[Federal Register: July 25, 2005 (Volume 70, Number 141)]
[Proposed Rules]
[Page 42673-43011]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jy05-19]
[[Page 42673]]
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Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 419 and 485
Medicare Program; Proposed Changes to the Hospital Outpatient
Prospective Payment System and Calendar Year 2006 Payment Rates;
Proposed Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 419 and 485
[CMS-1501-P]
RIN 0938-AN46
Medicare Program; Proposed Changes to the Hospital Outpatient
Prospective Payment System and Calendar Year 2006 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 and to implement certain related provisions of the Medicare
Prescription Drug, Improvement, and Modernization Act (MMA) of 2003. In
addition, the proposed rule describes proposed changes to the amounts
and factors used to determine the payment rates for Medicare hospital
outpatient services paid under the prospective payment system. This
proposed rule would also change the requirement for physician oversight
of mid-level practitioners in critical access hospitals (CAHs). These
changes would be applicable to services furnished on or after January
1, 2006.
DATES: To be ensured consideration, comments must be received at one of
the addresses provided in the ADDRESSES section, no later than 5 p.m.
on September 16, 2005.
ADDRESSES: In commenting, please refer to file code CMS-1501-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of three ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this proposed rule to http://www.cms.hhs.gov/regulations/ecomments.
(Attachments should be in Microsoft Word, WordPerfect, or
Excel; however, we prefer Microsoft Word).
2. By regular mail. You may 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-1501-P, P.O. Box 8016, Baltimore, MD 21244-8018.
3. By express or overnight mail. You may send 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-1501-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-7195 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201, or 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal Government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A
stamp-in clock is available for persons wishing to retain 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 received after the comment
period.
Submission of Comments on Paperwork Requirements: For comments that
relate to information collection requirements, mail a copy of comments
to the following addresses: Centers for Medicare & Medicaid Services,
Office of Strategic Operations and Regulatory Affairs, Security and
Standards Group, Office of Issuances, Room C4-24-02, 7500 Security
Boulevard, Baltimore, MD 21244-1850, Attn: James Wickliffe, CMS-1501-P;
and, Office of Information and Regulatory Affairs, Office of Management
and Budget, Room 3001, New Executive Office Building, Washington, DC
20503, Christopher Martin, CMS Desk Officer, CMS-1501-P.
Comments submitted to OMB may also be e-mailed to the following
address: Christopher_Martin@omb.eop.gov, or faxed to OMB at (202) 395-
6974.
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-1501-P and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. CMS posts all electronic
comments received before the close of the comment period on its public
Web site as soon as possible after they have been received. Hard copy
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, MD
21244-1850, Monday through Friday of each week from 8:30 a.m. to 4 p.m.
To schedule an appointment to view public comments, phone 1-800-743-
3951.
FOR FURTHER INFORMATION, CONTACT: Rebecca Kane, (410) 786-0378,
Outpatient prospective payment issues, and Suzanne Asplen, (410) 786-
4558, Partial hospitalization and community mental health center
issues.
SUPPLEMENTARY INFORMATION:
Electronic Access
This Federal Register document is 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.gpoaccess.gov/
fr/index.html.
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
AMP Average manufacturer price
ASP Average sales price
ASC Ambulatory surgical center
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000, Pub. L. 106-554
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999, Pub. L. 106-113
CAH Critical access hospital
CBSA Core-Based Statistical Areas
CCR (Cost center specific) cost-to-charge ratio
CMHC Community mental health center
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CMS Centers for Medicare & Medicaid Services (formerly known as the
Health Care Financing Administration)
CORF Comprehensive outpatient rehabilitation facility
CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 2005,
copyrighted by the American Medical Association
CRNA Certified registered nurse anesthetist
CY Calendar year
DMEPOS Durable medical equipment, prosthetics, orthotics, and supplies
DMERC Durable medical equipment regional carrier
DRG Diagnosis-related group
DSH Disproportionate share hospital
EACH Essential Access Community Hospital
E/M Evaluation and management
EPO Erythropoietin
ESRD End-stage renal disease
FACA Federal Advisory Committee Act, Pub. L. 92-463
FDA Food and Drug Administration
FI Fiscal intermediary
FSS Federal Supply Schedule
FY Federal fiscal year
GAO Government Accountability Office
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, Pub.
L. 104-191
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
MMA Medicare Prescription Drug, Improvement, and Modernization Act of
2003, Pub. L. 108-173
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NCD National Coverage Determination
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
PPI Producer Price Index
PPS Prospective payment system
PPV Pneumococcal pneumonia (virus)
PRA Paperwork Reduction Act
QIO Quality Improvement Organization
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 of 1982, Pub. L. 97-248
TOPS Transitional outpatient payments
USPDI United States Pharmacopoeia Drug Information
To assist readers in referencing sections contained in this
document, we are providing the following outline of contents:
Outline of Contents
I. Background
A. Legislative and Regulatory Authority for the Hospital
Outpatient Prospective Payment System
B. Excluded OPPS Services and Hospitals
C. Prior Rulemaking
D. APC Advisory Panel
1. Authority for the APC Panel
2. Establishment of the APC Panel
3. APC Panel Meetings and Organizational Structure
E. Provisions of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 To Be Implemented Beginning in CY 2006
1. Hold Harmless Provisions
2. Study and Authorization of Adjustment for Rural Hospitals
3. Payment for ``Specified Covered Outpatient Drugs''
4. Adjustment in Payment Rates for ``Specified Covered
Outpatient Drugs'' for Overhead Costs
5. Budget Neutrality Adjustment
F. CMS' Commitment to New Technologies
G. Summary of the Major Content of This Proposed Rule
II. Proposed Updates Affecting Payments for CY 2006
A. Recalibration of APC Relative Weights for CY 2006
1. Database Construction
a. Database Source and Methodology
b. Proposed Use of Single and Multiple Procedure Claims
2. Proposed Calculation of Median Costs for CY 2006
3. Proposed Calculation of Scaled OPPS Payment Weights
4. Proposed Changes to Packaged Services
B. Proposed Payment for Partial Hospitalization
1. Background
2. Proposed PHP APC Update for CY 2006
3. Proposed Separate Threshold for Outlier Payments to CMHCs
C. Proposed Conversion Factor Update for CY 2006
D. Proposed Wage Index Changes for CY 2006
E. Proposed Statewide Average Default Cost-to-Charge Ratios
F. Expiring Hold Harmless Provision for Transitional Corridor
Payments for certain Rural Hospitals
G. Proposed Adjustment for Rural Hospitals
1. Factors Contributing to Unit Cost Differences Between Rural
Hospitals and Urban Hospitals
2. Explanatory Variables
3. Results
H. Proposed Hospital Outpatient Outlier Payments
I. Calculation of Proposed National Unadjusted Medicare Payment
J. Proposed Beneficiary Copayments for CY 2006
1. Background
2. Proposed Copayment for CY 2006
3. Calculation of the Proposed Unadjusted Copayment Amount for
CY 2006
III. Proposed Ambulatory Payment Classification (APC) Group Policies
A. Background
B. Proposed Changes--Variations Within APCs
1. Application of the 2 Times Rule
a. APC 0146: Level I Sigmoidoscopy
b. APC 0342: Level I Pathology
2. Proposed Exceptions to the 2 Times Rule
C. New Technology APCs
1. Background
2. Proposed Refinement of New Technology Cost Bands
3. Proposed Requirements for Assigning Services to New
Technology APCs
4. Proposed Movement of Procedures from New Technology APCs to
Clinically Appropriate APCs
a. Proton Beam Therapy
b. Stereotactic Radiosurgery
c. Other Services in New Technology APCs
D. Proposed APC-Specific Policies
1. Hyperbaric Oxygen Therapy
2. Allergy Testing
3. Stretta Procedure
4. Vascular Access Procedures
E. Proposed Addition of New Procedure Codes
IV. Proposed Payment Changes for Devices
A. Device-Dependent APCs
B. APC Panel Recommendations Pertaining to APC 0107 and APC 0108
C. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
2. Proposed Policy for CY 2006
D. Other Policy Issues Relating to Pass-Through Device
Categories
1. Provisions for Reducing Transitional Pass-Through Payments to
Offset Costs Packaged into APC Groups
a. Background
b. Proposed Policy for CY 2006
2. Criteria for Establishing New Pass-Through Device Categories
a. Surgical Insertion and Implantation Criterion
b. Public Comments Received and Our Responses
c. Existing Device Category Criterion
V. Proposed Payment Changes for Drugs, Biologicals, and
Radiopharmaceutical Agents
A. Transitional Pass-Through Payment for Additional Costs of
Drugs and Biologicals
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1. Background
2. Expiration in CY 2005 of Pass-Through Status for Drugs and
Biologicals
3. Drugs and Biologicals with Proposed Pass-Through Status in CY
2006
B. Proposed Payment for Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs,
Biologicals, and Radiopharmaceuticals
3. Proposed Payment for Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Status That Are Not
Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs
(1) Background
(2) Proposed Changes for CY 2006 Related to Pub. L. 108-173
(3) Data Sources Available for Setting CY 2006 Payment Rates
(4) CY 2006 Proposed Payment Policy for Radiopharmaceutical
Agents
(5) MedPAC Report on APC Payment Rate Adjustment of Specified
Covered Outpatient Drugs
b. Proposed CY 2006 Payment for Nonpass-Through Drugs,
Biologicals, and Radiopharmaceuticals with HCPCS Codes But Without
OPPS Hospital Claims Data
C. Proposed Coding and Billing Changes for Specified Covered
Outpatient Drugs
1. Background
2. Proposed Policy for CY 2006
D. Proposed Payment for New Drugs, Biologicals, and
Radiopharmaceuticals Before HCPCS Codes Are Assigned
1. Background
2. Proposed Policy for CY 2006
E. Proposed Payment for Vaccines
F. Proposed Changes in Payments for Single Indication Orphan
Drugs
VI. Estimate of Transitional Pass-Through Spending in CY 2006 for
Drugs, Biologicals, and Devices
A. Total Allowed Pass-Through Spending
B. Estimate of Pass-Through Spending for CY 2006
VII. Proposed Brachytherapy Payment Changes
A. Background
B. Proposed Changes Related to Pub. L. 108-173
VIII. Proposed Coding and Payment for Drug Administration
A. Background
B. Proposed Changes for CY 2006
C. Proposed Changes to Vaccine Administration
IX. Hospital Coding for Evaluation and Management (E/M) Services
X. Proposed Payment for Blood and Blood Products
A. Background
B. Proposed Changes for CY 2006
XI. Proposed Payment for Observation Services
A. Background
B. Proposed CY 2006 Coding Changes for Observation Services
C. Proposed Criteria for Separately Payable Observation Services
1. Diagnosis Requirements
2. Observation Time
3. Additional Hospital Services
4. Physician Evaluation
D. Separate Payment for Direct Admission to Observation Care
(APC 0600)
XII. Procedures That Will Be Paid Only as Inpatient Procedures
A. Background
B. Proposed Changes to the Inpatient List
C. Ancillary Outpatient Services When Patient Expires
XIII. Proposed Indicator Assignments
A. Proposed Status Indicator Assignments
B. Proposed Comment Indicators for the CY 2006 OPPS Final Rule
XIV. Proposed Nonrecurring Policy Changes
A. Proposed Payment for Multiple Diagnostic Imaging Procedures
B. Interrupted Procedure Payment Policies (Modifiers -52, -73,
and -74)
XV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
B. APC Panel Recommendations
C. GAO Recommendations
XVI. Physician Oversight of Mid-Level Practitioners in Critical
Access Hospitals
A. Background
B. Proposed Policy Change
XVII. Files Available to the Public via the Internet
XVIII. Collection of Information Requirements
XIX. Response to Public Comments
XX. Regulatory Impact Analysis
A. OPPS: General
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Small Rural Hospitals
4. Unfunded Mandates
5. Federalism
B. Impact of Proposed Changes in this Proposed Rule
C. Alternatives Considered
1. Option Considered for Proposed Payment Policy for Separately
Payable Drugs and Biologicals
2. Payment Adjustment for Rural Sole Community Hospitals
3. Change in the Percentage of Total OPPS Payments Dedicated to
Outlier Payments
D. Limitations of Our Analysis
E. Estimated Impacts of this Proposed Rule on Hospitals
F. Estimated Impacts of this Proposed Rule on Beneficiaries
Regulation Text
Addenda
Addendum A--List of Ambulatory Payment Classification (APCs) with
Status Indicators, Relative Weights, Payment Rates, and Copayment
Amounts for CY 2006
Addendum B--Payment Status by HCPCS Code and Related Information--CY
2006
Addendum C--Healthcare Common Procedure Coding System (HCPCS) Codes
by Ambulatory Payment Classification (APC) (Available only on CMS
Web site via Internet. Refer to section XVII. of the preamble of
this proposed rule.)
Addendum D1--Payment Status Indicators for the Hospital Outpatient
Prospective Payment System
Addendum D2--Comment Indicators
Addendum E--CPT Codes That Are 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 K--Puerto Rico Wage Index by CBSA
Addendum L--Out-Migration Wage Adjustment--CY 2006
Addendum M--Hospital Reclassifications and Redesignations by
Individual Hospitals and CBSA
Addendum N--Hospital Reclassifications and Redesignations by
Individual Hospitals under Section 508 of Pub. L. 108-173
Addendum O--Hospitals Redesignated as Rural Under Section
1886(d)(8)(E) of the Act
I. Background
A. Legislative and Regulatory Authority for the Hospital 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 reasonable 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 Medicare, Medicaid, and SCHIP 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 SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554), enacted on December 21, 2000, made further
changes in the OPPS. Section 1833(t) of the Act was also amended by the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA), Pub. L. 108-173, enacted on December 8, 2003. (Discussion of
provisions related specifically to the CY 2006 OPPS is included in
sections V. and VII. of this proposed rule.) The OPPS was first
implemented for services furnished on or after August 1, 2000.
Implementing regulations for the OPPS are located at 42 CFR part 419.
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment
classification (APC) group to which the service is
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assigned. We use Healthcare Common Procedure Coding System (HCPCS)
codes (which include certain Current Procedural Terminology (CPT)
codes) and descriptors to identify and group the services within each
APC group. The OPPS includes payment for most hospital outpatient
services, except those identified in section I.B. of this proposed
rule. Section 1833(t)(1)(B)(ii) of the Act provides for Medicare
payment under the OPPS for certain services designated by the Secretary
that are furnished to inpatients who have exhausted their Part A
benefits or who are otherwise not in a covered Part A stay. Section 611
of Pub. L. 108-173 provided for Medicare coverage of an initial
preventive physical examination, subject to the applicable deductible
and coinsurance, as an outpatient department service, payable under the
OPPS. In addition, the OPPS includes payment for partial
hospitalization services furnished by community mental health centers
(CMHCs).
The OPPS rate is an unadjusted national payment amount that
includes the Medicare payment and the beneficiary copayment. This rate
is divided into a labor-related amount and a nonlabor-related amount.
The labor-related amount is adjusted for area wage differences using
the inpatient hospital wage index value for the locality in which the
hospital or CMHC is located.
All services and items within an APC group are comparable
clinically and with respect to resource use (section 1833(t)(2)(B) of
the Act). In accordance with section 1833(t)(2) of the Act, subject to
certain exceptions, services and items 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 APC group is more than 2 times greater than the
lowest median cost for an item or service within the same APC group
(referred to as the ``2 times rule''). In implementing this provision,
we use the median cost of the item or service assigned to an APC group.
Special payments under the OPPS may be made for new technology
items and services in one of two ways. Section 1833(t)(6) of the Act
provides for temporary additional payments or ``transitional pass-
through payments'' for certain drugs, biological agents, brachytherapy
devices used for the treatment of cancer, and categories of medical
devices for at least 2 but not more than 3 years. For new technology
services that are not eligible for pass-through payments and for which
we lack sufficient data to appropriately assign them to a clinical APC
group, we have established special APC groups based on costs, which we
refer to as ``APC cost bands.'' These cost bands allow us to price
these new procedures more appropriately and consistently. Similar to
pass-through payments, these special payments for new technology
services are also temporary; that is, we retain a service within a new
technology APC group until we acquire adequate data to assign it to a
clinically appropriate APC group.
B. Excluded OPPS Services and Hospitals
Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to
designate the hospital outpatient services that are paid under the
OPPS. While most hospital outpatient services are payable under the
OPPS, section 1833(t)(1)(B)(iv) of the Act excluded payment for
ambulance, physical and occupational therapy, and speech-language
pathology services, for which payment is made under a fee schedule.
Section 614 of Pub. L. 108-173 amended section 1833(t)(1)(B)(iv) of the
Act to exclude OPPS payment for screening and diagnostic mammography
services. The Secretary exercised the broad authority granted under the
statute to exclude from the OPPS those services that are paid under fee
schedules or other payment systems. Such excluded services include, for
example, the professional services of physicians and nonphysician
practitioners paid under the Medicare Physician Fee Schedule (MPFS);
laboratory services paid under the clinical diagnostic laboratory fee
schedule; services for beneficiaries with end-stage renal disease
(ESRD) that are paid under the ESRD composite rate; and services and
procedures that require an inpatient stay that are paid under the
hospital inpatient prospective payment system (IPPS). We set forth the
services that are excluded from payment under the OPPS in Sec. 419.22
of the regulations.
Under Sec. 419.20 of the regulations, we specify the types of
hospitals and entities that are excluded from payment under the OPPS.
These excluded entities include Maryland hospitals, but only for
services that are paid under a cost containment waiver in accordance
with section 1814(b)(3) of the Act; critical access hospitals (CAHs);
hospitals located outside of the 50 States, the District of Columbia,
and Puerto Rico; and Indian Health Service hospitals.
C. Prior Rulemaking
On April 7, 2000, we published in the Federal Register a final rule
with comment period (65 FR 18434) to implement a prospective payment
system for hospital outpatient services. The hospital OPPS was first
implemented for services furnished on or after August 1, 2000. Section
1833(t)(9) of the Act requires the Secretary to review certain
components of the OPPS not less often than annually and to revise the
groups, relative payment weights, and other adjustments 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. Since implementing the OPPS, we have published final rules
in the Federal Register annually to implement statutory requirements
and changes arising from our experience with this system. For a full
discussion of the changes to the OPPS, we refer readers to these
Federal Register final rules.\1\
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\1\ Interim final rule with comment period, August 3, 2000 (65
FR 47670); interim final rule with comment period, November 13, 2000
(65 FR 67798); final rule and interim final rule with comment
period, November 2, 2001 (66 FR 55850 and 55857); final rule,
November 30, 2001 (66 FR 59856); final rule, December 31, 2001 (66
FR 67494); final rule, March 1, 2002 (67 FR 9556); final rule,
November 1, 2002 (67 FR 66718); final rule with comment period,
November 7, 2003 (68 FR 63398); correction of the November 7, 2003
final rule with comment period, December 31, 2003 (68 FR 75442);
interim final rule with comment period, January 6, 2004 (69 FR 820);
and final rule with comment period, November 15, 2004 (69 FR 65681).
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On November 15, 2004, we published in the Federal Register a final
rule with comment period (69 FR 65681) that revised the OPPS to update
the payment weights and conversion factor for services payable under
the calendar year (CY) 2005 OPPS on the basis of claims data from
January 1, 2003 through December 31, 2003, and to implement certain
provisions of Pub. L. 108-173. In addition, we responded to public
comments received on the January 6, 2004 interim final rule with
comment period relating to Pub. L. 108-173 provisions that were
effective January 1, 2004, and finalized those policies. Further, we
responded to public comments received on the November 7, 2003 final
rule with comment period pertaining to the APC assignment of HCPCS
codes identified in Addendum B of that rule with the new interim (NI)
comment indicators; and public comments received on the August 16, 2004
OPPS proposed rule (69 FR 50448).
Subsequent to publishing the November 15, 2004 final rule with
comment period, we published a correction of final rule with comment
period on December 30, 2004 (69 FR 78315). This document corrected
technical errors that appeared in the November 15, 2004 final rule with
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comment period. It also provided additional information about the CY
2005 wage indices for the OPPS that was not published in the November
15, 2004 final rule with comment period.
D. APC Advisory Panel
1. Authority of the APC Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of
the BBRA of 1999, requires that we consult with an outside panel of
experts to review the clinical integrity of the payment groups and
weights under the OPPS. The Advisory Panel on Ambulatory Payment
Classification (APC) Groups (the APC Panel), discussed under section
I.D.2. of this preamble, fulfills this requirement. The Act further
specifies that the APC Panel will act in an advisory capacity. This
expert panel, which is to be composed of 15 representatives of
providers subject to the OPPS (currently employed full-time, not
consultants, in their respective areas of expertise), reviews and
advises us about the clinical integrity of the APC groups and their
weights. The APC Panel is not restricted to using our data and may use
data collected or developed by organizations outside the Department in
conducting its review.
2. Establishment of the APC Panel
On November 21, 2000, the Secretary originally signed the charter
establishing the APC Panel. The APC Panel is technical in nature and is
governed by the provisions of the Federal Advisory Committee Act
(FACA), as amended (Pub. L. 92-463). Since its initial chartering, the
Secretary has twice renewed the APC Panel's charter: On November 1,
2002, and on November 8, 2004. The renewed charter indicates that the
APC Panel continues to be technical in nature; is governed by the
provisions of the FACA with a Designated Federal Official (DEO) to
oversee the day-to-day administration of the FACA requirements and to
provide to the Committee Management Officer all committee reports for
forwarding to the Library of Congress; may convene up to three meetings
per year; and is chaired by a Federal official who also serves as a CMS
medical officer.
Originally, in establishing the APC 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 who
nominated either colleagues or themselves. After carefully reviewing
the applications, we chose 15 highly qualified individuals to serve on
the APC Panel. Because of the loss of four APC Panel members due to the
expiration of terms of office on March 31, 2004, we published a Federal
Register notice on January 23, 2004 (69 FR 3370) that solicited
nominations for APC Panel membership. From the 24 nominations that we
received, we chose four new members. Six members' terms expired on
March 31, 2005; therefore, a Federal Register notice was published on
February 25, 2005, requesting nominations to the APC Panel. We received
only 13 nominations before the nomination period closed on March 15,
2005. Therefore, we extended the deadline for nominations to May 9,
2005, and announced the extension in the Federal Register on April 8,
2005 (70 FR 18028). The entire APC Panel membership and information
pertaining to it, including Federal Register notices, meeting dates,
agenda topics, and meeting reports are identified on the CMS Web site:
http://www.cms.hhs.gov/faca/apc/apcmem.asp.
