........... $82.98
mg.
9111............. Inj, bivalirudin, per G................. ........... $397.81 ........... $59.46
250 mg vial.
9112............. Perflutren lipid G................. ........... $148.20 ........... $22.15
micro, per 2ml.
9113............. Inj, pantoprazole G................. ........... $22.80 ........... $3.41
sodium, vial.
9114............. Nesiritide, per 0.5 G................. ........... $144.40 ........... $21.58
mg vial.
9115............. Inj, zoledronic acid, G................. ........... $203.40 ........... $30.40
per 1 mg.
9116............. Inj, Ertapenem G................. ........... $45.31 ........... $6.77
sodium, per 1 gm
vial.
9117............. Y-90 ibritumomab K................. 332.7763 $18,066.09 ........... $3,613.22
tiuxetan.
9118............. IN-111 ibritumomab K................. 38.3972 $2,084.55 ........... $416.91
tiuxetan.
9119............. Pegfilgrastim, per 1 G................. ........... $467.09 ........... $69.82
mg.
9120............. Inj, Fulvestrant, per G................. ........... $175.16 ........... $26.18
50 mg.
9121............. Inj, Argatroban, per G................. ........... $14.25 ........... $2.13
5 mg.
9122............. Inj, Triptorelin G................. ........... $415.24 ........... $62.07
pamoate, per 3.75 mg.
9200............. Orcel, per 36 cm2.... G................. ........... $1,135.25 ........... $169.69
9201............. Dermagraft, per 37.5 K................. 7.9288 $430.45 ........... $86.09
sq cm.
9202............. Octafluoropropane.... K................. 2.1253 $115.38 ........... $23.08
9203............. Perflexane lipid G................. ........... $142.50 ........... $21.30
micro.
9204............. Ziprasidone mesylate. G................. ........... $41.56 ........... $6.21
9205............. Oxaliplatin.......... G................. ........... $94.46 ........... $14.12
9217............. Leuprolide acetate K................. 5.5128 $299.28 ........... $59.86
suspnsion, 7.5 mg.

[[Page 48030]]

9500............. Platelets, irradiated K................. 1.2398 $67.31 ........... $13.46
9501............. Platelets, pheresis.. K................. 6.7772 $367.93 ........... $73.59
9502............. Platelet pheresis K................. 7.3552 $399.31 ........... $79.86
irradiated.
9503............. Fresh frozen plasma, K................. 1.1560 $62.76 ........... $12.55
ea unit.
9504............. RBC deglycerolized... K................. 3.9764 $215.87 ........... $43.17
9505............. RBC irradiated....... K................. 1.8011 $97.78 ........... $19.56
9506............. Granulocytes, K................. 20.7004 $1,123.80 ........... $224.76
pheresis.
----------------------------------------------------------------------------------------------------------------

[[Page 48030]]

Addendum B.--Payment Status by HCPCS Code and Related Information Calendar Year 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
National Minimum
CPT/HCPCS Status indicator Condition Description APC Relative Payment unadjusted unadjusted
weight rate copayment copayment
--------------------------------------------------------------------------------------------------------------------------------------------------------
0001T................. C.................... ..................... Endovas repr abdo ao ..... ......... ........... ............ ............
aneurys.
0002T................. C.................... ..................... Endovas repr abdo ao ..... ......... ........... ............ ............
aneurys.
0003T................. S.................... ..................... Cervicography.......... 1501 ......... $25.00 ............ $5.00
0005T................. C.................... ...................