3. APC Panel Meetings and Organizational Structure
The APC Panel first met on February 27, February 28, and March 1,
2001. Since that initial meeting, the APC Panel has held six subsequent
meetings, with the last meeting taking place on February 23 and 24,
2005. (The APC Panel did not meet on February 25, 2004, as announced in
the meeting notice published on December 30, 2004, (69 FR 78464).)
Prior to each of these biennial meetings, we published a notice in the
Federal Register to announce each meeting and, when necessary, to
solicit and announce nominations for APC Panel membership. For a more
detailed discussion about these announcements, refer to the following
Federal Register notices: December 5, 2000 (65 FR 75943), December 14,
2001 (66 FR 64838), December 27, 2002 (67 FR 79107), July 25, 2003 (68
FR 44089), December 24, 2003 (68 FR 74621), August 5, 2004 (69 FR
47446), and December 30, 2004 (69 FR 78464).
During these meetings, the APC Panel established its operational
structure that, in part, includes the use of three subcommittees to
facilitate its required APC review process. Currently, the three
subcommittees are the Data Subcommittee, the Observation Subcommittee,
and the Packaging Subcommittee. The Data Subcommittee is responsible
for studying the data issues confronting the APC Panel and for
recommending viable options for resolving them. This subcommittee was
initially established on April 23, 2001, as the Research Subcommittee
and reestablished as the Data Subcommittee on April 13, 2004, and
February 11, 2005. The Observation Subcommittee, which was established
on June 24, 2003, and reestablished with new members on March 8, 2004,
and February 11, 2005, reviews and makes recommendations to the APC
Panel on all issues pertaining to observation services paid under the
OPPS, such as coding and operational issues. The Packaging
Subcommittee, which was established on March 8, 2004 and reestablished
with new members on February 11, 2005, studies and makes
recommendations on issues pertaining to services that are not
separately payable under the OPPS but are bundled or packaged APC
payments. Each of these subcommittees was established by a majority
vote of the APC Panel during a scheduled APC Panel meeting. All
subcommittee recommendations are discussed and voted upon by the full
APC Panel.
For a detailed discussion of the APC Panel meetings, refer to the
hospital OPPS final rules cited in section I.C. of this preamble. Full
discussion of the recommendations resulting from the APC Panel's
February 2005 meeting are included in the sections of this preamble
that are specific to each recommendation.
E. Provisions of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 To Be Implemented Beginning in CY 2006
On December 8, 2003, the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA), Pub. L. 108-173, was enacted. Pub.
L. 108-173 made changes to the Act relating to the Medicare OPPS. In
the January 6, 2004 interim final rule with comment period and the
November 15, 2004 final rule with comment period, we implemented
provisions of Pub. L. 108-173 relating to the OPPS that were effective
for CY 2004 and CY 2005, respectively. Provisions of Pub. L. 108-173
that were implemented in CY 2004 or CY 2005, and that are continuing in
CY 2006, are discussed throughout this proposed rule. Moreover, in this
proposed rule, we are proposing to implement the following provisions
of Pub. L. 108-173 that affect the OPPS beginning in CY 2006:
1. Hold Harmless Provisions
Section 411 of Pub. L. 108-173 amended section 1833(t)(7)(D)(i) of
the Act and extended the hold harmless provision for small rural
hospitals having 100 or fewer beds through December 31, 2005. Section
411 of Pub. L. 108-173 further amended section 1833(t)(7) of the Act to
provide that hold-harmless transitional corridor payments shall apply
through December
[[Page 42679]]
31, 2005 to sole community hospitals (SCHs) (as defined in section
1886(d)(5)(D)(iii) of the Act) located in a rural area. In accordance
with these provisions, effective January 1, 2006, we are proposing to
discontinue transitional corridor payments for small rural hospitals
having 100 or fewer beds and for SCHs located in a rural area.
2. Study and Authorization of Adjustment for Rural Hospitals
Section 411(b) of Pub. L. 108-173 added a new paragraph (13) to
section 1833(t) of the Act to authorize an ``Adjustment for Rural
Hospitals''. This provision requires us to conduct a study to determine
if costs incurred by hospitals located in rural areas by APCs exceed
those costs incurred by hospitals located in urban areas. This
provision further requires us to provide for an appropriate adjustment
by January 1, 2006, if we find that the costs incurred by hospitals
located in rural areas exceed those costs incurred by hospitals located
in urban areas.
3. Payment for ``Specified Covered Outpatient Drugs''
Section 621(a)(1) of Pub. L. 108-173 added section 1833(t)(14) to
the Act that specifies payments for certain ``specified covered
outpatient drugs'' beginning in 2006. Specifically, section
1833(t)(14)(A)(iii)(I) of the Act states that such payment shall be
equal to what we determine to be the average acquisition cost for the
drug, taking into account hospital acquisition cost survey data
furnished by the Government Accountability Office (GAO). Section
1833(t)(14)(A)(iii)(II) of the Act further notes that if hospital
acquisition cost data are not available, payment for specified covered
outpatient drugs shall equal the average price for the drug established
under section 1842(o), section 1847(A), or section 1847(B) of the Act
as calculated and adjusted by the Secretary as necessary. Both payment
approaches are subject to adjustments under section 1833(t)(14)(E) of
the Act as discussed below.
4. Adjustment in Payment Rates for ``Specified Covered Outpatient
Drugs'' for Overhead Costs
Section 621(a)(1) of Pub. L. 108-173 added section 1833(t)(14)(E)
to the Act. Section 1833(t)(14)(E)(ii) of the Act authorizes us to make
an adjustment to payments for ``specified covered outpatient drugs'' to
take into account overhead and related expenses such as pharmacy
services and handling costs, based on recommendations contained in a
report prepared by the Medicare Payment Advisory Commission (MedPAC).
5. Budget Neutrality Adjustment
Section 621(a)(1) of Pub. L. 108-173 amended the Act by adding
section 1833(t)(14)(H), which requires that additional expenditures
resulting from adjustments in APC payment rates for specified covered
outpatient drugs be taken into account beginning in CY 2006 and
continuing in subsequent years, in establishing the OPPS conversion,
weighting, and other adjustment factors.
F. CMS' Commitment to New Technologies
(If you choose to comment on issues in this section, please include
the caption ``Commitment to New Technologies'' at the beginning of
your comment.)
CMS is committed to ensuring that Medicare beneficiaries will have
timely access to new medical treatments and technologies that are well-
evaluated and demonstrated to be effective. We launched the Council on
Technology and Innovation (CTI) to provide the Agency with improved
methods for developing practical information about the clinical
benefits of new medical technologies to result in faster and more
efficient coverage and payment of these medical technologies. The CTI
supports CMS efforts to develop better evidence on the safety,
effectiveness, and cost of new and approved technologies to help
promote their more effective use.
We want to provide doctors and patients with better information
about the benefits of new medical treatments and/or technologies,
especially compared to other treatment options. We also want
beneficiaries to have access to valuable new medical innovations as
quickly and efficiently as possible. We note there are a number of
payment mechanisms in the OPPS and the IPPS designed to achieve
appropriate payment of promising new technologies. In the OPPS,
qualifying new medical devices may be paid on a cost basis by means of
transitional pass-through payments, in addition to the APC payments for
the procedures which utilize the devices. In addition, qualifying new
services may be assigned for payment to New Technology APCs or, if
appropriate, to regular clinical APCs. In the IPPS, qualifying new
technologies may receive add-on payments to the standard diagnosis-
related group (DRG) payments. We also note that collaborative efforts
are underway to facilitate coordination between the Food and Drug
Administration (FDA) and CMS with regard to streamlining the CMS
coverage process by which new technologies come to the marketplace.
To promote timely access to new medical treatments and
technologies, in this proposed rule we are proposing enhancements to
both the OPPS pass-through payment criteria for devices as discussed in
section IV.D.2. of this preamble and the qualifying process for
assignment of new services to New Technology APCs or regular clinical
APCs discussed in section III.C.3. of this preamble. We are proposing
to make device pass-through eligibility available to a broader range of
qualifying devices. We are also proposing to change the application and
review process for assignment of new services to New Technology APCs to
promote thoughtful review of the coding, clinical use and efficacy of
new services by the wider medical community, encouraging appropriate
dissemination of new technologies. These enhancements are explained in
this proposed rule.
G. Summary of the Major Content of This Proposed Rule
In this proposed rule, we are setting forth proposed changes to the
Medicare hospital OPPS for CY 2006. These changes would be effective
for services furnished on or after January 1, 2006. The following is a
summary of the major changes that we are proposing to make:
1. Proposed Updates to Payments for CY 2006
In section II. of this preamble, we set forth--
The methodology used to recalibrate the proposed APC
relative payment weights and the proposed recalibration of the relative
payment weights for CY 2006.
The proposed payment for partial hospitalization,
including the proposed separate threshold for outlier payments for
CMCHs.
The proposed update to the conversion factor used to
determine payment rates under the OPPS for CY 2006.
The proposed retention of our current policy to apply the
IPPS wage indices to wage adjust the APC median costs in determining
the OPPS payment rate and the copayment standardized amount for CY
2006.
The proposed update of statewide average default cost-to-
charge ratios.
Proposed changes relating to the expiring hold harmless
payment provision.
Proposed changes to payment for rural sole community
hospitals for CY 2006.
[[Page 42680]]
Proposed changes in the way we calculate hospital
outpatient outlier payments for CY 2006.
Calculation of the proposed national unadjusted Medicare
OPPS payment.
The proposed beneficiary copayment for OPPS services for
CY 2006.
2. Proposed Ambulatory Payment Classification (APC) Group Policies
In section III. of this preamble, we discuss our proposal to
establish a number of new APCs and to make changes to the assignment of
HCPCS codes under a number of existing APCs based on our analyses of
Medicare claims data and recommendations of the APC Panel. We also
discuss in section III. of this preamble, the application of the 2
times rule and proposed exceptions to it; proposed changes for specific
APCs; the proposed refinement of the New Technology cost bands; the
proposed movement of procedures from the New Technology APCs; and the
proposed additions of new procedure codes to the APC groups.
3. Proposed Payment Changes for Devices
In section IV. of this preamble, we discuss proposed changes to the
device-dependent APCs and to the pass-through payment for three
categories of devices.
4. Proposed Payment Changes for Drugs, Biologicals, and
Radiopharmaceutical Agents
In section V. of this preamble, we discuss proposed changes for
drugs, biologicals, radiopharmaceutical agents, and vaccines.
5. Estimate of Transitional Pass-Through Spending in CY 2006 for Drugs,
Biologicals, and Devices
In section VI. of this preamble, we discuss the proposed
methodology for estimating total pass-through spending and whether
there should be a pro rata reduction for transitional pass-through
drugs, biologicals, radiopharmacials, and categories of devices for CY
2006.
6. Proposed Brachytherapy Payment Changes
In section VII. of this preamble, we include a discussion of our
proposal concerning coding and payment for the sources of
brachytherapy.
7. Proposed Coding and Payment for Drug Administration
In section VIII. of this preamble, we discuss our proposed coding
and payment changes for drug administration services.
8. Hospital Coding for Evaluation and Management (E/M) Services
In section IX. of this preamble, we include a discussion of our
proposal for developing the coding guidelines for evaluation and
management services.
9. Proposed Payment for Blood and Blood Products
In section X. of this preamble, we discuss our proposed payment
changes for blood and blood products.
10. Proposed Payment for Observation Services
In section XI. of this preamble, we discuss our proposed criteria
and coding changes for separately payable observation services.
11. Procedures That Will Be Paid Only as Inpatient Services
In section XII. of this preamble, we discuss the procedures that we
are proposing to remove from the inpatient list and assign to APCs.
12. Proposed Indicator Assignments
In section XIII. of this preamble, we discuss the proposed changes
to the list of status indicators assigned to APCs and present our
proposed comment indicators for the CY 2006 OPPS final rule.
13. Proposed Nonrecurring Policy Changes
In section XIV. of this preamble, we discuss proposed changes in
payments for multiple diagnostic imaging procedures and in the
interrupted procedures payment policies.
14. OPPS Policy and Payment Recommendations
In section XV. of this preamble, we address recommendations made by
MedPAC, the APC Panel, and the GAO regarding the OPPS for CY 2006.
15. Physician Oversight in Critical Access Hospitals
In section XVI. of this preamble, we address physician oversight
for services provided by nonphysician practitioners such as physician
assistants, nurse practitioners, and clinical nurse specialists in
critical access hospitals (CAHs).
II. Proposed Updates Affecting Payments for CY 2006
A. Recalibration of APC Relative Weights for CY 2006
(If you choose to comment on the issues in this section, please
include the caption ``APC Relative Weights'' at the beginning of
your comment.)
1. Database Construction
a. Database Source and Methodology
Section 1833(t)(9)(A) of the Act requires that the Secretary review
and revise the relative payment weights for APCs at least annually. In
the April 7, 2000 OPPS 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
a small number of APC changes, these relative payment weights continued
to be in effect for CY 2001. This policy is discussed in the November
13, 2000 interim final rule (65 FR 67824 through 67827).
We are proposing to use the same basic methodology that we
described in the April 7, 2000 final rule to recalibrate the APC
relative payment weights for services furnished on or after January 1,
2006, and before January 1, 2007. That is, we would recalibrate the
relative payment weights for each APC based on claims and cost report
data for outpatient services. We are proposing to use the most recent
available data to construct the database for calculating APC group
weights. For the purpose of recalibrating APC relative payment weights
for CY 2006, we used approximately 127 million final action claims for
hospital OPD services furnished on or after January 1, 2004, and before
January 1, 2005. Of the 127 million final action claims for services
provided in hospital outpatient settings, 102 million claims were of
the type of bill potentially appropriate for use in setting rates for
OPPS services (but did not necessarily contain services payable under
the OPPS). Of the 102 million claims, we were able to use 49 million
whole claims to set the proposed OPPS APC relative weights for CY 2006
OPPS. From the 49 million whole claims, we created 81 million single
records, of which 50 million were ``pseudo'' single claims (created
from multiple procedure claims using the process we discuss in this
section).
The proposed APC relative weights and payments in Addenda A and B
to this proposed rule were calculated using claims from this period
that had been processed before January 1, 2005. We selected claims for
services paid under the OPPS and matched these claims to the most
recent cost report filed by the individual hospitals represented in our
claims data. We are proposing that the APC relative payment weights for
CY 2006 under the OPPS would continue to be based on the median
hospital costs for services in the APC groups. For the CY 2006 OPPS
final rule, we are proposing to base APC median costs on
[[Page 42681]]
claims for services furnished in CY 2004 and processed before June 30,
2005.
b. Proposed Use of Single and Multiple Procedure Claims
For CY 2006, we are proposing to continue to use single procedure
claims to set the medians on which the APC relative payment weights
would be based. As noted in the November 15, 2004 final rule with
comment period, 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 relative payment
weights (69 FR 65730 through 65731). Requesters believe that relying
solely on single procedure claims to recalibrate APC relative payment
weights fails to take into account data for many frequently performed
procedures, particularly those commonly performed in combination with
other procedures. They believe that, by depending upon single procedure
claims, we base relative payment weights on the least-costly services,
thereby introducing downward bias to the medians on which the weights
are based.
We agree that, optimally, it is desirable to use the data from as
many claims as possible to recalibrate the APC relative payment
weights, including those with multiple procedures. We generally use
single procedure claims to set the median costs for APCs because we
are, so far, unable to ensure that packaged costs can be appropriately
allocated across multiple procedures performed on the same date of
service. However, by bypassing specified codes that we believe do not
have significant packaged costs, we are able to use more data from
multiple procedure claims. In many cases this enables us to create
multiple ``pseudo'' single claims from claims that, as submitted,
contained multiple separately paid procedures on the same claim. We
have used the date of service on the claims and a list of codes to be
bypassed to create ``pseudo'' single claims from multiple procedure
claims the same as we did in recalibrating the CY 2005 APC relative
payment weights. We refer to these newly created single procedure
claims as ``pseudo'' singles because they were submitted by providers
as multiple procedure claims.
For CY 2003, we created ``pseudo'' single claims by bypassing HCPCS
codes 93005 (Electrocardiogram, tracing), 71010 (Chest x-ray), and
71020 (Chest x-ray) on a submitted claim. However, we did not use
claims data for the bypassed codes in the creation of the median costs
for the APCs to which these three codes were assigned because the level
of packaging that would have remained on the claim after we selected
the bypass code was not apparent and, therefore, it was difficult to
determine if the medians for these codes would be correct.
For CY 2004, we created ``pseudo'' single claims by bypassing these
three codes and also by bypassing an additional 269 HCPCS codes in
APCs. We selected these codes based on a clinical review of the
services and because it was presumed that these codes had only very
limited packaging and could appropriately be bypassed for the purpose
of creating ``pseudo'' single claims. The APCs to which these codes
were assigned were varied and included mammography, cardiac
rehabilitation, and Level I plain film x-rays. To derive more
``pseudo'' single claims, we also split the claims where there were
dates of service for revenue code charges on that claim that could be
matched to a single procedure code on the claim on the same date.
As in CY 2003, we did not include the claims data for the bypassed
codes in the creation of the APCs to which the 269 codes were assigned
because, again, we had not established that such an approach was
appropriate and would aid in accurately estimating the median cost for
that APC. For CY 2004, from about 16.3 million otherwise unusable
claims, we used about 9.5 million multiple procedure claims to create
about 27 million ``pseudo'' single claims. For CY 2005, we created 383
bypass codes and from approximately 24 million otherwise unusable
claims, we used about 18 million multiple procedure claims to create
about 52 million ``pseudo'' single claims.
For CY 2006, we are proposing to continue using date of service
matching as a tool for creation of ``pseudo'' single claims and to
continue the use of a bypass list to create ``pseudo'' single claims.
The process we are proposing for CY 2006 OPPS results in our being able
to use some part of 90 percent of the total claims that are eligible
for use in OPPS ratesetting and modeling in developing this proposed
rule. This process enabled us to use, for CY 2006, 81 million single
bills for ratesetting: 50 million ``pseudo'' singles and 31 million
``natural'' single bills (bills that were submitted containing only one
separately payable major HCPCS code).
We are proposing to bypass the 404 codes identified in Table 1 to
create new single claims and to use the line-item costs associated with
the bypass codes on these claims in the creation of the median costs
for the APCs into which they are assigned. Of the codes on this list,
345 were used for bypass in CY 2005. We are proposing to continue the
use of the codes on the CY 2005 OPPS bypass list and expand it by
adding 46 codes that, using data presented to the APC Panel at its
February 2005 meeting, meet the same empirical criteria as those used
in CY 2005 to create the bypass list. Our examination of the data
against the criteria for inclusion on the bypass list, as discussed
below for the addition of new codes, shows that the empirically
selected codes used for bypass for the CY 2005 OPPS generally continue
to meet the criteria or come very close to meeting the criteria, and we
have received no comments against bypassing them.
To facilitate comment, Table 1 indicates the list of codes we are
proposing to bypass for creation of ``pseudo'' singles for CY 2006 OPPS
and indicates those used in the CY 2005 OPPS for bypass and those
proposed to be added for the CY 2006 OPPS. Bypass codes shown in Table
1 with an asterisk indicate the HCPCs codes we are proposing to add to
the list for the CY 2006 OPPS. The criteria we are proposing to use to
determine the additional codes to add to the CY 2005 OPPS bypass list
in order to create the bypass list for CY 2006 OPPS are discussed
below.
The following empirical criteria were developed by reviewing the
frequency and magnitude of packaging in the single claims for payable
codes other than drugs and biologicals. We assumed that the
representation of packaging on the single claims for any given code is
comparable to packaging for that code in the multiple claims:
There were 100 or more single claims for the code. This
number of single claims ensured that observed outcomes were
sufficiently representative of packaging that might occur in the
multiple claims.
Five percent or fewer of the single claims for the code
had packaged costs on that single claim for the code. This criterion
results in limiting the amount of packaging being redistributed to the
payable procedure remaining on the claim after the bypass code is
removed and ensures that the costs associated with the bypass code
represent the cost of the bypassed service.
The median cost of packaging observed in the single claim
was equal to or less than $50. This limits the amount of error in
redistributed costs.
The code is not a code for an unlisted service.
We also added to the bypass list three codes (CPT codes 51701,
51702, and 51703 for bladder catheterization) which do not meet these
criteria. These
[[Page 42682]]
codes have been packaged and have never been paid separately. For that
reason, when these were the only services provided to the beneficiary,
no payment was made to the hospital. The APC Panel's packaging
subcommittee recommends that we make separate payment when they are the
only service on the claim. See section II.A.4. of this preamble for
further discussion of our proposal to pay them separately. We are
proposing to add them to the bypass list because changing them from
packaged to separately paid would result in the reduction of the number
of single bills on which we could base median costs for other major
separately paid procedures which are billed on the same claim with
these procedure codes. Single bills which contain other procedures
would become multiple procedure claims when these bladder
catheterization codes were converted from packaged to separately paid
status.
We examined the packaging on the single procedure claims in the CY
2004 data used for this proposed rule for these codes. We found that
none of these codes met the empirical standards for the bypass list.
However, we believe that when these services are performed on the same
date as another separately paid procedure, any packaging that appears
on the claim would appropriately be associated with the other
procedures and not with these codes. Therefore, we believe that
bypassing them does not adversely affect the medians for other
procedures. Moreover, future separate payment for these codes does not
harm the hospitals that furnish these services, in view of the
historical absence of separate payment for them under the OPPS in the
past. Hence, we propose to pay separately for these codes and to add
them to the bypass list for the CY 2006 OPPS.
We specifically invite public comment on the ``pseudo'' single
process, including the bypass list and the criteria.
Table 1.--Proposed CY 2006 HCPCS Bypass Codes for Creating ``Pseudo''
Single Claims for Calculating Median Costs
------------------------------------------------------------------------
HCPCS code \1\ Short description Status indicator
------------------------------------------------------------------------
11056*........................ Trim skin lesions, 2 T
to 4.
11057*........................ Trim skin lesions, T
over 4.
11719......................... Trim nail(s)........ T
11720......................... Debride nail, 1-5... T
11721......................... Debride nail, 6 or T
more.
17003*........................ Destroy lesions, 2- T
14.
31231*........................ Nasal endoscopy, dx. T
31579......................... Diagnostic T
laryngoscopy.
51701*........................ Insert bladder X
catheter.
51702*........................ Insert temp bladder X
catheter.
51703*........................ Insert bladder X
catheter, complex.
51798*........................ Us urine capacity X
measure.
54240......................... Penis study......... T
67820*........................ Revise eyelashes.... S
70030*........................ X-ray eye for X
foreign body.
70100......................... X-ray exam of jaw... X
70110......................... X-ray exam of jaw... X
70130......................... X-ray exam of X
mastoids.
70140......................... X-ray exam of facial X
bones.
70150......................... X-ray exam of facial X
bones.
70160......................... X-ray exam of nasal X
bones.
70200......................... X-ray exam of eye X
sockets.
70210......................... X-ray exam of X
sinuses.
70220......................... X-ray exam of X
sinuses.
70250......................... X-ray exam of skull. X
70260......................... X-ray exam of skull. X
70328......................... X-ray exam of jaw X
joint.
70330......................... X-ray exam of jaw X
joints.
70336*........................ Magnetic image, jaw S
joint.
70355......................... Panoramic x-ray of X
jaws.
70360......................... X-ray exam of neck.. X
70370*........................ Throat x-ray & X
fluoroscopy.
70371......................... Speech evaluation, X
complex.
70450......................... Ct head/brain w/o S
dye.
70480......................... Ct orbit/ear/fossa w/ S
o dye.
70486......................... Ct maxillofacial w/o S
dye.
70544......................... Mr angiography head S
w/o dye.
70551*........................ Mri brain w/o dye... S
71010......................... Chest x-ray......... X
71015......................... Chest x-ray......... X
71020......................... Chest x-ray......... X
71021......................... Chest x-ray......... X
71022......................... Chest x-ray......... X
71023*........................ Chest x-ray and X
fluoroscopy.
71030......................... Chest x-ray......... X
71034......................... Chest x-ray and X
fluoroscopy.
71090......................... X-ray & pacemaker X
insertion.
71100......................... X-ray exam of ribs.. X
71101......................... X-ray exam of ribs/ X
chest.
[[Page 42683]]
71110......................... X-ray exam of ribs.. X
71111......................... X-ray exam of ribs/ X
chest.
71120......................... X-ray exam of X
breastbone.
71130......................... X-ray exam of X
breastbone.
71250......................... Ct thorax w/o dye... S
72040......................... X-ray exam of neck X
spine.
72050......................... X-ray exam of neck X
spine.
72052......................... X-ray exam of neck X
spine.
72069*........................ X-ray exam of trunk X
spine.
72070......................... X-ray exam of X
thoracic spine.
72072......................... X-ray exam of X
thoracic spine.
72074......................... X-ray exam of X
thoracic spine.
72080......................... X-ray exam of trunk X
spine.
72090......................... X-ray exam of trunk X
spine.
72100......................... X-ray exam of lower X
spine.
72110......................... X-ray exam of lower X
spine.
72114......................... X-ray exam of lower X
spine.
72120......................... X-ray exam of lower X
spine.
72125......................... Ct neck spine w/o S
dye.
72128*........................ Ct chest spine w/o S
dye.
72141......................... Mri neck spine w/o S
dye.
72146......................... Mri chest spine w/o S
dye.
72148......................... Mri lumbar spine w/o S
dye.
72170......................... X-ray exam of pelvis X
72190......................... X-ray exam of pelvis X
72192......................... Ct pelvis w/o dye... S
72220......................... X-ray exam of X
tailbone.
73000......................... X-ray exam of collar X
bone.
73010......................... X-ray exam of X
shoulder blade.
73020......................... X-ray exam of X
shoulder.
73030......................... X-ray exam of X
shoulder.
73050......................... X-ray exam of X
shoulders.
73060......................... X-ray exam of X
humerus.
73070......................... X-ray exam of elbow. X
73080......................... X-ray exam of elbow. X
73090......................... X-ray exam of X
forearm.
73100......................... X-ray exam of wrist. X
73110......................... X-ray exam of wrist. X
73120......................... X-ray exam of hand.. X
73130......................... X-ray exam of hand.. X
73140......................... X-ray exam of X
finger(s).
73218......................... Mri upper extremity S
w/o dye.
73221......................... Mri joint upr extrem S
w/o dye.
73510......................... X-ray exam of hip... X
73520......................... X-ray exam of hips.. X
73540......................... X-ray exam of pelvis X
& hips.
73550......................... X-ray exam of thigh. X
73560......................... X-ray exam of knee, X
1 or 2.
73562......................... X-ray exam of knee, X
3.
73564......................... X-ray exam, knee, 4 X
or more.
73565......................... X-ray exam of knees. X
73590......................... X-ray exam of lower X
leg.
73600......................... X-ray exam of ankle. X
73610......................... X-ray exam of ankle. X
73620......................... X-ray exam of foot.. X
73630......................... X-ray exam of foot.. X
73650......................... X-ray exam of heel.. X
73660......................... X-ray exam of toe(s) X
73700......................... Ct lower extremity w/ S
o dye.
73718*........................ Mri lower extremity S
w/o dye.
73721......................... Mri jnt of lwr extre S
w/o dye.
74000......................... X-ray exam of X
abdomen.
74010*........................ X-ray exam of X
abdomen.
74210......................... Contrst x-ray exam S
of throat.
74220......................... Contrast x-ray, S
esophagus.
74230......................... Cine/vid x-ray, S
throat/esoph.
74235......................... Remove esophagus S
obstruction.
74240......................... X-ray exam, upper gi S
tract.
74245......................... X-ray exam, upper gi S
tract.
74246......................... Contrst x-ray uppr S
gi tract.
[[Page 42684]]
74247......................... Contrst x-ray uppr S
gi tract.
74249......................... Contrst x-ray uppr S
gi tract.
74250......................... X-ray exam of small S
bowel.
74300......................... X-ray bile ducts/ X
pancreas.
74301......................... X-rays at surgery X
add-on.
74305......................... X-ray bile ducts/ X
pancreas.
74327......................... X-ray bile stone S
removal.
74340......................... X-ray guide for GI X
tube.
74350......................... X-ray guide, stomach X
tube.
74355......................... X-ray guide, X
intestinal tube.
74360......................... X-ray guide, GI S
dilation.
74363......................... X-ray, bile duct S
dilation.
74475......................... X-ray control, cath S
insert.
74480......................... X-ray control, cath S
insert.
74485......................... X-ray guide, GU S
dilation.
74742......................... X-ray, fallopian X
tube.
75894......................... X-rays, transcath S
therapy.
75898......................... Follow-up X
angiography.
75901......................... Remove cva device X
obstruct.
75902......................... Remove cva lumen X
obstruct.
75945......................... Intravascular us.... S
75946......................... Intravascular us add- S
on.
75960......................... Transcatheter intro, S
stent.
75961......................... Retrieval, broken S
catheter.
75962......................... Repair arterial S
blockage.
75964......................... Repair artery S
blockage, each.
75966......................... Repair arterial S
blockage.
75968......................... Repair artery S
blockage, each.
75970......................... Vascular biopsy..... S
75978......................... Repair venous S
blockage.
75980......................... Contrast xray exam S
bile duct.
75982......................... Contrast xray exam S
bile duct.
75984......................... Xray control X
catheter change.
75992......................... Atherectomy, x-ray S
exam.
75993......................... Atherectomy, x-ray S
exam.
75994......................... Atherectomy, x-ray S
exam.
75995......................... Atherectomy, x-ray S
exam.
75996......................... Atherectomy, x-ray S
exam.
76012......................... Percut S
vertebroplasty
fluor.
76013......................... Percut S
vertebroplasty, ct.
76040......................... X-rays, bone X
evaluation.
76061......................... X-rays, bone survey. X
76062......................... X-rays, bone survey. X
76066......................... Joint survey, single X
view.
76070*........................ CT scan, bone S
density study.
76075......................... Dexa, axial skeleton S
study.
76076......................... Dexa, peripheral S
study.
76078......................... Radiographic X
absorptiometry.
76095......................... Stereotactic breast T
biopsy.
76096......................... X-ray of needle X
wire, breast.
76100......................... X-ray exam of body X
section.
76101......................... Complex body section X
x-ray.
76360......................... Ct scan for needle S
biopsy.
76380......................... CAT scan follow-up S
study.
76393......................... Mr guidance for S
needle place.
76511......................... Echo exam of eye.... S
76512......................... Echo exam of eye.... S
76516......................... Echo exam of eye.... S
76519......................... Echo exam of eye.... S
76536......................... Us exam of head and S
neck.
76645......................... Us exam, breast(s).. S
76700......................... Us exam, abdom, S
complete.
76705......................... Echo exam of abdomen S
76770......................... Us exam abdo back S
wall, comp.
76775......................... Us exam abdo back S
wall, lim.
76778*........................ Us exam kidney S
transplant.
76801*........................ Ob us < 14 wks, S
single fetus.
76811*........................ Ob us, detailed, S
sngl fetus.
76817*........................ Transvaginal us, S
obstetric.
76830......................... Transvaginal us, non- S
ob.
[[Page 42685]]
76856......................... Us exam, pelvic, S
complete.
76857......................... Us exam, pelvic, S
limited.
76870......................... Us exam, scrotum.... S
76880......................... Us exam, extremity.. S
76941......................... Echo guide for S
transfusion.
76945......................... Echo guide, villus S
sampling.
76946......................... Echo guide for S
amniocentesis.
76948......................... Echo guide, ova S
aspiration.
76950*........................ Echo guidance S
radiotherapy.
76970*........................ Ultrasound exam S
follow-up.
76977......................... Us bone density X
measure.
77280......................... Set radiation X
therapy field.
77285......................... Set radiation X
therapy field.
77295*........................ Set radiation X
therapy field.
77300......................... Radiation therapy X
dose plan.
77301......................... Radiotherapy dose X
plan, imrt.
77315......................... Teletx isodose plan X
complex.
77326......................... Radiation therapy X
dose plan.
77327......................... Brachytx isodose X
calc interm.
77328......................... Brachytx isodose X
plan compl.
77331......................... Special radiation X
dosimetry.
77332......................... Radiation treatment X
aid(s).
77333......................... Radiation treatment X
aid(s).
77334......................... Radiation treatment X
aid(s).
77336......................... Radiation physics X
consult.
77370......................... Radiation physics X
consult.
77402*........................ Radiation treatment S
delivery.
77403......................... Radiation treatment S
delivery.
77404*........................ Radiation treatment S
delivery.
77408*........................ Radiation treatment S
delivery.
77409......................... Radiation treatment S
delivery.
77411......................... Radiation treatment S
delivery.
77412......................... Radiation treatment S
delivery.
77413......................... Radiation treatment S
delivery.
77414......................... Radiation treatment S
delivery.
77416......................... Radiation treatment S
delivery.
77417......................... Radiology port X
film(s).
77418......................... Radiation tx S
delivery, imrt.
77470......................... Special radiation S
treatment.
78350......................... Bone mineral, single X
photon.
80502......................... Lab pathology X
consultation.
85060......................... Blood smear X
interpretation.
86585......................... TB tine test........ X
86850......................... RBC antibody screen. X
86870......................... RBC antibody X
identification.
86880......................... Coombs test, direct. X
86885......................... Coombs test, X
indirect, qual.
86886......................... Coombs test, X
indirect, titer.
86890......................... Autologous blood X
process.
86900......................... Blood typing, ABO... X
86901......................... Blood typing, Rh (D) X
86905......................... Blood typing, RBC X
antigens.
86906......................... Blood typing, Rh X
phenotype.
86930......................... Frozen blood prep... X
86970......................... RBC pretreatment.... X
88104......................... Cytopathology, X
fluids.
88106......................... Cytopathology, X
fluids.
88107......................... Cytopathology, X
fluids.
88108......................... Cytopath, X
concentrate tech.
88160......................... Cytopath smear, X
other source.
88161......................... Cytopath smear, X
other source.
88172......................... Cytopathology eval X
of fna.
88182......................... Cell marker study... X
88300......................... Surgical path, gross X
88304......................... Tissue exam by X
pathologist.
88305......................... Tissue exam by X
pathologist.
88311......................... Decalcify tissue.... X
88312......................... Special stains...... X
88313......................... Special stains...... X
88321......................... Microslide X
consultation.
[[Page 42686]]
88323......................... Microslide X
consultation.
88325......................... Comprehensive review X
of data.
88331......................... Path consult X
intraop, 1 bloc.
88342......................... Immunohistochemistry X
88346......................... Immunofluorescent X
study.
88347......................... Immunofluorescent X
study.
90801......................... Psy dx interview.... S
90804*........................ Psytx, office, 20-30 S
min.
90805......................... Psytx, off, 20-30 S
min w/e&m.
90806......................... Psytx, off, 45-50 S
min.
90807......................... Psytx, off, 45-50 S
min w/e&m.
90808......................... Psytx, office, 75-80 S
min.
90809......................... Psytx, off, 75-80, w/ S
e&m.
90810......................... Intac psytx, off, 20- S
30 min.
90818......................... Psytx, hosp, 45-50 S
min.
90826......................... Intac psytx, hosp, S
45-50 min.
90845......................... Psychoanalysis...... S
90846......................... Family psytx w/o S
patient.
90847......................... Family psytx w/ S
patient.
90853......................... Group psychotherapy. S
90857......................... Intac group psytx... S
90862......................... Medication X
management.
92002......................... Eye exam, new V
patient.
92004......................... Eye exam, new V
patient.
92012......................... Eye exam established V
pat.
92014......................... Eye exam & treatment V
92020*........................ Special eye S
evaluation.
92081*........................ Visual field S
examination(s).
92082......................... Visual field S
examination(s).
92083......................... Visual field S
examination(s).
92135......................... Opthalmic dx imaging S
92136......................... Ophthalmic biometry. S
92225......................... Special eye exam, S
initial.
92226......................... Special eye exam, S
subsequent.
92230......................... Eye exam with photos T
92250......................... Eye exam with photos S
92275......................... Electroretinography. S
92285......................... Eye photography..... S
92286......................... Internal eye S
photography.
92520......................... Laryngeal function X
studies.
92541*........................ Spontaneous X
nystagmus test.
92546......................... Sinusoidal X
rotational test.
92548......................... Posturography....... X
92552......................... Pure tone X
audiometry, air.
92553......................... Audiometry, air & X
bone.
92555......................... Speech threshold X
audiometry.
92556......................... Speech audiometry, X
complete.
92557*........................ Comprehensive X
hearing test.
92567......................... Tympanometry........ X
92582......................... Conditioning play X
audiometry.
92585......................... Auditor evoke S
potent, compre.
92604*........................ Reprogram cochlear X
implt 7 >.
93005......................... Electrocardiogram, S
tracing.
93225......................... ECG monitor/record, X
24 hrs.
93226......................... ECG monitor/report, X
24 hrs.
93231......................... Ecg monitor/record, X
24 hrs.
93232......................... ECG monitor/report, X
24 hrs.
93236......................... ECG monitor/report, X
24 hrs.
93270......................... ECG recording....... X
93278......................... ECG/signal-averaged. S
93303......................... Echo transthoracic.. S
93307......................... Echo exam of heart.. S
93320......................... Doppler echo exam, S
heart.
93731......................... Analyze pacemaker S
system.
93732*........................ Analyze pacemaker S
system.
93733......................... Telephone analy, S
pacemaker.
93734......................... Analyze pacemaker S
system.
93735*........................ Analyze pacemaker S
system.
93736......................... Telephonic analy, S
pacemaker.
93741*........................ Analyze ht pace S
device sngl.
[[Page 42687]]
93743......................... Analyze ht pace S
device dual.
93797......................... Cardiac rehab....... S
93798......................... Cardiac rehab/ S
monitor.
93875......................... Extracranial study.. S
93880......................... Extracranial study.. S
93882......................... Extracranial study.. S
93886......................... Intracranial study.. S
93888......................... Intracranial study.. S
93922......................... Extremity study..... S
93923......................... Extremity study..... S
93924......................... Extremity study..... S
93925......................... Lower extremity S
study.
93926......................... Lower extremity S
study.
93930*........................ Upper extremity S
study.
93931......................... Upper extremity S
study.
93965......................... Extremity study..... S
93970......................... Extremity study..... S
93971......................... Extremity study..... S
93975......................... Vascular study...... S
93976......................... Vascular study...... S
93978......................... Vascular study...... S
93979......................... Vascular study...... S
93990......................... Doppler flow testing S
94015......................... Patient recorded X
spirometry.
95115......................... Immunotherapy, one X
injection.
95117*........................ Immunotherapy X
injections.
95165......................... Antigen therapy X
services.
95805......................... Multiple sleep S
latency test.
95806*........................ Sleep study, S
unattended.
95807......................... Sleep study, S
attended.
95812......................... Electroencephalogram S
(EEG).
95813......................... Eeg, over 1 hour.... S
95816......................... Electroencephalogram S
(EEG).
95819......................... Electroencephalogram S
(EEG).
95822......................... Sleep S
electroencephalogra
m.
95864......................... Muscle test, 4 limbs S
95867*........................ Muscle test, head or S
neck.
95872......................... Muscle test, one S
fiber.
95900......................... Motor nerve S
conduction test.
95921......................... Autonomic nerv S
function test.
95925*........................ Somatosensory S
testing.
95926......................... Somatosensory S
testing.
95930......................... Visual evoked S
potential test.
95937......................... Neuromuscular S
junction test.
95950......................... Ambulatory eeg S
monitoring.
95953......................... EEG monitoring/ S
computer.
95970*........................ Analyze neurostim, S
no prog.
95972*........................ Analyze neurostim, S
complex.
95974*........................ Cranial neurostim, S
complex.
96000......................... Motion analysis, S
video/3d.
96100......................... Psychological X
testing.
96115......................... Neurobehavior status X
exam.
96117*........................ Neuropsych test X
battery.
96900......................... Ultraviolet light S
therapy.
96910......................... Photochemotherapy S
with UV-B.
96912......................... Photochemotherapy S
with UV-A.
96913......................... Photochemotherapy, S
UV-A or B.
98925*........................ Osteopathic S
manipulation.
98940......................... Chiropractic S
manipulation.
99213......................... Office/outpatient V
visit, est.
99214......................... Office/outpatient V
visit, est.
99241......................... Office consultation. V
99242*........................ Office consultation. V
99243......................... Office consultation. V
99244......................... Office consultation. V
99245......................... Office consultation. V
99273......................... Confirmatory V
consultation.
99274......................... Confirmatory V
consultation.
99275......................... Confirmatory V
consultation.
D0473......................... Micro exam, prep & S
report.
[[Page 42688]]
G0101......................... CA screen; pelvic/ V
breast exam.
G0127......................... Trim nail(s)........ T
G0166......................... Extrnl counterpulse, T
per tx.
G0175......................... OPPS Service, sched V
team conf.
HCPCS......................... Descriptor.......... SI
Q0091......................... Obtaining screen pap T
smear.
------------------------------------------------------------------------
\1\ HCPCS codes shown with an asterisk are bypass codes we are proposing
to add to the list for CY 2006.
2. Proposed Calculation of Median Costs for CY 2006
In this section of the preamble, we discuss the use of claims to
calculate the proposed OPPS payment rates for CY 2006. The hospital
outpatient prospective payment page on the CMS Web site on which this
proposed rule is posted provides an accounting of claims used in the
development of the proposed rates: http://www.cms.hhs.gov/providers/hopps.
The accounting of claims used in the development of the proposed
rule is included on the Web site under supplemental materials for the
CY 2006 proposed rule. That accounting provides additional detail
regarding the number of claims derived at each stage of the process. In
addition, below we discuss the files of claims that comprise the data
sets that are available for purchase under a CMS data user contract.
Our CMS Web site, http://www.cms.hhs.gov/providers/hopps, includes
information about purchasing the following two OPPS data files: ``OPPS
Limited Data Set'' and ``OPPS Identifiable Data Set.''
We are proposing to use the following methodology to establish the
relative weights to be used in calculating the proposed OPPS payment
rates for CY 2006 shown in Addenda A and B to this proposed rule. This
methodology is as follows:
We used outpatient claims for full CY 2004 to set the proposed
relative weights for CY 2006. To begin the calculation of the relative
weights for CY 2006, we pulled all claims for outpatient services
furnished in CY 2004 from the national claims history file. This is not
the population of claims paid under the OPPS, but all outpatient claims
(including, for example, CAH claims, and hospital claims for clinical
laboratory services for persons who are neither inpatients nor
outpatients of the hospital).
We then excluded claims with condition codes 04, 20, 21, and 77.
These are claims that providers submitted to Medicare knowing that no
payment will be made. For example, providers submit claims with a
condition code 21 to elicit an official denial notice from Medicare and
document that a service is not covered. We then excluded claims for
services furnished in Maryland, Guam, and the U.S. Virgin Islands
because hospitals in those geographic areas are not paid under the
OPPS.
We divided the remaining claims into the three groups shown below.
Groups 2 and 3 comprise the 102 million claims that contain hospital
bill types paid under the OPPS.
1. Claims that were not bill types 12X, 13X, 14X (hospital bill
types), or 76X (CMHC bill types). Other bill types, such as ambulatory
surgical centers (ASCs), bill type 83, are not paid under the OPPS and,
therefore, these claims were not used to set OPPS payment.
2. Claims that were bill types 12X, 13X, or 14X (hospital bill
types). These claims are hospital outpatient claims.
3. Claims that were bill type 76X (CMHC). (These claims are later
combined with any claims in item 2 above with a condition code 41 to
set the per diem partial hospitalization rate determined through a
separate process.)
For the cost-to-charge ratio (CCR) calculation process, we used the
same approach as that used in developing the final APC rates for CY
2005 (69 FR 65744). That is, we first limited the population of cost
reports to only those for hospitals that filed outpatient claims in CY
2004 before determining whether the CCRs for such hospitals were valid.
This initial limitation changed the distribution of CCRs used during
the trimming process discussed below.
We then calculated the CCRs at a departmental level and overall for
each hospital for which we had claims data. We did this using hospital-
specific data from the Hospital Cost Report Information System (HCRIS).
We used the most recent available cost report data, in most cases, cost
reports for CY 2002 or CY 2003. We used the most recent cost report
available whether submitted or settled. If the most recent available
cost report was submitted but not settled, we looked at the last
settled cost report to determine the ratio of submitted to settled
cost, and we then adjusted the most recent available submitted but not
settled cost report using that ratio. We propose to use the most
recently submitted cost reports to calculate the CCRs to be used to
calculate median costs for the OPPS CY 2006 final rule.
We then flagged CAHs, which are not paid under the OPPS, and
hospitals with invalid CCRs. These included claims from hospitals
without a CCR; those from hospitals paid an all-inclusive rate; those
from hospitals with obviously erroneous CCRs (greater than 90 or less
than .0001); and those from hospitals with CCRs that were identified as
outliers (3 standard deviations from the geometric mean after removing
error CCRs). In addition, we trimmed the CCRs at the departmental level
by removing the CCRs for each cost center as outliers if they exceeded
+/-3 standard deviations of the geometric mean. This is the same
methodology that we used in developing the final CY 2005 CCRs. For CY
2006, we are proposing to trim at the departmental CCR level to
eliminate aberrant CCRs that, if found in high volume hospitals, could
skew the medians. We used a four-tiered hierarchy of cost center CCRs
to match a cost center to a revenue code with the top tier being the
most common cost center and the last tier being the default CCR. If a
hospital's departmental CCR was deleted by trimming, we set the
departmental CCR for that cost center to ``missing,'' so that another
departmental CCR in the revenue center hierarchy could apply. If no
other departmental CCR could apply to the revenue code on the claim, we
used the hospital's overall CCR for the revenue code in question. The
hierarchy of CCRs is available for inspection and comment at the CMS
Web site: http://www.cms.hhs.gov/providers/hopps/default.asp.
We then converted the charges on the claim by applying the CCR that
we believed was best suited to the revenue
[[Page 42689]]
code indicated on the line with the charge. Table 2 below in this
preamble contains a list of the allowed revenue codes. Revenue codes
not included in Table 2 are those not allowed under the OPPS because
their services cannot be paid under the OPPS (for example, inpatient
room and board charges) and, thus charges with those revenue codes were
not packaged for creation of the OPPS median costs. If a hospital did
not have a CCR that was appropriate to the revenue code reported for a
line-item charge (for example, a visit reported under the clinic
revenue code, but the hospital did not have a clinic cost center), we
applied the hospital-specific overall CCR, except as discussed in
section X. of this preamble, for calculation of costs for blood.
Thus, we applied CCRs as described above to claims with bill types
12X, 13X, or 14X, excluding all claims from CAHs and hospitals in
Maryland, Guam, and the U.S. Virgin Islands, and flagged hospitals with
invalid CCRs. We excluded claims from all hospitals for which CCRs were
flagged as invalid.
We identified claims with condition code 41 as partial
hospitalization services of CMHCs and moved them to another file. These
claims were combined with the 76X claims identified previously to
calculate the proposed partial hospitalization per diem rate.
We then excluded claims without a HCPCS code. We also moved claims
for observation services to another file. We moved to another file
claims that contained nothing but flu and pneumococcal pneumonia
(``PPV'') vaccine. Influenza and PPV vaccines are paid at reasonable
cost and, therefore, these claims are not used to set OPPS rates. We
note that the two above mentioned separate files containing partial
hospitalization claims and the observation services claims are included
in the files that are available for purchase as discussed above.
We next copied line-item costs for drugs, blood, and devices (the
lines stay on the claim, but are copied off onto another file) to a
separate file. No claims were deleted when we copied these lines onto
another file. These line-items are used to calculate the per unit
median for drugs, radiopharmaceuticals, and blood and blood products.
The line-item costs were also used to calculate the per administration
cost of drugs, radiopharmaceuticals, and biologicals (other than blood
and blood products).
We then divided the remaining claims into five groups.
1. Single Major Claims: Claims with a single separately payable
procedure, all of which would be used in median setting.
2. Multiple Major Claims: Claims with more than one separately
payable procedure or multiple units for one payable procedure. As
discussed below, some of these can be used in median setting.
3. Single Minor Claims: Claims with a single HCPCS code that is not
separately payable. These claims may have a single packaged procedure
or a drug code.
4. Multiple Minor Claims: Claims with multiple HCPCS codes that are
not separately payable without examining dates of service. For example,
pathology codes are not used unless the pathology service is the single
code on the bill or unless the pathology code is on a separate date of
service from the other procedure on the claim. The multiple minor file
has claims with multiple occurrences of pathology codes, with packaged
costs that cannot be appropriately allocated across the multiple
pathology codes. However, by matching dates of service for the code and
the reported costs through the ``pseudo'' single creation process
discussed earlier, a claim with multiple pathology codes may become
several ``pseudo'' single claims with a unique pathology code and its
associated costs on each day. These ``pseudo'' singles for the
pathology codes would then be considered a separately payable code and
would be used the same as claims in the single major claim file.
5. Non-OPPS Claims: Claims that contain no services payable under
the OPPS. These claims are excluded from the files used for the OPPS.
Non-OPPS claims have codes paid under other fee schedules, for example,
durable medical equipment or clinical laboratory.
We note that the claims listed in numbers 1, 2, and 4 above are
included in the data files that can be purchased as described above.
We set aside the single minor claims and the non-OPPS claims
(numbers 3 and 5 above) because we did not use either in calculating
median cost. We then examined the multiple major and multiple minor
claims (numbers 2 and 4 above) to determine if we could convert any of
them to single major claims using the process described previously. We
first grouped items on the claims by date of service. If each major
procedure on the claim had a different date of service and if the line-
items for packaged HCPCS and packaged revenue codes had dates of
service, we split the claim into multiple ``pseudo'' single claims
based on the date of service.
After those single claims were created, we used the list of
``bypass codes'' in Table 1 of this preamble to remove separately
payable procedures that we determined contain limited costs or no
packaged costs from a multiple procedure bill. A discussion of the
creation of the list of bypass codes used for the creation of
``pseudo'' single claims is contained in section II.A.1.b. of this
preamble.
When one of the two separately payable procedures on a multiple
procedure claim was on the bypass code list, we split the claim into
two single procedure claims records. The single procedure claim record
that contained the bypass code did not retain packaged services. The
single procedure claim record that contained the other separately
payable procedure (but no bypass code) retained the packaged revenue
code charges and the packaged HCPCS charges. This enables us to use a
claim that would otherwise be a multiple procedure claim and could not
be used.
We excluded those claims that we were not able to convert to
singles even after applying both of the techniques for creation of
``pseudo'' singles. We then packaged the costs of packaged HCPCS codes
(codes with status indicator ``N'' listed in Addendum B to this
proposed rule) and packaged revenue codes into the cost of the single
major procedure remaining on the claim. The list of packaged revenue
codes is shown in Table 2 below.
After removing claims for hospitals with error CCRs, claims without
HCPCS codes, claims for immunizations not covered under the OPPS, and
claims for services not paid under the OPPS, 55 million claims were
left. Of these 55 million claims, we were able to use some portion of
49 million whole claims (90 percent of the potentially usable claims)
to create the 81 million single and ``pseudo'' single claims for use in
the CY 2006 median payment ratesetting.
We also excluded (1) claims that had zero costs after summing all
costs on the claim; (2) claims for which CMS lacked an appropriate
provider wage index; and (3) claims containing token charges (charges
of less than $1.01) or for which intermediary systems had allocated
charges as if the charges were submitted on the claim. We are proposing
to delete claims containing token charges. We do not believe that a
charge of less than $1.01 would yield a cost that would be valid to set
weights for a significant separately paid service. Moreover, effective
for services furnished on or after July 1, 2004, the OCE assigns
payment flag number 3 to claims on which hospitals submitted token
charges for a service with status
[[Page 42690]]
indicator ``S'' or ``T'' (a major separately paid service under OPPS)
for which the intermediary is required to allocate the sum of charges
for services with a status indicator equaling ``S'' or ``T'' based on
the weight for the APC to which each code is assigned. We do not
believe that these charges, which were token charges as submitted by
the hospital, are valid reflections of hospital resource and that they
should not be used to set median costs. Therefore, we are proposing to
delete these claims.
For the remaining claims, we then wage adjusted 60 percent of the
cost of the claim (which we have previously determined to be the labor-
related portion), as has been our policy since the initial
implementation of the OPPS, to adjust for geographic variation in
labor-related costs. We made this adjustment by determining the wage
index that applied to the hospital that furnished the service and
dividing the cost for the separately paid HCPCS code furnished by the
hospital by that wage index. As has been our policy since the inception
of the OPPS, we are proposing to use the pre-reclassified wage indices
for standardization because we believe that they better reflect the
true costs of items and services in the area in which the hospital is
located than the post-reclassification wage indices, and would result
in the most accurate adjusted median costs.
We then excluded claims that were outside 3 standard deviations
from the geometric mean cost for each HCPCS code. We used the remaining
claims to calculate median costs for each separately payable HCPCS
code; first, to determine the applicability of the ``2 times'' rule,
and second, to determine APC medians based on the claims containing the
HCPCS codes assigned to each APC. As stated previously, section
1833(t)(2) of the Act provides that, subject to certain exceptions, the
items and services within an APC group cannot be considered comparable
with respect to the use of resources if the highest median (or mean
cost, if elected by the Secretary) for an item or service in the group
is more than 2 times greater than the lowest median cost for an item or
service within the same group (``the 2 times rule''). Finally, we
reviewed the medians and reassigned HCPCS codes to different APCs as
deemed appropriate. Section III.B. of this preamble includes a
discussion of the HCPCS code assignment changes that resulted from
examination of the medians and for other reasons. The APC medians were
recalculated after we reassigned the affected HCPCS codes.
A detailed discussion of the medians for blood and blood products
is included in section X. of this preamble. A discussion of the medians
for APCs that require one or more devices when the service is performed
is included in section IV.A. of this preamble. A discussion of the
median for observation services is included in section XI. of this
preamble and a discussion of the median for partial hospitalization is
included below in section II.B. of this preamble.
Table 2.--CY 2006 Proposed 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.
343............................... DIAGNOSTIC RADIOPHARMS.
344............................... THERAPEUTIC RADIOPHARMS.
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.
681............................... TRAUMA RESPONSE, LEVEL I.
682............................... TRAUMA RESPONSE, LEVEL II.
683............................... TRAUMA RESPONSE, LEVEL III.
684............................... TRAUMA RESPONSE, LEVEL IV.
689............................... TRAUMA RESPONSE, OTHER.
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.
------------------------------------------------------------------------
3. Proposed Calculation of Scaled OPPS Payment Weights
Using the median APC costs discussed previously, we calculated the
proposed relative payment weights for each APC for CY 2006 shown in
Addenda A and B to this proposed rule. 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 CY 2004 data, the median cost for APC 0601 is $60.57 for CY 2006.
Section 1833(t)(9)(B) of the Act requires that APC reclassification
and recalibration changes, wage index changes, and other adjustments be
made in a manner that assures that aggregate payments under the OPPS
for CY 2006 are neither greater than nor less than the 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 2005 relative weights to aggregate payments using
the CY 2006 proposed relative weights. Based on this comparison, we are
proposing to make an adjustment to the relative weights for purposes of
budget neutrality. The unscaled relative payment weights were adjusted
by .999207669 for budget neutrality. The proposed relative payment
weights are listed in Addenda A and B to this proposed rule. The
proposed relative payment weights incorporate the recalibration
adjustments discussed in sections II.A.1. and 2.
[[Page 42691]]
Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, states that ``Additional expenditures resulting from
this paragraph shall not be taken into account in establishing the
conversion factor, weighting and other adjustment factors for 2004 and
2005 under paragraph (9) but shall be taken into account for subsequent
years.'' Section 1833(t)(14) of the Act provides the payment rates for
certain ``specified covered outpatient drugs.'' Therefore, the
incremental cost of those specified covered outpatient drugs (as
discussed in section V. of this preamble) is included in the budget
neutrality calculations.
Under section 1833(t)(16)(C) of the Act, as added by section
621(b)(1) of Pub. L. 108-173, payment for devices of brachytherapy
consisting of a seed or seeds (or radioactive source) is to be made at
charges adjusted to cost for services furnished on or after January 1,
2004, and before January 1, 2006. As we stated in our January 6, 2004
interim final rule, charges for the brachytherapy sources will not be
used in determining outlier payments and payments for these items will
be excluded from budget neutrality calculations. (We provide a
discussion of brachytherapy payment issues at section VII. of this
proposed rule.)
4. Proposed Changes to Packaged Services
Payments for packaged services under the OPPS are bundled into the
payments providers receive for separately payable services provided on
the same day. Packaged services are identified by the status indicator
``N.'' Hospitals include charges for packaged services on their claims,
and the costs associated with these packaged services are then bundled
into the costs for separately payable procedures on the claims for
purposes of median cost calculations. Hospitals may use CPT codes to
report any packaged services that were performed, consistent with CPT
coding guidelines.
As a result of requests from the public, a Packaging Subcommittee
to the APC Panel was established to review all the procedural CPT codes
with a status indicator of ``N.''
Providers have often suggested that many packaged services could be
provided alone, without any other separately payable services on the
claim, and requested that these codes not be assigned status indicator
``N.'' The Packaging Subcommittee reviewed every code that was packaged
in the CY 2004 OPPS. Based on comments we have received and their own
expert judgment, the subcommittee identified a set of packaged codes
that are often provided separately and subsequently reviewed
utilization and median cost data for these codes. One of the main
criteria utilized by the Packaging Subcommittee to determine whether a
code should become unpackaged was how likely it was for the code to be
billed without any other separately payable services on the claim. The
Packaging Subcommittee also examined median costs from hospital claims
for packaged services that were billed alone.
The Packaging Subcommittee identified areas for change for some
packaged CPT codes that they believe could frequently be provided to
patients as the sole service on a given date and that require
significant hospital resources as determined from hospital claims data.
During the February 2005 meeting, the APC Panel accepted the report of
the Packaging Subcommittee and made the following recommendations:
(1) That packaged codes be reviewed by the Panel individually.
(2) That the Packaging Subcommittee continue to meet throughout the
year to discuss problematic packaged codes.
(3) That CMS assign a modifier to CPT codes 36540 (Collect blood,
venous device); 36600 (Withdrawal of arterial blood); and 51701
(Insertion of non-indwelling bladder catheter), for use when there are
no other separately payable codes on the claim. The modifier would flag
the outpatient code editor (OCE) to assign payment to the claim.
(4) That CMS maintain the current packaged status indicator for CPT
code 76937 (Ultrasound guidance for vascular access).
(5) That CMS change the status indicators for CPT immunization
administration codes 90471 and 90472 to allow separate payment and
ensure consistency with other injection codes.
(6) That CMS gather more data on CPT code 94762 (Overnight pulse
oximetry) to determine how often this code is billed without any other
separately payable codes and whether it is performed more frequently
alone in rural settings than other settings.
(7) No changes to the packaged status of CPT codes 77790 (radiation
source handling) and 94760 and 94761 (both codes measure blood oxygen
levels).
(8) That CMS provide education and consistent guidelines to
providers and fiscal intermediaries on correct billing procedures for
packaged codes in general and in particular for CPT codes 36540, 36600,
and 51701 and the recommended modifier, if approved.
(9) That the Packaging Subcommittee review CPT codes 42550
(Injection for salivary x-ray) and 38792 (Sentinel node imaging).
(10) That CPT code 97602 (Nonselective wound care) be referred to
the Physician Payment Group within CMS for evaluation of its bundled
status as it relates to services provided under the OPPS and that the
Physician Payment Group report its conclusions back to the APC Panel.
For CY 2006, we are proposing to maintain CPT codes 36540 (Collect
blood venous device) and 36600 (Withdrawal of arterial blood) as
packaged services and not adopt the APC Panel's recommendation to add a
modifier. We note CPT code 36540 is also bundled under the Medicare
Physician Fee Schedule (MPFS), and our data demonstrate that the
service is generally billed with other separately payable services. We
also have relatively few single claims for CPT code 36600, compared to
the procedure's overall frequency. Both of these codes have relatively
low resource utilization. As these procedures are almost always
provided with other separately payable services, hospitals' payments
for those other services include the costs of CPT codes 36540 and
36600.
For CY 2006, we are proposing to pay separately for CPT code 51701
(Insertion of non-indwelling bladder catheter), and to map it to APC
0340 (Minor Ancillary Procedures), with status indicator ``X'', and a
median cost of $38.52. The APC Panel recommended that we pay separately
for this code only when there are no other separately payable services
on the claim. However, we are proposing to pay separately for this code
every time it is billed. We believe that it is more appropriate to make
payment for each procedure rather than increase hospitals'
administrative burden by requiring specific coding changes to indicate
that there are no other separately payable procedures on the claim.
Based on our review of the data, the cost for this procedure is not
insignificant, and the volume of single and multiple claims is modest.
When we reviewed related codes, including CPT code 51702 (Insertion of
temporary indwelling bladder catheter, simple) and CPT code 51703
(Insertion of temporary indwelling bladder catheter, complicate), we
noted that these codes also had substantial median costs and a moderate
volume of single claims. Therefore, for CY 2006, we are also proposing
to pay separately for CPT codes 51702 and 51703, mapping them to APC
0340 with a median cost of $38.52 and APC 0164 (Level I Urinary
[[Page 42692]]
and Anal Procedures) with a median cost of $71.54, respectively. CPT
codes 51701, 51702, and 51703 will be placed on the bypass list, as
discussed in section II.A.1.b. of this proposed rule.
For CY 2006, we are proposing to accept the APC Panel
recommendation that CPT code 76937 (Ultrasound guidance for vascular
access) remain packaged. We are concerned that there may be unnecessary
overuse of this procedure if it is separately payable. In addition, we
believe that the service would always be provided with another
separately payable procedure, so its costs would be appropriately
bundled with the definitive vascular access service. As stated in the
CY 2005 final rule with comment period (69 FR 65697), CMS and the
Packaging Subcommittee reviewed CY 2004 claims data for CPT code 76937
and determined that this code should remain packaged.
For CY 2006, see section VIII. of this preamble on drug
administration regarding CPT codes 90471 and 90472.
For CY 2006, we are proposing to accept the APC Panel
recommendations that CPT codes 77790 (Radiation handling), 94760 (Pulse
oximetry for oxygen saturation, single determination), and 94761 (Pulse
oximetry for oxygen saturation, multiple determinations) remain
packaged. We believe that CPT code 77790 is integral to the provision
of brachytherapy and should always be billed on the same day with
brachytherapy sources and their loading, ensuring that the provider
would receive appropriate payment for the radiation source handling and
loading bundled with the payment for the brachytherapy service. The
small number of single claims for this code in our data verifies that
this code is rarely billed alone without other payable services on the
claim, and those few single claims may be miscoded claims. Our data
review of CPT codes 94760 and 94761 revealed that these codes have low
resource utilization, and are most frequently provided with other
services. Similar to CPT code 77790, there are many fewer single claims
for CPT codes 94760 and 94761 than multiple procedure claims that
include CPT codes 94760 and 94761. CPT codes 94760 and 94761 describe
services that are very commonly performed in the hospital outpatient
setting, and unpackaging these codes would likely significantly
decrease the number of single claims available for use in calculating
median costs for other services.
For CY 2006, we are proposing to accept the APC Panel
recommendation to gather data and review CPT codes 94762, 42550, and
38792 with the Packaging Subcommittee. We will analyze single and
multiple procedure claims' volumes and resource utilization data, and
review these studies with the Packaging Subcommittee.
We referred CPT code 97602 (non-selective wound care) for MPFS
evaluation of its bundled status as CPT code 97602 relates to services
provided under the OPPS. CPT code 97602 is assigned status indicator
``A'' in this OPPS proposed rule, meaning that while it is no longer
payable under the OPPS, it is payable under a fee schedule other than
OPPS. Under the MPFS, the nonselective wound care services described by
CPT code 97602 are ``bundled'' into the selective wound care
debridement codes (CPT codes 97597 and 97598). Under the MPFS, a
separate payment is never made for ``bundled'' services and, because of
this designation, the provider does not receive separate payment for
non-selective wound care described by CPT code 97602. While this code
now falls under the MPFS rules, payment policy for this ``bundled''
service has not changed and separate payment is not made.
The APC Panel Packaging Subcommittee remains active, and additional
issues and new data concerning the packaging status of codes will be
shared for its consideration as information becomes available. We
continue to encourage submission of common clinical scenarios involving
currently packaged HCPCS codes to the Packaging Subcommittee for its
ongoing review. Additional detailed suggestions for the Packaging
Subcommittee should be submitted to APCPanel@cms.hhs.gov, with
``Packaging Subcommittee'' in the subject line.
B. Proposed Payment for Partial Hospitalization
(If you choose to comment on issues in this section, please include
the caption ``Partial Hospitalization'' at the beginning of your
comment.)
1. Background
Partial hospitalization is an intensive outpatient program of
psychiatric services provided to patients as an alternative to
inpatient psychiatric care for beneficiaries who have an acute mental
illness. A partial hospitalization program (PHP) may be provided by a
hospital to its outpatients or by a Medicare-certified CMHC. Section
1833(t)(1)(B)(i) of the Act provides the Secretary with the authority
to designate the hospital outpatient services to be covered under the
OPPS. Section 419.21(c) of the Medicare regulations that implement this
provision specifies that payments under the OPPS will be made for
partial hospitalization services furnished by CMHCs. Section
1883(t)(2)(C) of the Act requires that we establish relative payment
weights based on median (or mean, at the election of the Secretary)
hospital costs determined by 1996 claims data and data from the most
recent available cost reports. 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. For a detailed discussion, refer
to the April 7, 2000 OPPS final rule (65 FR 18452).
2. Proposed PHP APC Update for CY 2006
To calculate the proposed CY 2006 PHP per diem payment, we used the
same methodology that was used to compute the CY 2005 PHP per diem
payment. For CY 2005, the per diem amount was based on 12 months of
hospital and CMHC PHP claims data (for services furnished from January
1, 2003 through December 31, 2003). We used data from all hospital
bills reporting condition code 41, which identifies the claim as
partial hospitalization, and all bills from CMHCs because CMHCs are
Medicare providers only for the purpose of providing partial
hospitalization services. We used CCRs 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 services. Per diem costs were then computed by summing the line-
item costs on each bill and dividing by the number of days on the bill.
In a Program Memorandum issued on January 17, 2003 (Transmittal A-
03-004), we directed fiscal intermediaries to recalculate hospital and
CMHC CCRs using the most recently settled cost reports by April 30,
2003. Following the initial update of CCRs, fiscal intermediaries were
further instructed to continue to update a provider's CCR and enter
revised CCRs into the outpatient provider specific file. Therefore, for
CMHCs, we use CCRs from the outpatient provider specific file.
Historically, the median per diem cost for CMHCs has greatly
exceeded the median per diem cost for hospital-based PHPs and has
fluctuated significantly
[[Page 42693]]
from year to year while the median per diem cost for hospital-based
PHPs has remained relatively constant ($200-$225). Medicare providers
are required to maintain uniform charges for all payers. We believe
that hospitals have multiple payers and are far less likely to
significantly change their charges for PHP from year to year. However,
many CMHCs have indicated that Medicare is their only payer. As a
result, we believe that these providers may have increased and
decreased their charges in response to Medicare payment policies. As
discussed in more detail in the next section and in the final rule
establishing the CY 2004 OPPS (68 FR 63470), we believe that some CMHCs
manipulated their charges in order to inappropriately receive outlier
payments.
In the CY 2003 update, the difference in median per diem cost for
CMHCs and hospital-based PHPs was so great, $685 for CMHCs and $225 for
hospital-based PHPs, that we applied an adjustment factor of .583 to
CMHC costs to account for the difference between ``as submitted'' and
``final settled'' cost reports. By doing so, the CMHC median per diem
cost was reduced to $384, resulting in a combined hospital-based and
CMHC PHP median per diem cost of $273. As with all APCs in the OPPS,
the median cost for each APC was scaled to be relative to the cost of a
mid-level office visit and the conversion factor was applied. The
resulting per diem rate for PHP for CY 2003 was $240.03.
In the CY 2004 OPPS update, the median per diem cost for CMHCs grew
to $1038, while the median per diem cost for hospital-based PHPs was
again $225. After applying the .583 adjustment factor to the median
CMHC per diem cost, the median CMHC per diem cost was $605. As the CMHC
median per diem cost exceeded the average per diem cost of inpatient
psychiatric care, we proposed a per diem rate for CY 2004 based solely
on hospital-based PHP data. The proposed PHP per diem for CY 2004,
after scaling, was $208.95. However, by the time we published the OPPS
final rule for CY 2004, we had received updated CCRs for CMHCs. Using
the updated CCRs significantly lowered the CMHC median per diem cost to
$440. As a result, we determined that the higher per diem cost for
CMHCs was not due to the difference between ``as submitted'' and
``final settled'' cost reports, but were the result of excessive
increases in charges which may have been done in order to receive
higher outlier payments. Therefore, in calculating the PHP median per
diem cost for CY 2004, we did not apply the .583 adjustment factor to
CMHC costs to compute the PHP APC. Using the updated CCRs for CMHCs,
the combined hospital-based and CMHC median per diem cost for PHP was
$303. After scaling, we established the CY 2004 PHP APC of $286.82.
Then, in the CY 2005 OPPS update, the CMHC median per diem cost was
$310 and the hospital-based PHP median per diem cost was $215. No
adjustments were determined to be necessary and, after scaling, the
combined median per diem cost of $289 was reduced to $281.33. We
believed that the reduction in the CMHC median per diem cost indicated
that the use of updated CCRs had accounted for the previous increase in
CMHC charges, and represented a more accurate estimate of CMHC per diem
costs for PHP.
For CY 2006, we analyzed 12 months of data for hospital and CMHC
PHP claims for services furnished between January 1, 2004, and December
31, 2004. The data indicated that the median per diem cost for CMHCs
had dropped to $143, while the median per diem cost for hospital-based
PHPs was $209. It appears that CMHCs significantly reduced their
charges in CY 2004. The average charge per day for CMHCs in CY 2003 was
$1,184 and the average cost per day was $335. In CY 2004, the CMHC
average charge per day dropped to $765 and the average cost per day was
$167. We have determined that a combination of lower charges and
slightly lower CCRs for CMHCs resulted in a significant decline in the
CMHC median per diem cost.
Following the methodology used for the CY 2005 OPPS update, the
combined hospital-based and CMHC median per diem cost would be $149, a
decrease of 48 percent compared to the CY 2005 combined median per diem
amount. We believe that after scaling this amount to the cost of a mid-
level office visit, the resulting APC rate would be too low to cover
the per diem cost for all PHPs.
We are considering an alternative update methodology for the PHP
APC for CY 2006 that would mitigate this drastic reduction in payment
for PHP. One alternative would be to base the PHP APC on hospital-based
PHP data alone. The median per diem cost of hospital-based PHPs has
remained in the $200-225 range over the last 5 years, while the median
per diem cost for CMHC PHPs has fluctuated significantly from a high of
$1,037 to a low of $143. Under this alternative, we would use $209, the
median per diem cost for hospital-based PHPs during CY 2004 to
establish the PHP APC for CY 2006. However, we believe using this
amount would also result in an unacceptable drop in Medicare payments
for all PHPs in CY 2006 compared to payments in CY 2005.
Another alternative we are considering is to apply a different
trimming methodology to CMHC costs in an effort to eliminate the effect
of data for those CMHCs that appeared to have excessively increased
their charges in order to receive outlier payments. We compared CMHC
per diem costs in CY 2003 to CMHC per diem costs in CY 2004 and
determined the percentage change. Initially, we trimmed CMHCs claims
where the CMHC's per diem costs changed by 50 percent or more from CY
2003 to CY 2004. After combining the remaining CMHC claims with the
hospital-based PHP claims, we calculated a median per diem cost of
$160.75. However, this approach did not eliminate the data for all of
the CMHCs with unreasonable per diem costs. We then analyzed the
resulting median per diem cost if we trimmed CMHC claims where the
difference in CMHC per diem costs from 2003 to 2004 was 25 percent.
This trimming approach resulted in a combined CMHC and hospital-based
PHP median per diem cost of $176. We also trimmed the CMHC claims from
the CY 2003 data to see how trimming aberrant data would affect the
combined hospital/CMHC median per diem cost. We found that trimming the
claims from the CMHCs with a 25 percent difference in per diem cost
from CY 2003 to CY 2004 reduced the $289 median per diem cost to $218.
We believe it is important to eliminate aberrant data and we
believe trimming certain CMHC data would provide an incentive for CMHCs
to stabilize their charges so that we could use their data in future
updates of the PHP APC. However, we believe that the trimming methods
described above would also result in an unacceptably large decrease in
payment. In addition, the trimming method we used was based on
percentage change in cost per day, and may not have identified all the
CMHCs that may have manipulated their charges in order to receive more
outlier payments, for example, CMHCs with high charges and no reduction
in charges compared to CY 2003.
Although we prefer to use both CMHC and hospital data to establish
the PHP APC, we continue to be concerned about the volatility of the
CMHC data. The analyses we have conducted seem to indicate that
eliminating aberrant CMHC data results in a median per diem cost more
in line with hospital data. We will continue to analyze the CMHC data
in developing payment rates, however, if the data continues to
[[Page 42694]]
be unstable, we may use only hospital data in the future.
We are considering an approach that would lessen the PHP payment
reduction for CY 2006, yet, ensure an adequate payment amount and
continue to ensure access to the partial hospitalization benefit for
Medicare beneficiaries. For CY 2006, we are proposing to apply a 15-
percent reduction in the combined hospital-based and CMHC median per
diem cost that was used to establish the CY 2005 PHP APC. That amount
would then be scaled to be relative to the cost of a mid-level office
visit to establish the PHP APC for CY 2006. We believe a reduction in
the CY 2005 median per diem cost would strike an appropriate balance
between using the best available data and providing adequate payment
for a program that often spans 5-6 hours a day. We believe 15 percent
is an appropriate reduction because it recognizes decreases in median
per diem costs in both the hospital data and the CMHC data, and also
reduces the risk of any adverse impact on access to these services that
might result from a large single-year rate reduction. However, we would
propose that the reduction in payments for PHP be a transitional
measure, and will continue to monitor CMHC costs and charges for these
services and work with CMHCs to improve their reporting so that
payments can be calculated based on better empirical data, consistent
with the approach we have used to calculate payments in other areas of
the OPPS.
To apply the methodology, we would reduce $289 (the CY 2005
combined hospital-based and CMHC median per diem cost) by 15 percent,
resulting in a combined median per diem cost of $245.65. After scaling,
we are proposing the resulting APC amount for PHP of $240.51 for CY
2006, of which $48.10 is the beneficiary's coinsurance. We will
continue to analyze the data to determine whether there is a more
targeted approach that would allow use of the CMHC and hospital PHP
claims data to establish the final PHP rate for CY 2006.
3. Proposed Separate Threshold for Outlier Payments to CMHCs
In the November 7, 2003 final rule with comment period (68 FR
63469), we indicated that, given the difference in PHP charges between
hospitals and CMHCs, we did not believe it was appropriate to make
outlier payments to CMHCs using the outlier percentage target amount
and threshold established for hospitals. There was a significant
difference in the amount of outlier payments made to hospitals and
CMHCs for PHP. Further analysis indicated the use of OPPS outlier
payments for CMHCs was contrary to the intent of the general OPPS
outlier policy. Therefore, for CYs 2004 and 2005, we established a
separate outlier threshold for CMHCs. We designated 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 each of those years, excluding outlier payments.
As stated in the November 15, 2004 final rule with comment period,
CMHCs were projected to receive 0.6 percent of the estimated total OPPS
payments in CY 2005 (69 FR 65848). The CY 2005 CMHC outlier threshold
is met when the cost of furnishing services by a CMHC exceeds 3.5 times
the PHP APC payment amount. The current outlier payment percentage is
50 percent of the amount of costs in excess of the threshold.
CMS and the Office of the Inspector General are continuing to
monitor the excessive outlier payments to CMHCs. As previously stated
in section II.B.2. above, we used CY 2004 claims data to calculate the
proposed CY 2006 per diem payment. These data show the effect of the
separate outlier threshold for CMHCs that was effective January 1,
2004. During CY 2004, the separate outlier threshold for CMHCs resulted
in $1.8 million in outlier payments to CMHCs, within the 2.0 percent of
total OPPS payments identified for CMHCs. In CY 2003, more than $30
million was paid to CMHCs in outlier payments. We believe this
difference in outlier payments indicates that the separate outlier
threshold for CMHCs has been successful in keeping outlier payments to
CMHCs in line with the percentage of OPPS payments made to CMHCs.
As noted in section II.H. of this preamble, for CY 2006, we are
proposing to set the target for hospital outpatient outlier payments at
1.0 percent of total OPPS payments. We are also proposing to allocate a
portion of that 1.0 percent, 0.006 percent (or 0.006 percent of total
OPPS payments), to CMHCs for PHP services. As discussed in section
II.G. below, we are proposing a dollar threshold in addition to an APC
multiplier threshold for hospital OPPS outlier payments. However,
because PHP is the only APC for which CMHCs may receive payment under
the OPPS, we would not expect to redirect outlier payments by imposing
a dollar threshold. Therefore, we are not proposing a dollar threshold
for CMHC outliers. We are proposing to set the outlier threshold for
CMHCs for CY 2006 at 3.45 percent times the APC payment amount and the
CY 2006 outlier payment percentage applicable to costs in excess of the
threshold at 50 percent. As we did with the hospital outlier threshold,
we used hospital charge inflation factor to inflate charges to CY 2006.
C. Proposed Conversion Factor Update for CY 2006
(If you choose to comment on issues in this section, please include
the caption ``Conversion Factor'' at the beginning of your comment.)
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
CY 2006, 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 2006
published in the IPPS proposed rule on May 4, 2005 is 3.2 percent (70
FR 23384). To set the OPPS proposed conversion factor for CY 2006, we
increased the CY 2005 conversion factor of $56.983, as specified in the
November 15, 2004 final rule with comment period (69 FR 65842), by 3.2
percent.
In accordance with section 1833(t)(9)(B) of the Act, we further
adjusted the conversion factor for CY 2005 to ensure that the revisions
we are making to our updates by means of the wage index are made on a
budget-neutral basis. We calculated a proposed budget neutrality factor
of 1.002015212 for wage index changes by comparing total payments from
our simulation model using the FY 2006 IPPS proposed wage index values
to those payments using the current (FY 2005) IPPS wage index values.
In addition, to accommodate the proposed rural adjustment discussed in
section II.G. of this preamble, we calculated a proposed budget
neutrality factor of 0.99652023 by comparing payments with the rural
adjustment to those without. For CY 2006, allowed pass-through payments
are estimated to decrease to 0.05 percent of total OPPS payments, down
from 0.1 percent in CY 2005. The proposed conversion factor is also
adjusted by the difference in estimated pass-through payments of 0.05
percent. Finally, decreasing proposed payments for outliers to 1.0
percent of total payments returned 1.0 percent to the conversion
factor.
The proposed market basket increase update factor of 3.2 percent
for CY 2006, the required wage index budget neutrality adjustment of
approximately 1.002015212, the return of 1.0 percent
[[Page 42695]]
in total payments from a reduced outlier target, the 0.05 percent
adjustment to the pass-through estimate, and the adjustment for the
proposed rural payment adjustment of 0.99652023 result in a proposed
conversion factor for CY 2006 of $59.350.
D. Proposed Wage Index Changes for CY 2006
(If you choose to comment on issues in this section, please include
the caption ``Wage Index'' at the beginning of your comment.)
Section 1833(t)(2)(D) of the Act requires the Secretary to
determine a wage adjustment factor to adjust, for geographic wage
differences, the portion of the OPPS payment rate and the copayment
standardized amount attributable to labor and labor-related cost. This
adjustment must be made in a budget neutral manner. As we have done in
prior years, we are proposing to adopt the IPPS wage indices and extend
these wage indices to TEFRA hospitals that participate in the OPPS but
not the IPPS.
As discussed in section II.A. of this preamble, we standardize 60
percent of estimated costs (labor-related costs) for geographic area
wage variation using the IPPS wage indices that are calculated prior to
adjustments for reclassification to remove the effects of differences
in area wage levels in determining the OPPS payment rate and the
copayment standardized amount.
As published in the original OPPS April 7, 2000 final rule (65 FR
18545), OPPS has consistently adopted the final IPPS wage indices as
the wage indices for adjusting the OPPS standard payment amounts for
labor market differences. As initially explained in the September 8,
1998 OPPS proposed rule, we believed and continue to believe that using
the IPPS wage index as the source of an adjustment factor for OPPS is
reasonable and logical, given the inseparable, subordinate status of
the hospital outpatient within the hospital overall. In accordance with
section 1886(d)(3)(E) of the Act, the IPPS wage index is updated
annually. In this proposed rule, we are proposing to use the proposed
FY 2006 hospital IPPS wage index published in the Federal Register on
May 4, 2005 (70 FR 23550 through 23581), and as corrected and posted on
the CMS Web site, to determine the wage adjustments for the OPPS
payment rate and the copayment standardized amount for CY 2006. In
accordance with our established policy, we are proposing to use the FY
2006 final version of these wage indices to determine the wage
adjustments and copayment standardized amount that we will publish in
our final rule for CY 2006.
We note that the FY 2006 IPPS wage indices continue to reflect a
number of changes implemented in FY 2005 as a result of the new OMB
standards for defining geographic statistical areas, the implementation
of an occupational mix adjustment as part of the wage index, and new
wage adjustments provided for under Pub. L. 108-173. The following is a
brief summary of the proposed changes in the FY 2005 IPPS wage indices,
continued for FY 2006, and any adjustments that we are proposing
applying to the OPPS for CY 2006. We refer the reader to the FY 2006
IPPS proposed rule (70 FR 23367 through 23384, May 4, 2005) for a
detailed discussion of the changes to the wage indices.)
1. The proposed continued use of the new Core Based Statistical
Areas (CBSAs) issued by the Office of Management and Budget (OMB) as
revised standards for designating geographical statistical areas based
on the 2000 Census data, to define labor market areas for hospitals for
purposes of the IPPS wage index. The OMB revised standards were
published in the Federal Register on December 27, 2000 (65 FR 82235),
and OMB announced the new CBSAs on June 6, 2003, through an OMB
bulletin. In the FY 2005 hospital IPPS final rule, CMS adopted the new
OMB definitions for wage index purposes. In the FY 2006 IPPS proposed
rule, we again stated that hospitals located in MSAs would be urban and
hospitals that are located in Micropolitan Areas or Outside CBSAs would
be rural. To help alleviate the decreased payments for previously urban
hospitals that became rural under the new MSA definitions, we allowed
these hospitals to maintain their assignment to the MSA where they
previously had been located for the 3-year period from FY 2005 through
FY 2007. To be consistent with IPPS, we will continue the policy we
began in CY 2005 of applying the same criterion to TEFRA hospitals paid
under the OPPS but not under the IPPS and to maintain that MSA
designation for determining a wage index for the specified period.
Beginning in FY 2008, these hospitals will receive their statewide
rural wage index, although those hospitals paid under the IPPS will be
eligible to apply for reclassification. In addition to this ``hold
harmless'' provision, the FY 2005 IPPS final rule implemented a one-
year transition for hospitals that experienced a decrease in their FY
2005 wage index compared to their FY 2004 wage index due solely to the
changes in labor market definitions. These hospitals received 50
percent of their wage indices based on the new MSA configurations and
50 percent based on the FY 2004 labor market areas. In the FY 2006 IPPS
proposed rule, we discussed the cessation of the one-year transition
and proposed that hospitals receive 100 percent of their wage index
based upon the new CBSA configurations beginning in FY 2006. Again, for
the sake of consistency with IPPS, we also are proposing that TEFRA
hospitals would receive 100 percent of their wage index based upon the
new CBSA configurations beginning in FY 2006.
2. We again proposed to apply the proposed occupational mix
adjustment for FY 2006 IPPS to 10-percent of the average hourly wage
and leave 90 percent of the average hourly wage unadjusted for
occupational mix. As noted in the FY 2006 IPPS proposed rule, we are,
essentially, using the same CMS Wage Index Occupational Mix Survey and
Bureau of Labor Statistics data to calculate the adjustment. Because
there are no significant differences between the FY 2005 and the FY
2006 occupational mix survey data and results, we believe it is
appropriate to adopt the IPPS rule and apply the same occupational mix
adjustment to 10 percent of the proposed FY 2006 wage index.
3. The reclassifications of hospitals to geographic areas for
purposes of the wage index. For purposes of the OPPS wage index, we are
proposing to adopt all of the IPPS reclassifications proposed for FY
2006, including reclassifications that the Medicare Geographic
Classification Review Board (MGCRB) approved under the one-time appeal
process for hospitals under section 508 of Pub. L. 108-173. We note
that section 508 reclassifications will terminate March 31, 2007.
4. The proposed continuation of an adjustment to the wage index to
reflect the ``out-migration'' of hospital employees who reside in one
county but commute to work in a different county with a higher wage
index, in accordance with section 505 of Pub. L. 108-173 (FY 2006 IPPS
proposed rule (70 FR 23381 and 23382, May 4, 2005)). Hospitals paid
under the IPPS located in the qualifying section 505 ``out-migration''
counties receive a wage index increase unless they have already been
reclassified under section 1886(d)(10) of the Act, redesignated under
section 1886(d)(8)(B) of the Act, or reclassified under section 508. As
discussed in the FY 2006 IPPS proposed rule, we proposed that
reclassified hospitals not receive the out-migration adjustment unless
they waive their reclassified
[[Page 42696]]
status. For OPPS purposes, we are continuing our policy from CY 2005 to
apply the same 505 criterion to TEFRA hospitals paid under the OPPS but
not paid under the IPPS. Because TEFRA hospitals cannot reclassify
under sections 1886(d)(8) and 1886(d)(10) of the Act or section 508,
they are eligible for the out-migration adjustment. Therefore, TEFRA
hospitals located in a qualifying section 505 county will also receive
an increase to their wage index under OPPS. Addendum L shows the
hospitals, including TEFRA hospitals, that we currently believe will
receive the out-migration adjustment. However, because we are proposing
to adopt the final FY 2006 IPPS wage index, we will adopt any changes
in a hospital's classification status that would make them either
eligible or ineligible for the out-migration adjustment.
The following proposed FY 2006 IPPS wage indices that were
published in the May 4, 2005 Federal Register (70 FR 23550 through
2323581) are reprinted as Addenda in this OPPS proposed rule: Addendum
H--Wage Index for Urban Areas; Addendum I--Wage Index for Rural Areas;
Addendum J--Wage Index for Hospitals That Are Reclassified; Addendum
K--Puerto Rico Wage Index by CBSA; Addendum L--Out-Migration Wage
Adjustment; Addendum M--Hospital Reclassifications and Redesignations
by Individual Hospital and CBSA; Addendum N--Hospital Reclassifications
and Redesignations by Individual Hospital under Section 508 of Pub. L.
108-173; and Addendum O--Hospitals Redesignated as Rural Under Section
1886(d)(8)(E) of the Act. We are proposing to use these FY 2006 IPPS
indices, as they are finalized, to adjust the payment rates and
coinsurance amounts that we will publish in the OPPS final rule for CY
2006.
With the exception of reclassifications resulting from the
implementation of the one-time appeal process under section 508 of Pub.
L. 108-173, all changes to the wage index resulting from geographic
labor market area reclassifications or other adjustments must be
incorporated in a budget neutral manner. Accordingly, in calculating
the OPPS budget neutrality estimates for CY 2006, we have included the
wage index changes that result from MGCRB reclassifications,
implementation of section 505 of Pub. L. 108-173, and other refinements
made in the FY 2006 IPPS proposed rule, such as the hold harmless
provision for hospitals changing status from urban to rural under the
new CBSA geographic statistical area definitions. However, section 508
set aside $900 million to implement the section 508 reclassifications.
We considered the increased Medicare payments that the section 508
reclassifications would create in both the IPPS and OPPS when we
determined the impact of the one-time appeal process. Because the
increased OPPS payments already counted against the $900 million limit,
we did not consider these reclassifications when we calculated the OPPS
budget neutrality adjustment.
E. Proposed Statewide Average Default Cost-to-Charge Ratios
(If you choose to comment on issues in this section, please include
the caption ``Cost-to-Charge Ratios'' at the beginning of your
comment.)
CMS uses CCRs to determine outlier payments, payments for pass-
through devices, and monthly interim transitional corridor payments
under the OPPS. Some hospitals do not have a valid CCR. These hospitals
include, but are not limited to, hospitals that are new and have not
yet submitted a cost report, hospitals that have a CCR that falls
outside predetermined floor and ceiling thresholds for a valid CCR, or
hospitals that have recently given up their all-inclusive rate status.
Last year we updated the default urban and rural CCRs for CY 2005 in
our final rule published on November 15, 2004 (69 FR 65821 through
65825). We are proposing to update the default ratios using the most
recent cost report data for CY 2006.
We calculated the proposed statewide default CCRs using the same
CCRs that we use to adjust charges to costs on claims data. Table 3
lists the proposed CY 2006 default urban and rural CCRs by State. These
CCRs are the ratio of total costs to total charges from each provider's
most recently submitted cost report, for those cost centers relevant to
outpatient services. We also adjusted these ratios to reflect final
settled status by applying the differential between settled to
submitted costs and charges from the most recent pair of settled to
submitted cost reports.
The majority of submitted cost reports, 80.79 percent, were for CY
2003. We only used valid CCRs to calculate these default ratios. That
is, we removed the CCRs for all-inclusive hospitals, CAHs, and
hospitals in Guam and the U.S. Virgin Islands because these entities
are not paid under the OPPS, or in the case of all-inclusive hospitals,
because their CCRs are suspect. We further identified and removed any
obvious error CCRs and trimmed any outliers. We limited the hospitals
used in the calculation of the default CCRs to those hospitals that
billed for services under the OPPS during CY 2003.
Finally, we calculated an overall average CCR, weighted by a
measure of volume, for each State except Maryland. This measure of
volume is the total lines on claims and is the same one that we use in
our impact tables. For Maryland, we used an overall weighted average
CCR for all hospitals in the nation as a substitute for Maryland CCRs,
which appear in Table 3. Very few providers in Maryland are eligible to
receive payment under the OPPS, which limits the data available to
calculate an accurate and representative CCR. The overall decrease in
default statewide CCRs can be attributed to the general decline in the
ratio between costs and charges widely observed in the cost report
data.
Table 3.--Statewide Average Cost-to-Charge Ratios
----------------------------------------------------------------------------------------------------------------
Previous
State Urban/rural default CCR Default CCR
----------------------------------------------------------------------------------------------------------------
ALABAMA................................ RURAL.................................. 0.31552 0.26710
ALABAMA................................ URBAN.................................. 0.29860 0.24570
ALASKA................................. RURAL.................................. 0.59388 0.61850
ALASKA................................. URBAN.................................. 0.38555 0.42710
ARIZONA................................ RURAL.................................. 0.39748 0.32760
ARIZONA................................ URBAN.................................. 0.30922 0.26980
ARKANSAS............................... RURAL.................................. 0.35936 0.31750
ARKANSAS............................... URBAN.................................. 0.38278 0.30470
CALIFORNIA............................. RURAL.................................. 0.40335 0.29310
CALIFORNIA............................. URBAN.................................. 0.32427 0.24210
COLORADO............................... RURAL.................................. 0.51041 0.43060
[[Page 42697]]
COLORADO............................... URBAN.................................. 0.41863 0.32170
CONNECTICUT............................ RURAL.................................. 0.42702 0.47250
CONNECTICUT............................ URBAN.................................. 0.46592 0.44620
DELAWARE............................... RURAL.................................. 0.36289 0.36300
DELAWARE............................... URBAN.................................. 0.45061 0.45940
DISTRICT OF COLUMBIA................... URBAN.................................. 0.38690 0.37510
FLORIDA................................ RURAL.................................. 0.31782 0.24300
FLORIDA................................ URBAN.................................. 0.28363 0.22400
GEORGIA................................ RURAL.................................. 0.39829 0.33820
GEORGIA................................ URBAN.................................. 0.40262 0.32100
HAWAII................................. RURAL.................................. 0.44420 0.41020
HAWAII................................. URBAN.................................. 0.34815 0.34470
IDAHO.................................. RURAL.................................. 0.49682 0.46450
IDAHO.................................. URBAN.................................. 0.51942 0.49170
ILLINOIS............................... RURAL.................................. 0.41825 0.34060
ILLINOIS............................... URBAN.................................. 0.36825 0.29960
INDIANA................................ RURAL.................................. 0.44596 0.36860
INDIANA................................ URBAN.................................. 0.44205 0.37230
IOWA................................... RURAL.................................. 0.50166 0.41990
IOWA................................... URBAN.................................. 0.46963 0.38780
KANSAS................................. RURAL.................................. 0.48065 0.38970
KANSAS................................. URBAN.................................. 0.34698 0.29270
KENTUCKY............................... RURAL.................................. 0.36987 0.31080
KENTUCKY............................... URBAN.................................. 0.37381 0.32470
LOUISIANA.............................. RURAL.................................. 0.34317 0.29910
LOUISIANA.............................. URBAN.................................. 0.34357 0.27730
MAINE.................................. RURAL.................................. 0.47857 0.38800
MAINE.................................. URBAN.................................. 0.54084 0.44890
MARYLAND............................... RURAL.................................. 0.70380 0.36521
MARYLAND............................... URBAN.................................. 0.68104 0.32997
MASSACHUSETTS.......................... URBAN.................................. 0.44439 0.38810
MICHIGAN............................... RURAL.................................. 0.44890 0.39410
MICHIGAN............................... URBAN.................................. 0.41143 0.37420
MINNESOTA.............................. RURAL.................................. 0.48514 0.47130
MINNESOTA.............................. URBAN.................................. 0.45259 0.37410
MISSISSIPPI............................ RURAL.................................. 0.34264 0.30290
MISSISSIPPI............................ URBAN.................................. 0.37097 0.29320
MISSOURI............................... RURAL.................................. 0.42187 0.34160
MISSOURI............................... URBAN.................................. 0.38128 0.31080
MONTANA................................ RURAL.................................. 0.51173 0.47890
MONTANA................................ URBAN.................................. 0.49396 0.44810
NEBRASKA............................... RURAL.................................. 0.49386 0.42370
NEBRASKA............................... URBAN.................................. 0.42043 0.33870
NEVADA................................. RURAL.................................. 0.42878 0.50620
NEVADA................................. URBAN.................................. 0.22854 0.22330
NEW HAMPSHIRE.......................... RURAL.................................. 0.50083 0.43580
NEW HAMPSHIRE.......................... URBAN.................................. 0.39954 0.33220
NEW JERSEY............................. URBAN.................................. 0.49024 0.34030
NEW MEXICO............................. RURAL.................................. 0.44932 0.33890
NEW MEXICO............................. URBAN.................................. 0.50857 0.43310
NEW YORK............................... RURAL.................................. 0.52062 0.43940
NEW YORK............................... URBAN.................................. 0.54625 0.42550
NORTH CAROLINA......................... RURAL.................................. 0.37776 0.35410
NORTH CAROLINA......................... URBAN.................................. 0.42726 0.38110
NORTH DAKOTA........................... RURAL.................................. 0.52829 0.41170
NORTH DAKOTA........................... URBAN.................................. 0.47341 0.36740
OHIO................................... RURAL.................................. 0.42562 0.41160
OHIO................................... URBAN.................................. 0.42718 0.32810
OKLAHOMA............................... RURAL.................................. 0.40628 0.32900
OKLAHOMA............................... URBAN.................................. 0.36264 0.29190
OREGON................................. RURAL.................................. 0.47915 0.42460
OREGON................................. URBAN.................................. 0.49958 0.43760
PENNSYLVANIA........................... RURAL.................................. 0.40582 0.36010
PENNSYLVANIA........................... URBAN.................................. 0.33807 0.28010
PUERTO RICO............................ URBAN.................................. 0.42208 0.41370
RHODE ISLAND........................... URBAN.................................. 0.43930 0.35100
SOUTH CAROLINA......................... RURAL.................................. 0.35996 0.29370
SOUTH CAROLINA......................... URBAN.................................. 0.36961 0.29160
SOUTH DAKOTA........................... RURAL.................................. 0.49599 0.39210
SOUTH DAKOTA........................... URBAN.................................. 0.44259 0.33940
TENNESSEE.............................. RURAL.................................. 0.36663 0.30290
[[Page 42698]]
TENNESSEE.............................. URBAN.................................. 0.36464 0.28310
TEXAS.................................. RURAL.................................. 0.41763 0.33640
TEXAS.................................. URBAN.................................. 0.33611 0.30300
UTAH................................... RURAL.................................. 0.49748 0.47090
UTAH................................... URBAN.................................. 0.46733 0.45230
VERMONT................................ RURAL.................................. 0.47278 0.46750
VERMONT................................ URBAN.................................. 0.54533 0.44250
VIRGINIA............................... RURAL.................................. 0.39408 0.33500
VIRGINIA............................... URBAN.................................. 0.38604 0.32550
WASHINGTON............................. RURAL.................................. 0.54246 0.43420
WASHINGTON............................. URBAN.................................. 0.54658 0.41360
WEST VIRGINIA.......................... RURAL.................................. 0.42671 0.35070
WEST VIRGINIA.......................... URBAN.................................. 0.45616 0.40700
WISCONSIN.............................. RURAL.................................. 0.50126 0.42300
WISCONSIN.............................. URBAN.................................. 0.46268 0.38480
WYOMING................................ RURAL.................................. 0.54596 0.51580
WYOMING................................ URBAN.................................. 0.41265 0.41080
----------------------------------------------------------------------------------------------------------------
F. Expiring Hold Harmless Provision for Transitional Corridor Payments
for Certain Rural Hospitals
When the OPPS was implemented, every provider was eligible to
receive an additional payment adjustment (transitional corridor
payment) if the payments it received for covered OPD services under the
OPPS were less than the payments it would have received for the same
services under the prior reasonable cost-based system (section
1833(t)(7) of the Act). Section 1833(t)(7) of the Act provides that the
transitional corridor payments are temporary payments for most
providers, with two exceptions, to ease their transition from the prior
reasonable cost-based payment system to the OPPS system. Cancer
hospitals and children's hospitals receive the transitional corridor
payments on a permanent basis. Section 1833(t)(7)(D)(i) of the Act
originally provided for transitional corridor payments to rural
hospitals with 100 or fewer beds for covered OPD services furnished
before January 1, 2004. However, section 411 of Pub. L. 108-173 amended
section 1833(t)(7)(D)(i) of the Act to extend these payments through
December 31, 2005, for rural hospitals with 100 or fewer beds. Section
411 also extended the transitional corridor payments to sole community
hospitals located in rural areas for services furnished during the
period that begins with the provider's first cost reporting period
beginning on or after January 1, 2004, and ends on December 31, 2005.
Accordingly, the authority for making transitional corridor payments
under section 1833(t)(7)(D)(i) of the Act, as amended by section 411 of
Pub . L. 108-173, will expire for rural hospitals having 100 or fewer
beds and sole community hospitals located in rural areas on December
31, 2005. For CY 2006, transitional corridor payments will continue to
be available to cancer and children's hospitals. (We note that the
succeeding section II.G. of this preamble discusses an additional
provision of section 411 of Pub. L. 108-173 that related to a study to
determine appropriate adjustment to payments for rural hospitals under
the OPPS beginning January 2006.)
G. Proposed Adjustment for Rural Hospitals
(If you choose to comment on issues in this section, please include
the caption ``Rural Hospital Adjustment'' at the beginning of your
comment.)
Section 411 of Pub. L. 108-173 added a new paragraph (13) to
section 1833(t) of the Act. New section 1833(t)(13)(A) specifically
instructs the Secretary to conduct a study to determine if rural
hospital outpatient costs exceed urban hospital outpatient costs.
Moreover, under new section 1833(t)(13)(B) of the Act, the Secretary is
given authorization to provide an appropriate adjustment to rural
hospitals by January 1, 2006, if rural hospital costs are determined to
be greater than urban hospital costs.
To conduct the study required under section 1833(t)(13)(A), as
added by section 411 of Pub. L. 108-173, we believe that a simple
comparison of unit costs is insufficient because the costs faced by
hospitals, whether urban or rural, will be a function of many factors.
These include the local labor supply, and the complexity and volume of
services provided. Therefore, we used regression analysis to study
differences in the outpatient cost per unit between rural and urban
hospitals in order to compare costs after accounting for the influence
of these other factors.
Our regression analysis included all 4,077 hospitals billing under
OPPS for which we could model accurate cost per unit estimates. For
each hospital, total outpatient costs and descriptive information were
derived from CY 2004 Medicare claims and the hospital's most recently
submitted cost report. The description of claims used, our methodology
for creating costs from charges, and a description of the specific
hospitals included in our modeling are discussed in section II.A. of
this preamble. We excluded separately payable drugs and biologicals,
and clinical laboratory services paid on a fee schedule from our
analysis. We excluded the 49 hospitals in Puerto Rico because their
wage indices and unit costs are so different that they would have
skewed results. Finally, we excluded facilities whose unit outpatient
costs were outside of 3 standard deviations from the geometric mean
unit outpatient cost.
Total unit outpatient cost for each hospital was calculated by
dividing total outpatient cost by the total number of APC units
discounted for the joint performance of multiple procedures. (See
section II.G.2. below for a definition of discounted units.) We modeled
both explanatory and payment regression models. In an ``explanatory
model'' approach, all variables that are hypothesized to be important
determinants of cost are included in the cost regression, whether or
not they are going to be used as payment adjustments. In a ``payment
model'' approach, the only independent variables included in the cost
regression are those variables that are used as payment adjustments.
The regression
[[Page 42699]]
equations for both models were specified in double logarithmetic form.
The dependent variable in the explanatory regression equation was unit
outpatient cost. The dependent variable in the payment regressions was
standardized unit outpatient costs, that is, unit outpatient costs
adjusted to reflect payment by dividing through by the provider's
service-mix index which was adjusted by the provider's wage index. The
service-mix index is a measure of the resource intensity of services
provided by each hospital. Both regression equation models included
quantitative independent variables transformed into natural logarithms
and categorical independent variables. Categorical independent (dummy)
variables included hospital characteristics such as rural location or
type of hospital (short stay or specialty hospital).
1. Factors Contributing to Unit Cost Differences Between Rural
Hospitals and Urban Hospitals
In considering potential independent variables that might explain
differences in unit outpatient costs between urban and rural hospitals,
we determined that several factors would be important:
First, unit outpatient costs are expected to vary directly
with the prices of inputs used to produce outpatient services,
especially labor. Wage rates tend to be lower in rural areas than in
urban areas.
Second, there may be economies of scale in producing
outpatient services, which imply that unit costs will vary inversely
with the volume of outpatient services provided.
Third, independent of the volume of outpatient services,
hospitals that provide more complex outpatient services are expected to
have higher unit costs than hospitals with less complex service-mixes.
Typically, greater complexity involves a combination of higher
equipment and labor costs. Rural hospitals usually have less volume and
perform less complex services than urban hospitals.
Fourth, the size of a hospital may influence the volume
and service-mix of outpatient services. Large hospitals generally
provide a wider range of more complex services than do small hospitals.
Large hospitals may also have larger volumes in ancillary departments
that are shared between outpatient and inpatient services, and as a
result, benefit from greater economies of scale than do small
hospitals. Rural hospitals tend to be smaller than urban hospitals. Our
primary measure of outpatient volume is units of APCs, which only
reflects the volume of Medicare services paid under the outpatient PPS.
This measure does not include the inpatient utilization of shared
ancillary departments or non-Medicare outpatient services. For all
these reasons, it seems appropriate to include a broader measure of
facility size in the explanatory regression model. Therefore, as
explained below, we used the total number of facility beds to measure
facility size. Unit outpatient costs may be positively or negatively
related to facility size depending on whether complexity effects or
scale economies are more important.
2. Explanatory Variables
We used the hospital wage index as our measure of labor input
prices. To reflect the complexity of outpatient services, we used a
service-mix index defined as the ratio of the number of discounted
units weighted by APC relative weights divided by the number of
unweighted discounted units. Discounted units are the total number of
units after we adjust for the multiple procedure reduction of 50
percent that applies to payment for surgical services when two surgical
procedures are performed during the same operative session and for
selected radiology procedures, as proposed (see section XIV. of the
preamble). For example, if a procedure is paid at 100 percent of
payment 1,000 times and the same procedure is paid at 50 percent of
payment 100 times, the discounted units for that procedure equal 1,050
units (the sum of 1,000 units at full payment plus 100 units at 50
percent payment). We then calculate the total weight for that procedure
by multiplying the discounted units by the full weight for the
procedure. The service-mix index reflects the average APC weight of
each facility's outpatient services. Outpatient service volume was
measured as the total number of unweighted discounted units. We used
the total number of facility beds as the broader measure of facility
size. We also included categorical variables to indicate the types of
specialty hospitals that participate in OPPS, specifically cancer,
children's, long-term care, rehabilitation, and psychiatric hospitals.
Finally, we included a categorical variable for rural/urban location to
capture variation unexplained by the other independent variables in the
model. For all of the rural dummy variables discussed below, urban
hospitals are the reference group. Table 4 provides descriptive
statistics for the dependent variable and key independent variables by
urban and rural status. Without controlling for the other influences on
per unit cost, rural hospitals have lower cost per unit than urban
hospitals. However, when standardized for the service-mix wage indices,
average unit costs are nearly identical between urban and rural
hospitals
Table 4.--Means and Standard Deviations (In Parenthesis) for Key
Variables by Urban-Rural Location
------------------------------------------------------------------------
Rural Urban
------------------------------------------------------------------------
Unit Outpatient Cost............ $163.78 $195.54
($65.69) ($93.59)
Standardized Unit Outpatient $75.04 $75.15
Cost...........................
($26.97) ($45.00)
Wage Index...................... 0.8798 1.0214
(0.0771) (0.1487)
Service-Mix Index............... 2.4121 2.7741
(0.8915) (1.4579)
Outpatient Volume............... 18,645 35,744
(19,578) (42,626)
Beds............................ 76.70 198
(55.82) (169)
Number of Hospitals............. 1,257 2,820
------------------------------------------------------------------------
[[Page 42700]]
3. Results
Overall, all rural hospitals give some indication of having higher
cost per unit, after controlling for labor input prices, service-mix
complexity, volume, facility size, and type of hospital. In an
explanatory model regressing unit costs on all independent variables
discussed above, the coefficient for the rural categorical variable was
0.024 (p=0.058), which suggests that rural hospitals are approximately
2.4 percent more costly than urban hospitals after accounting for the
impact of other explanatory variables. The results of this regression
appear in Table 5. This regression demonstrated reasonably good
explanatory power with an adjusted R2 of 0.53 (rounded). Adjusted R2 is
the percentage of variation in the dependent variable explained by the
independent variables and is a standard measure of how well the
regression model fits the data. The regression coefficients of the key
explanatory variables all move in the expected direction: positive for
the wage index, indicating that rural hospitals can be expected to have
lower unit outpatient costs because they tend to be located in areas
with lower wage rates; positive for the outpatient service-mix index,
consistent with the hypothesis that rural hospitals' less complex
outpatient service-mixes result in lower unit costs than those of the
typical urban hospital; negative for outpatient service volume,
implying that, on average, rural hospitals' lower service volumes are a
source of higher unit cost compared to urban hospitals; and positive
for the facility size variable (beds), suggesting that facility size is
more reflective of complexity than any economies of scale. The rural
dummy variable has a coefficient of 0.02414. If the unit costs of rural
hospitals are the same as the unit costs of urban hospitals, the
probability of observing a value as extreme as or more extreme than 2.4
percent would be approximately 6 percent or less. This explanatory
regression model provides some evidence that outpatient services
provided by rural hospitals are more costly than outpatient services
provided by urban hospitals, but the evidence is weak. The payment
regression that accompanies this explanatory model indicates an
adjustment for all rural hospitals of 3.7 percent.
Table 5.--Regression Results for Unit Outpatient Cost: Rural Versus Urban
----------------------------------------------------------------------------------------------------------------
Explanatory Payment
-------------------------------------------------------------------------
Variable Regression Regression
coefficient t Value 1 p Value 2 coefficient t Value 1 p Value 2
----------------------------------------------------------------------------------------------------------------
Intercept............................. 4.89665 124.65 < .0001 4.24092 0.00624 < 0.0001
Wage Index............................ 0.64435 17.96 < .0001 ........... .......... ..........
Service-Mix Index..................... 0.75813 58.51 < .0001 ........... .......... ..........
Outpatient Volume..................... -0.06532 -14.40 < .0001 ........... .......... ..........
Beds.................................. 0.04475 6.17 < .0001 ........... .......... ..........
Rural................................. 0.02414 1.89 0.0582 0.03656 3.25 0.0012
Children's Hospital................... 0.06497 1.33 0.1824 ........... .......... ..........
Psychiatric Hospital.................. -0.44446 -15.13 < .0001 ........... .......... ..........
Long-Term Care Hospital............... -0.08759 -2.77 .0.0057 ........... .......... ..........
Rehabilitation Hospital............... -0.25295 -7.85 < .0001 ........... .......... ..........
Cancer Hospital....................... 0.30897 3.45 0.0006 ........... .......... ..........
R2.................................... 0.5285 .......... .......... ........... .......... ..........
----------------------------------------------------------------------------------------------------------------
Note: Coefficients of all quantitative variables are elasticities since both the dependent variable, unit
outpatient cost, and all quantitative independent variables were in natural logarithms. To calculate
percentage differences for categorical variables, their coefficients must be raised to the power, e, the base
of natural logarithms.
1 A t value is an indicator of our degree of confidence that the regression coefficient is different from zero,
taking into account the statistical variability of the estimated coefficient.
2 A p value is the probability of observing the specific t value when the estimated coefficient is zero. The t
values greater than 2 and less than -2 indicate a probability less than 5 percent, p-value< 0.05, that the
estimated coefficient is zero.
In order to assess whether the small difference in costs was
uniform across rural hospitals or whether all of the variation was
attributable to a specific class of rural hospitals, we included more
specific categories of rural hospitals in our explanatory regression
analysis. We divided rural hospitals into rural SCHs, rural hospitals
with less than 100 beds that are not rural sole community hospitals,
and other rural hospitals. The first two categories of rural hospitals
are currently eligible for payments under the expiring hold-harmless
provision. Because it appears that rural SCHs are responsible for the
variation in rural hospital costs, we then collapsed the last remaining
categories in an ``all other'' rural hospital category.
We found that rural SCHs demonstrated significantly higher cost per
unit than urban hospitals after controlling for labor input prices,
service-mix complexity, volume, facility size, and type of hospital.
The results of this regression appear in Table 6. With the exception of
the new rural variables, the independent variables have the same sign
and significance as in Table 5. Rural SCHs have a positive and
significant coefficient; all other rural hospitals do not. The rural
SCH ``dummy'' variable has an explanatory regression coefficient of
0.05668 and an observed probability that the coefficient is zero of
less than 0.001. If the unit costs of rural SCHs are the same as those
of urban hospitals, the probability of observing a value as extreme or
more extreme than 5.8 percent would be less than 0.1 percent.
Accordingly, we have determined that rural SCHs are more costly than
urban hospitals, holding all other variables constant. Notably, we
observed no significant difference between all other rural hospitals
and urban hospitals.
[[Page 42701]]
Table 6.--Regression Results for Unit Outpatient Cost: Rural Sole Community Hospitals
----------------------------------------------------------------------------------------------------------------
Explanatory Payment
-------------------------------------------------------------------------
Variable Regression t Value Regression t Value
coefficient \1\ pValue \2\ coefficient \1\ pValue \2\
----------------------------------------------------------------------------------------------------------------
Intercept............................. 4.89444 124.70 < .0001 4.24474 768.57 < .0001
Wage Index............................ 0.64022 17.85 < .0001 ........... .......... ..........
Service-Mix Index..................... 0.75798 58.56 < .0001 ........... .......... ..........
Outpatient Volume..................... -0.06538 -14.43 < .0001 ........... .......... ..........
Beds.................................. 0.04533 6.26 < .0001 ........... .......... ..........
Rural SCH............................. 0.05668 3.42 0.0006 0.06354 3.94 < .0001
All Other Rural....................... 0.00415 0.29 0.7715 ........... .......... ..........
Children's Hospital................... 0.06475 1.33 0.1835 ........... .......... ..........
Psychiatric Hospital.................. -0.44345 -15.11 < .0001 ........... .......... ..........
Long-Term Care Hospital............... -0.08644 -2.73 0.0063 ........... .......... ..........
Rehabilitation Hospital............... -0.25234 -7.83 < .0001 ........... .......... ..........
Cancer Hospital....................... 0.30957 3.46 0.0005 ........... .......... ..........
R2.................................... 0.5295 .......... .......... ........... .......... ..........
----------------------------------------------------------------------------------------------------------------
Note: Coefficients of all quantitative variables are elasticities since both the dependent variables, unit
outpatient cost, and all quantitative independent variables were in natural logarithms. To calculate
percentage differences for categorical variables, their coefficients must be raised to the power, e, the base
of natural logarithms.
\1\ A t value is an indicator of our degree of confidence that the regression coefficient is different from
zero, taking into account the statistical variability of the estimated coefficient.
\2\ A p value is the probability of observing the specific t value when the estimated coefficient is zero. The t
values greater than 2 and less than -2 indicate a probability less than 5 percent, p-value < 0.05, that the
estimated coefficient is zero.
Based on the above analysis and as noted in the explanatory
regression in Table 6, we believe that a payment adjustment for rural
SCHs is warranted. The accompanying payment regression, also appearing
in Table 6, indicates a cost impact of 6.6 percent. Thus, in accordance
with the authority provided in section 1833(t)(13)(B) of the Act, as
added by section 411 of Pub. L. 108-173, we are proposing a 6.6 percent
payment increase for rural SCHs for CY 2006. This adjustment would
apply to all services and procedures paid under the OPPS, excluding
drugs and biologicals. We note that this adjustment would be budget
neutral, and would be applied before calculating outliers and
coinsurance. We may revisit this adjustment in the future.
Additional descriptive statistics are available on the CMS Web
site.
H. Proposed Hospital Outpatient Outlier Payments
(If you choose to comment on issues in this section, please include
the caption ``Outlier Payments'' at the beginning of your comment.)
Currently, the OPPS pays outlier payments on a service-by-service
basis. For CY 2005, the outlier threshold is met when the cost of
furnishing a service or procedure by a hospital exceeds 1.75 times the
APC payment amount and exceeds the APC payment rate plus a $1,175 fixed
dollar threshold. We introduced a fixed dollar threshold in CY 2005 in
addition to the traditional multiple threshold to better target
outliers to those high cost and complex procedures where a very costly
case could present a hospital with significant financial loss. If a
provider meets both of these conditions, the multiple threshold and the
fixed dollar threshold, the outlier payment is calculated as 50 percent
of the amount by which the cost of furnishing the service exceeds 1.75
times the APC payment rate. For CMHCs, the outlier threshold is met
when the cost of furnishing a service or procedure by a CMHC exceeds
3.5 times the APC payment rate. If a CMHC provider meets this
condition, the outlier payment is calculated as 50 percent of the
amount by which the cost exceeds 3.5 times the APC payment rate.
As explained in our CY 2005 final rule (69 FR 65844), we set our
projected target for aggregate outlier payments at 2.0 percent of
aggregate total payments under OPPS. Our outlier thresholds were set so
that estimated CY 2005 aggregate outlier payments would equal 2.0
percent of aggregate total payments under OPPS.
For CY 2006, we are proposing to set our projected target for
aggregate outlier payments at 1.0 percent of aggregate total payments
under OPPS. A portion of that 1.0 percent, an amount equal to .006
percent of aggregate total payments under OPPS, would be allocated to
CMHCs for partial hospitalization program service outliers. In its
March 2004 Report, MedPAC recommended that Congress should eliminate
the outlier policy under the outpatient prospective payment system.
While this would require a statutory change, many of the reasons cited
by MedPAC for the elimination of the outlier policy are equally
applicable to any reduction in the size of the percentage of total
payments dedicated to outlier payments, including the following: the
narrow definition of many of the services provided in hospital
outpatient departments suggests that variability in costs should not be
great; the distribution of outlier payments benefits some hospital
groups more than others; the outlier policy is susceptible to
``gaming'' through charge inflation; and, the OPPS is the only
ambulatory payment system with an outlier policy.
In order to ensure that estimated CY 2006 aggregate outlier
payments would equal 1.0 percent of estimated aggregate total payments
under OPPS, we are proposing that the outlier threshold be modified so
that outlier payments are triggered when the cost of furnishing a
service or procedure by a hospital exceeds 1.75 times the APC payment
amount and exceeds the APC payment rate plus a $1,575 fixed dollar
threshold. We choose to modify the fixed dollar threshold to target 1.0
percent of estimated aggregate total payment under OPPS and not modify
the current 1.75 multiple to further our policy of targeting outlier
payments to complex and expensive procedures with sufficient
variability to pose a financial risk for hospitals. Modifying the
multiple would do less to target outlier payments to complex and
expensive procedures. For example, if we were to establish a multiple
of 2.00 rather than 1.75, then an APC with a payment rate of $20,000
would see the outlier threshold associated with the multiple increase
from $35,000 to $40,000. Raising the fixed dollar threshold to
[[Page 42702]]
$1,575 only increases the threshold for expensive procedures by $400.
For this reason, we believe it is more appropriate to focus the
modification necessary to target 1.0 percent of aggregate OPPS payments
on the fixed dollar threshold and increase it from $1,175 in CY 2005 to
our proposed $1,575 in CY 2006 and have the multiple threshold remain
at 1.75.
For CY 2006, the outlier threshold for CMHCs is met when the cost
of furnishing a service or procedure by a CMHC exceeds 3.45 times the
APC payment rate. If a CMHC provider meets this condition, the outlier
payment is calculated as 50 percent of the amount by which the cost
exceeds 3.45 times the APC payment rate.
The following is an example of an outlier calculation for CY 2006
under our proposed policy. A hospital charges $26,000 for a procedure.
The APC payment for the procedure is $3,000, including a rural
adjustment, if applicable. Using the provider's cost-to-charge ratio of
0.30, the estimated cost to the hospital is $7,800. To determine
whether this provider is eligible for outlier payments for this
procedure, the provider must determine whether the cost for the service
exceeds both the APC outlier cost threshold (1.75 x APC payment) and
the fixed dollar threshold ($1,575 + APC payment). In this example, the
provider meets both criteria:
(1) $7,800 exceeds $5,250 (1.75 x $3,000)
(2) $7,800 exceeds $4,575 ($1,575 + $3,000)
To calculate the outlier payment, which is 50 percent of the amount
by which the cost of furnishing the service exceeds 1.75 times the APC
rate, subtract $5,250 (1.75 x $3,000) from $7,800 (resulting in
$2,550). The provider is eligible for 50 percent of the difference, in
this case $1,275 ($2,550/2). The formula is (cost -(1.75 x APC payment
rate))/2.
I. Calculation of the Proposed National Unadjusted Medicare Payment
(If you choose to comment on issues in this section, please include
the caption ``Payment Rate for APCs'' at the beginning of your
comment.)
The basic methodology for determining prospective payment rates for
OPD services under the OPPS is set forth in existing regulations at
Sec. 419.31 and Sec. 419.32. The payment rate for services and
procedures for which payment is made under the OPPS is the product of
the conversion factor calculated in accordance with section II.C. of
this proposed rule, and the relative weight determined under section
II.A. of this proposed rule. Therefore, the national unadjusted payment
rate for APCs contained in Addendum A to this proposed rule and for
payable HCPCS codes in Addendum B to this proposed rule (Addendum B is
provided as a convenience for readers) was calculated by multiplying
the proposed CY 2006 scaled weight for the APC by the proposed CY 2006
conversion factor.
However, to determine the payment that would be made in a calendar
year under the OPPS to a specific hospital for an APC for a service
other than a drug, in a circumstance in which the multiple procedure
discount does not apply, we take the following steps:
Step 1. Calculate 60 percent (the labor-related portion) of the
national unadjusted payment rate. Since initial implementation of the
OPPS, we have used 60 percent to represent our estimate of that portion
of costs attributable, on average, to labor. (Refer to the April 7,
2000 final rule with comment period (65 FR 18496 through 18497), for a
detailed discussion of how we derived this percentage.)
Step 2. Determine the wage index area in which the hospital is
located and identify the wage index level that applies to the specific
hospital. The wage index values assigned to each area reflect the new
geographic statistical areas as a result of revised OMB standards
(urban and rural) to which hospitals would be assigned for FY 2006
under the IPPS, reclassifications through the Medicare Classification
Geographic Review Board, section 1866(d)(8)(B) ``Lugar'' hospitals, and
section 401 of Pub. L. 108-173, and the reclassifications of hospitals
under the one-time appeals process under section 508 of Pub. L. 108-
173. Assess whether the previous MSA-based wage index is higher than
the CBSA-based wage index, and, if higher, apply a 50/50 blend. The
wage index values include the occupational mix adjustment described in
section II.D. of this proposed rule that was developed for the IPPS.
Step 3. Adjust the wage index of hospitals located in certain
qualifying counties that have a relatively high percentage of hospital
employees who reside in the county, but who work in a different county
with a higher wage index, in accordance with section 505 of Pub. L.
108-173. Addendum K contains the qualifying counties and the proposed
wage index increase developed for the IPPS. This step is to be followed
only if the hospital has chosen not to accept reclassification under
Step 2 above.
Step 4. Multiply the applicable wage index determined under Steps 2
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
Step 5. Calculate 40 percent (the nonlabor-related portion) of the
national unadjusted payment rate and add that amount to the resulting
product of Step 4. The result is the wage index adjusted payment rate
for the relevant wage index area.
Step 6. If a provider is a sole community hospital, as defined in
Sec. 419.92, and located in a rural area, as defined in Sec.
412.63(b) or is treated as being located in a rural area under section
1886(d)(8)(E) of the Act, multiply the wage index adjusted payment rate
by 1.066 to calculate the total payment.
J. Proposed Beneficiary Copayments for CY 2006
(If you choose to comment on issues in this section, please include
the caption ``Beneficiary Copayment'' at the beginning of your
comment.)
1. Background
Section 1833(t)(3)(B) of the Act requires the Secretary to set
rules for determining copayment amounts to be paid by beneficiaries for
covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies
that the Secretary must reduce the national unadjusted copayment amount
for a covered OPD service (or group of such services) furnished in a
year in a manner so that the effective copayment rate (determined on a
national unadjusted basis) for that service in the year does not exceed
specified percentages. For all services paid under the OPPS in CY 2006,
and in calendar years thereafter, the specified percentage is 40
percent of the APC payment rate. Section 1833(t)(3)(B)(ii) of the Act
provides that, for a covered OPD service (or group of such services)
furnished in a year, the national unadjusted coinsurance amount cannot
be less than 20 percent of the OPD fee schedule amount.
2. Proposed Copayment for CY 2006
For CY 2006, we are proposing to determine copayment amounts for
new and revised APCs using the same methodology that we implemented for
CY 2004 (see the November 7, 2003 OPPS final rule with comment period,
68 FR 63458). The proposed unadjusted copayment amounts for services
payable under the OPPS that would be effective January 1, 2006, are
shown in Addendum A and Addendum B of this proposed rule.
[[Page 42703]]
3. Calculation of the Proposed Unadjusted Copayment Amount for CY 2006
To calculate the unadjusted copayment amount for an APC group, take
the following steps:
Step 1. Calculate the beneficiary payment percentage for the APC by
dividing the APC's national unadjusted copayment by its payment rate.
For example, using APC 0001, $9.95 is 40 percent of $24.89.
Step 2. Calculate the wage adjusted payment rate for the APC, for
the provider in question, as indicated in section II.I. above.
Step 3. Multiply the percentage calculated in Step 1 by the payment
rate calculated in Step 2. The result is the wage adjusted copayment
amount for the APC.
III. Proposed Ambulatory Payment Classification (APC) Group Policies
A. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient services.
Section 1833(t)(2)(B) provides that this classification system may be
composed of groups of services, so that services within each group are
comparable clinically and with respect to the use of resources. In
accordance with these provisions, we developed a grouping
classification system, referred to as the Ambulatory Payment
Classification Groups (or APCs), as set forth in Sec. 419.31 of the
regulations. We use Level I and Level II HCPCS codes and descriptors to
identify and group the services within each APC. The APCs are organized
such that each group is homogeneous both clinically and in terms of
resource use. Using this classification system, we have established
distinct groups of surgical, diagnostic, and partial hospitalization
services, and medical visits. We also have developed separate APC
groups for certain medical devices, drugs, biologicals,
radiopharmaceuticals, and devices of brachytherapy.
We have packaged into each procedure or service within an APC group
the cost associated with those items or services that are directly
related and integral to performing a procedure or furnishing a service.
Therefore, we do not make separate payment for packaged items or
services. For example, packaged items and services include: use of an
operating, treatment, or procedure room; use of a recovery room; use of
an observation bed; anesthesia; medical/surgical supplies;
pharmaceuticals (other than those for which separate payment may be
allowed under the provisions discussed in section V. of this preamble);
and incidental services such as venipuncture. Our packaging methodology
is discussed in section II.A. of this proposed rule.
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 0601 (Mid-Level Clinic
Visits). The APC weights are scaled to APC 0601 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 than annually and to revise the
groups and relative payment weights and make 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, as amended
by section 201(h) of the BBRA of 1999, also requires the Secretary,
beginning in CY 2001, to consult with an outside panel of experts to
review the APC groups and the relative payment weights (the APC Panel
recommendations for CY 2006 OPPS and our responses to them are
discussed in sections III.B. and III.C.4. of this preamble).
Finally, as discussed earlier, 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
unusual cases, such as low-volume items and services.
B. Proposed Changes--Variations Within APCs
(If you choose to comment on issues in this section, please include
the caption ``2 Times Rule'' at the beginning of your comment.)
1. Application of the 2 Times Rule
In accordance with section 1833(t)(2) of the Act and Sec. 419.31
of the regulations, we annually review the items and services within an
APC group to determine with respect to comparability of the use of
resources if the median of the highest cost item or service within an
APC group is more than 2 times greater than the median of the lowest
cost item or service within that same group (``2 times rule''). We make
exceptions to this limit on the variation of costs within each APC
group in unusual cases such as low-volume items and services. The
statute provides no exception in the case of a drug or biological that
has been designated as an orphan drug under section 526 of the Federal
Food, Drug, and Cosmetic Act because these drugs are assigned to
individual APC's.
During the APC Panel's February 2005 meeting, we presented median
cost and utilization data for the period of January 1, 2004, through
September 30, 2004, concerning a number of APCs that violate the 2
times rule and asked the APC Panel for its recommendation. After
carefully considering the information and data we presented, the APC
Panel recommended moving a total of 65 HCPCS codes from their currently
assigned APC to a different APC to resolve the 2 times rule violations.
Of the 65 HCPCS code reassignments recommended by the APC Panel, we
concur with 58 of the recommended reassignments. Therefore, we are
proposing to reassign these HCPCS codes as shown in Table 7.
Table 7.--Proposed Movement of HCPCS Codes Among APCs Based on the APC Panel's Recommendations for CY 2006
----------------------------------------------------------------------------------------------------------------
Proposed CY
HCPCS code Description CY 2005 APC 2006 APC
----------------------------------------------------------------------------------------------------------------
45307....................................... Proctosigmoidoscopy fb............ 0146 0428
45320....................................... Proctosigmoidoscopy ablate........ 0147 0428
45321....................................... Proctosigmoidoscopy volvul........ 0147 0428
[[Page 42704]]
45335....................................... Sigmoidoscopy w/submuc inj........ 0147 0146
45337....................................... Sigmoidoscopy & decompress........ 0147 0146
46606....................................... Anoscopy and biopsy............... 0147 0146
46610....................................... Anoscopy, remove lesion........... 0147 0428
46612....................................... Anoscopy, remove lesions.......... 0147 0428
46614....................................... Anoscopy, control bleeding........ 0147 0146
46615....................................... Anoscopy.......................... 0147 0428
56405....................................... I & D of vulva/perineum........... 0192 0189
57155....................................... Insert uteri tandems/ovoids....... 0193 0192
65265....................................... Remove foreign body from eye...... 0236 0237
65285....................................... Repair of eye wound............... 0236 0672
66220....................................... Repair eye lesion................. 0236 0672
67025....................................... Replace eye fluid................. 0236 0237
67027....................................... Implant eye drug system........... 0237 0672
67036....................................... Removal of inner eye fluid........ 0237 0672
67038....................................... Strip retinal membrane............ 0237 0672
67039....................................... Laser treatment of retina......... 0237 0672
67121....................................... Remove eye implant material....... 0236 0237
75790....................................... Visualize A-V shunt............... 0281 0279
75820....................................... Vein x-ray, arm/leg............... 0281 0668
75822....................................... Vein x-ray, arms/legs............. 0281 0668
75831....................................... Vein x-ray, kidney................ 0287 0279
75840....................................... Vein x-ray, adrenal gland......... 0287 0280
75842....................................... Vein x-ray, adrenal glands........ 0287 0280
75860....................................... Vein x-ray, neck.................. 0287 0668
75870....................................... Vein x-ray, skull................. 0287 0668
75872....................................... Vein x-ray, skull................. 0287 0279
75880....................................... Vein x-ray, eye socket............ 0287 0668
86077....................................... Physician blood bank service...... 0343 0433
86079....................................... Physician blood bank service...... 0343 0433
88104....................................... Cytopathology, fluids............. 0343 0433
88107....................................... Cytopathology, fluids............. 0343 0433
88160....................................... Cytopath smear, other source...... 0342 0433
88161....................................... Cytopath smear, other source...... 0343 0433
88162....................................... Cytopath smear, other source...... 0342 0433
88184....................................... Flowcytometry/tc, 1 marker........ 0342 0344
88185....................................... Flowcytometry/tc, add-on.......... 0342 0343
88187....................................... Flowcytometry/read, 2-8........... 0342 0433
88188....................................... Flowcytometry/read, 9-15.......... 0342 0433
88189....................................... Flowcytometry/read, 16 & >........ 0344 0343
88312....................................... Special stains.................... 0342 0433
88313....................................... Special stains.................... 0342 0433
88318....................................... Chemical histochemistry........... 0342 0433
88323....................................... Microslide consultation........... 0344 0343
88329....................................... Path consult introp............... 0342 0433
88332....................................... Path consult intraop, add'l....... 0342 0433
88342....................................... Immunohistochemistry.............. 0344 0343
88346....................................... Immunofluorescent study........... 0344 0343
88347....................................... Immunofluorescent study........... 0344 0343
88355....................................... Analysis, skeletal muscle......... 0344 0343
89230....................................... Collect sweat for test............ 0343 0433
92004....................................... Eye exam, new patient............. 0602 0601
92014....................................... Eye exam & treatment.............. 0602 0601
----------------------------------------------------------------------------------------------------------------
The seven HCPCS code movements that the APC Panel recommended, but
upon further review we are proposing not to accept, are discussed
below. We include in our discussion our proposal specific to each of
them to resolve the 2 times rule violations.
a. APC 0146: Level I Sigmoidoscopy, APC 0147: Level II
Sigmoidoscopy, APC 0428: Level III Sigmoidoscopy.
APCs 0146 and 0147 were exceptions to the 2 times rule in CY 2005.
Our analysis of these two APCs based on the most current CY 2004 data
revealed greater violations of the 2 times rule and changing relative
frequencies of simple and complex procedures in these two APCs. Thus,
for CY 2006, the APC Panel assisted us in reconfiguring these two APCs
into three related APCs to resolve the two times violations and improve
their clinical and resource homogeneity based on the most current
hospital claims data and to remove these APCs from the list of
exceptions. The APC Panel recommended moving CPT codes 45303
(Proctosigmoidoscopy dilate) and 45305 (Proctosigmoidoscopy w/bx) from
APC 0147 to APC 0146 because the median cost for these codes appeared
too high, and was likely based primarily on aberrant CY 2004 claims. In
addition, the APC Panel recommended that CMS move CPT code 45309
(Proctosigmoidoscopy removal) from APC 0147 to a new proposed APC 0428.
[[Page 42705]]
Based on the results of our review of several years of claims data and
our study of hospital resource homogeneity, we disagree that these
claims data are aberrant. We are proposing to move CPT codes 45303 and
45305 to APC 0147 and to keep CPT 45309 in APC 0147, to resolve the 2
times rule violation.
b. APC 0342: Level I Pathology, APC 0433: Level II Pathology, APC
0343: Level III Pathology.
To resolve a 2 times rule violation, the APC Panel recommended
moving CPT codes 88108 (Cytopath, concentrate tech) and 88112
(Cytopath, cell enhance tech) from APC 0343 to a proposed new APC 0433.
The APC Panel also recommended moving CPT codes 88319 (Enzyme
histochemistry) and 88321 (Microslide consultation) from APC 0342 to a
proposed new APC 0433. Based on the results of our review of several
years of claims data and the study of hospital resource homogeneity, we
are proposing a different way to resolve the 2 times rule violation: We
are proposing to place CPT codes 88319 and 88112 in APC 0343 and to
place CPT codes 88108 and 88321 in APC 0433.
2. Proposed Exceptions to the 2 Times Rule
As discussed earlier, we may make exceptions to the 2 times limit
on the variation of costs within each APC group in unusual cases such
as low-volume items and services. Taking into account the APC changes
that we are proposing for CY 2006 based on the APC Panel
recommendations discussed in section III.B.1. of this preamble and the
use of CY 2004 claims data to calculate the median cost of procedures
classified in the APCs, we reviewed all the APCs to determine which
APCs would not meet the 2 times limit. We used the following criteria
to decide whether to propose exceptions to the 2 times rule for
affected APCs:
Resource homogeneity
Clinical homogeneity
Hospital concentration
Frequency of service (volume)
Opportunity for upcoding and code fragments.
For a detailed discussion of these criteria, refer to the April 7,
2000 OPPS final rule with comment period (65 FR 18457).
Table 8 below contains the APCs that we are proposing 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 APC Panel's
recommendation because these recommendations were based on explicit
consideration of resource use, clinical homogeneity, hospital
specialization, and the quality of the data used to determine the APC
payment rates that we are proposing for CY 2006. The median cost for
hospital outpatient services for these and all other APCs can be found
on the CMS Web site: http//http://www.cms.hhs.gov.
Table 8.--Proposed APC Exceptions to the 2 Times Rule For CY 2006
------------------------------------------------------------------------
APC APC description
-----------------------------------------------------------------------
0004........................... Level I Needle Biopsy/ Aspiration
Except Bone Marrow.
0005........................... Level II Needle Biopsy/Aspiration
Except Bone Marrow.
0019........................... Level I Excision/ Biopsy.............
0024........................... Level I Skin Repair..................
0040........................... Level I Implantation of
Neurostimulator Electrodes.
0043........................... Closed Treatment Fracture Finger/Toe/
Trunk.
0046........................... Open/Percutaneous Treatment Fracture
or Dislocation.
0060........................... Manipulation Therapy.................
0080........................... Diagnostic Cardiac Catheterization...
0081........................... Non-Coronary Angioplasty or
Atherectomy.
0093........................... Vascular Reconstruction/Fistula
Repair without Device.
0099........................... Electrocardiograms...................
0105........................... Revision/Removal of Pacemakers, AICD,
or Vascular.
0120........................... Infusion Therapy Except Chemotherapy.
0140........................... Esophageal Dilation without Endoscopy
0141........................... Level I Upper GI Procedures..........
0148........................... Level I Anal/Rectal Procedures.......
0164........................... Level I Urinary and Anal Procedures..
0191........................... Level I Female Reproductive Proc.....
0204........................... Level I Nerve Injections.............
0209........................... Extended EEG Studies and Sleep
Studies, Level II.
0235........................... Level I Posterior Segment Eye
Procedures.
0251........................... Level I ENT Procedures...............
0252........................... Level II ENT Procedures..............
0262........................... Plain Film of Teeth..................
0274........................... Myelography..........................
0297........................... Level II Therapeutic Radiologic
Procedures.
0303........................... Treatment Device Construction........
0312........................... Radioelement Applications............
0325........................... Group Psychotherapy..................
0330........................... Dental Procedures....................
0341........................... Skin Tests...........................
0353........................... Level II Injections..................
0373........................... Neuropsychological Testing...........
0397........................... Vascular Imaging.....................
0409........................... Red Blood Cell Tests.................
0432........................... Health and Behavior Services.........
0600........................... Low Level Clinic Visits..............
0688........................... Revision/Removal of Neurostimulator
Pulse Generator Receiver.
0004........................... Level I Needle Biopsy/ Aspiration
Except Bone Marrow.
0005........................... Level II Needle Biopsy/Aspiration
Except Bone Marrow.
[[Page 42706]]
0019........................... Level I Excision/ Biopsy.............
------------------------------------------------------------------------
C. New Technology APCs
(If you choose to comment on issues in this section, please include
the caption ``New Technology APCs'' at the beginning of your
comment.)
1. Background
In the November 30, 2001 final rule (66 FR 59903), we finalized
changes to the time period a service was eligible for payment under a
New Technology APC. Beginning in CY 2002, we retain services within New
Technology APC groups until we gather sufficient claims data to enable
us to assign the service to 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. 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.
2. Proposed Refinement of New Technology Cost Bands
In the November 7, 2003 final rule with comment period, we last
restructured the New Technology APC groups to make the cost intervals
more consistent across payment levels (68 FR 63416). We established
payment levels in $50, $100, and $500 intervals and expanded the number
of New Technology APCs. We also retained two parallel sets of New
Technology APCs, one set with a status indicator of ``S'' (Significant
Procedure, Not Discounted When Multiple) and the other set with a
status indicator of ``T'' (Significant Procedures, Multiple Reduction
Applies). We did this restructuring because the number of procedures
assigned to New Technology APCs had increased, and narrower cost bands
were necessary to avoid significant payment inaccuracies for New
Technology services. Therefore, we dedicated two new series of APCs to
the restructured New Technology APCs, which allowed us to narrow the
cost bands and afforded us the flexibility to create additional bands
as future needs dictated.
As the number of procedures that qualify for placement in the New
Technology APCs has continued to increase over the past 2 years, the $0
to $50 cost band represented by ``S'' status APC 1501 (New Technology,
Level I, $0-$50) and ``T'' status APC 1538 (New Technology, Level I,
$0-$50) spans too broad of a cost interval to accurately represent the
lower costs of an ever-increasing number of procedures that qualify for
New Technology payment. Therefore, we are proposing to refine this cost
band to five $10 increments, resulting in the creation of an additional
10 New Technology APCs to accommodate the two parallel sets of New
Technology APCs, one set with a status indicator of ``S'' and the other
set with a status indicator of ``T.'' We are also proposing to
eliminate the two $0 to $50 cost band New Technology APCs 1501 and
1538, so that the cost bands of all New Technology APCs would continue
to be mutually exclusive. Table 9 contains a listing of the 10
additional New Technology APCs that we are proposing for CY 2006.
Table 9.--Proposed New Technology APCs for CY 2006
----------------------------------------------------------------------------------------------------------------
Proposed CY
APC Descriptor Status indicator 2006 payment
rate
----------------------------------------------------------------------------------------------------------------
1491............................... New Technology--Level IA ($0- S $5
$10).
1492............................... New Technology--Level IB ($10- S 15
$20).
1493............................... New Technology--Level IC ($20- S 25
$30).
1494............................... New Technology--Level ID ($30- S 35
$40).
1495............................... New Technology--Level IE ($40- S 45
$50).
1496............................... New Technology--Level IA ($0- T 5
$10).
1497............................... New Technology--Level B ($10- T 15
$20).
1498............................... New Technology--Level IC ($20- T 25
$30).
1499............................... New Technology--Level D ($30- T 35
$40).
1500............................... New Technology--Level E ($40- T 45
$50).
----------------------------------------------------------------------------------------------------------------
As we explained in the November 30, 2001 final rule (66 FR 59897),
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, or where the New
Technology APCs are restructured, we may, based on more recent resource
utilization information (including claims data) or the availability of
refined New Technology APC bands, reassign the procedure or service to
a different New Technology APC that most appropriately reflects its
cost. Therefore, we are proposing to discontinue New Technology APCs
1501 and 1538, and reassign the procedures currently assigned to them
to proposed New Technology APCs 1491 through 1500. Table 10 summarizes
these proposed New Technology APC reassignments.
[[Page 42707]]
Table 10.--Proposed Movement of HCPCS Codes From New Technology APCS 1501 and 1538 to New Technology APCs 1491
Through 1500 for CY 2006
----------------------------------------------------------------------------------------------------------------
CY 2006
CY 2005 new proposed new
HCPCS/CPT code Descriptor technology APC technology APC
assignment reassignment
----------------------------------------------------------------------------------------------------------------
0003T.................................... Cervicography........................ 1501 1492
90473.................................... Immunization Admin, one vaccine by N/A 1491
intranasal or oral.
90474.................................... Immunization Admin, each additional N/A 1491
vaccine by intranasal or oral.
G0375.................................... Smoking and tobacco-use cessation 1501 1491
counseling visit; intermediate,
greater than 3 minutes up to 10
minutes.
G0376.................................... Smoking and tobacco-use cessation 1501 1492
counseling visit; intensive, greater
than 10 minutes.
----------------------------------------------------------------------------------------------------------------
3. Proposed Requirements for Assigning Services to New Technology APCs
In the April 7, 2000 final rule (65 FR 18477), we created a set of
New Technology APCs to pay for certain new technology services under
the OPPS. We described a group of criteria for use in determining
whether a service is eligible for assignment to a New Technology APC.
We subsequently modified this set of criteria in our November 30, 2001
final rule (66 FR 59897 to 59901), effective January 1, 2002. These
modifications were based on changes in the data (we were no longer
required to use 1996 data to set payment rates) and on our continuing
experience with the assignment of services to New Technology APCs.
Based on our history of reviewing applications for New Technology
APC assignments under the OPPS, we have encountered situations where
there is extremely limited clinical experience with new technology
services regarding their use and efficacy in the typical Medicare
population. In some cases, there may be ambiguity regarding how the new
technology services fit within the standard coding framework for
established procedures, and there may be no specific coding available
for the new technology services in other settings or for use by other
payers. Nevertheless, applicants requesting assignment of services to
New Technology APCs request that we provide billing and payment
mechanisms under the OPPS for the new technology services through the
establishment of codes, descriptors, and payment rates. As stated in
section I.F. of this preamble, we remain committed to the overarching
goal of ensuring that Medicare beneficiaries have timely access to the
most effective new medical treatments and technologies in clinically
appropriate settings. We believe that our current New Technology APC
assignment process helps to assure such access, and that an enhancement
to the New Technology service application process may further encourage
appropriate dissemination of and Medicare beneficiary access to new
technology services.
We are interested in promoting review of the coding, clinical use,
and efficacy of new technology services by the greater medical
community through our New Technology service application and review
process for the OPPS. Therefore, in addition to our current information
requirements at the time of application, we are proposing to require
that an application for a code for a new technology service be
submitted to the American Medical Association's (AMA's) CPT Editorial
Panel before we accept a New Technology APC application for review.
This will not change our current criteria for assignment of a service
to a New Technology APC. This requirement will encourage timely review
by the wider medical community as CMS is reviewing the service for
possible new coding and assignment to a New Technology APC under the
OPPS. There is only one CPT code application that is used by applicants
requesting consideration for either Category I or III codes. We would
accept either a Category I or Category III code application to the CPT
Editorial Panel. The application requests relevant clinical information
regarding new services, including their appropriate use and the patient
populations expected to benefit from the services which will provide us
with useful additional information. CPT code applications are reviewed
by the CPT Editorial Panel, whose members bring diverse clinical
expertise to that review. We believe that consideration by the CPT
Editorial Panel may facilitate appropriate dissemination of the new
technology services across delivery settings and may bring to light
other needed coding changes or clarifications. We are further proposing
that a copy of the submitted CPT application be filed with us as part
of the application for a New Technology APC assignment under the OPPS,
along with CPT's letter acknowledging or accepting the coding
application. We remind the public that we do not consider an
application complete until all informational requirements are provided.
In addition, we remind the public that when we assign a new service a
HCPCS code and provide for payment under the OPPS, these actions do not
imply coverage by the Medicare program, but indicate only how the
procedure or service may be paid if covered by the program. Fiscal
intermediaries must determine whether a service meets all program
requirements for coverage, for example, that it is reasonable and
necessary to treat the beneficiary's condition and whether it is
excluded from payment. CMS may also make National Coverage
Determinations (NCDs) on new technology procedures.
4. Proposed Movement of Procedures From New Technology APCs to Clinical
APCs
The procedures discussed below represent New Technology services
for which we believe we have sufficient data to reassign to a
clinically appropriate APC.
a. Proton Beam Therapy
(If you choose to comment on issues in this section, please include
the caption ``Proton Beam Therapy'' at the beginning of your
comment.)
In the August 16, 2004 proposed rule (69 FR 50467), we proposed to
reassign CPT codes 77523 (Proton treatment delivery, intermediate) and
77525 (Proton treatment delivery, complex) from New Technology APC 1511
(New Technology, Level XI, $900-$1,000) to clinical APC 0419 (Proton
Beam Therapy, Level II). In response to this proposal, we received
numerous comments urging that we maintain CPT codes 77523 and 77525 in
New Technology APC 1511 at a payment rate of $950 for CY 2005, arguing
that the proposed payment rate of $678.31 for
[[Page 42708]]
CY 2005 would halt diffusion of this technology and negatively impact
patient access to this cancer treatment. Commenters explained that the
low volume of claims submitted by only two facilities provided volatile
and insufficient data for movement into the proposed clinical APC 0419.
They further explained that the extraordinary capital expense of
between $70 and $125 million and high operating costs of a proton beam
facility necessitate adequate payment for this service to protect the
financial viability of this emerging technology.
In the November 15, 2004 final rule with comment period (69 FR
65719 through 65720), we considered the concerns expressed by numerous
commenters that patient access to proton beam therapy might be impeded
by a significant reduction in OPPS payment. Therefore, we set the CY
2005 payment rate for CPT codes 77523 and 77525 by calculating a 50/50
blend of the median cost for intermediate and complex proton beam
therapies of $690.45 derived from CY 2003 claims and the CY 2004 New
Technology payment rate of $950. We used the result of this calculation
($820) to assign intermediate and complex proton beam therapies (CPT
codes 77523 and 77525) to New Technology APC 1510 (New Technology--
Level X ($800-$900) for a blended payment rate of $850 for CY 2005.
Our examination of the CY 2004 claims data has revealed a second
year of a stable, albeit modest, number of claims on which to set the
CY 2006 payment rates for CPT codes 77523 and 77525. However, unlike
the median of $690.45 for the CY 2005 Level II proton beam radiation
therapy clinical APC containing CPT codes 77523 and 77525 derived from
the CY 2003 claims data, the median for a comparable Level II proton
beam radiation therapy clinical APC is $934.46 derived from CY 2004
claims data. This more recent median appears to more accurately reflect
the significant capital expense and high operating costs of a proton
beam therapy facility, and supports patient access to proton beam
therapy. Therefore, we are proposing to move CPT codes 77523 and 77525
from New Technology APC 1510 to clinical APC 0667 (Level II Proton Beam
Radiation Therapy) based on a median cost of $934.46 for CY 2006.
b. Stereotactic Radiosurgery
(If you choose to comment on issues in this section, please include
the caption ``Stereotactic Radiosurgery'' at the beginning of your
comment.)
In a correction to the November 7, 2003 final rule with comment
period, issued on December 31, 2003 (68 FR 75442), we considered a
commenter's request to combine HCPCS codes G0242 (Cobalt 60-based
stereotactic radiosurgery planning) and G0243 (Cobalt 60-based
stereotactic radiosurgery delivery) into a single procedure code in
order to capture the costs of this treatment in single procedure claims
because the majority of patients receive the planning and delivery of
this treatment on the same day. We responded to the commenter's request
by explaining that several other commenters stated that HCPCS code
G0242 was being misused to code for the planning phase of linear
accelerator-based stereotactic radiosurgery planning. Because the
claims data for HCPCS code G0242 represented costs for linear
accelerator-based stereotactic radiosurgery planning (due to misuse of
the code), in addition to Cobalt 60-based stereotactic radiosurgery
planning, we were uncertain of how to combine these data with HCPCS
code G0243 to determine an accurate payment rate for a combined code
for planning and delivery of Cobalt 60-based stereotactic radiosurgery.
In consideration of the misuse of HCPCS code G0242 and the
potential for causing greater confusion by combining HCPCS codes G0242
and G0243 into a single procedure code, for CY 2004 we created a
planning code for linear accelerator-based stereotactic radiosurgery
(HCPCS code G0338) to distinguish this service from Cobalt 60-based
stereotactic radiosurgery planning. We maintained both HCPCS codes
G0242 and G0243 for the planning and delivery of Cobalt 60-based
stereotactic radiosurgery, consistent with the use of the two G-codes
for planning (HCPCS code G0338) and delivery (HCPCS codes G0173, G0251,
G0339, G0340, as applicable) of each type of linear accelerator-based
stereotactic radiosurgery (SRS). We indicated that we intended to
maintain these new codes in their current New Technology APCs until we
had sufficient hospital claims data reflecting the costs of the
services to consider moving them to clinical APCs.
During the February 2005 APC Panel meeting, the APC Panel discussed
the clinical and resource cost similarities between planning for Cobalt
60-based and linear accelerator-based SRS. The APC Panel also discussed
the use of CPT codes instead of specific G-codes to describe the
services involved in SRS planning, noting the clinical similarities in
radiation treatment planning regardless of the mode of treatment
delivery. Acknowledging the possible need for CMS to separately track
planning for SRS, the APC Panel eventually recommended that we create a
single HCPCS code to encompass both Cobalt 60-based and linear
accelerator-based SRS planning. However, a hospital association and
other presenters at the APC Panel meeting urged that we discontinue the
use of G-codes for SRS planning, and instead, recognize the current CPT
codes that describe the specific component services involved in SRS
planning to reduce the burden on hospitals of maintaining duplicative
codes for the same services to accommodate different payers. Lastly,
one presenter urged that we combine HCPCS codes G0242 (Cobalt 60-based
stereotactic radiosurgery planning) and G0243 (Cobalt 60-based
stereotactic radiosurgery delivery) into a single procedure code to
reflect that the majority of patients receive the planning and delivery
of this treatment on the same day as a single fully integrated service.
The APC Panel recommended that we make no changes to the coding or
APC placement of SRS delivery codes G0173, G0243, G0251, G0339, and
G0340 for CY 2006. We first established the above full group of
delivery codes in 2004, so we have only one year of hospital claims
data reflecting costs of the services. In addition, presenters to the
APC Panel described current ongoing deliberations amongst interested
professional societies around the descriptions and coding for SRS. The
APC Panel and presenters suggested that we wait for the outcome of
these deliberations prior to making any significant changes to SRS
delivery coding or payment rates.
In an effort to balance the recommendations of the APC Panel with
the recommendations of presenters at the APC Panel meeting, in
accordance with the APC Panel recommendations, we are proposing to make
no changes to the APC placement of the following SRS treatment delivery
codes for CY 2006: HCPCS codes G0173, G0243, G0251, G0339, and G0340.
We recognize concerns expressed by some presenters urging that we
discontinue the use of the G-codes for SRS planning, and instead,
recognize the current CPT codes that describe the specific component
services involved in SRS planning to reduce the burden on hospitals of
maintaining duplicative codes for the same services to accommodate
different payers. In addition, we have no need to separately track SRS
planning services, which share clinical and resource homogeneity with
other radiation treatment planning
[[Page 42709]]
services described by current CPT codes.
When HCPCS code G0242 was established for SRS planning, several
radiology planning services were considered in determining its APC
placement. In the November 30, 2001 final rule, in which we described
our determination of the total cost for SRS planning based on our
claims experience, we added the median costs of the following CPT codes
that we found to be regularly billed with SRS delivery (CPT code 61793
in the available hospital data): 77295, 77300, 77370, and 77315. Our
examination of the costs from the CY 2004 claims data for the above-
mentioned CPT codes closely approximates the CY 2004 median costs
reported for HCPCS codes G0242 and G0338. The APC median costs for the
above-mentioned CPT codes based on the CY 2004 claims data total
$1,297, while the median cost for HCPCS code G0242 is $1,366 and the
median cost for HCPCS code G0338 is $1,100 based on the CY 2004 claims
data. In addition, three of the above-mentioned CPT codes are included
on the proposed bypass list for CY 2006, so we would not anticipate
that the billing of these codes on the same day as an SRS treatment
service would cause significant problems with multiple bills for SRS
services. Therefore, we are proposing to discontinue HCPCS codes G0242
and G0338 for the reporting of charges for SRS planning under the OPPS,
and to instruct hospitals to bill charges for SRS planning using all of
the available CPT codes that most accurately reflect the services
provided.
We acknowledge one APC Panel presenter's concern that the coding
structure of Cobalt 60-based SRS, using either the current SRS planning
G code or the appropriate CPT codes for planning services as we are
proposing for CY 2006, may not necessarily reflect the same day,
integrated Cobalt 60-based SRS service furnished to the majority of
patients receiving Cobalt 60-based SRS. Thus, we are seeking public
comment on the clinical, administrative, or other concerns that could
arise if we were to bundle Cobalt 60-based SRS planning services,
currently reported using HCPCS code G0242 and proposed for CY 2006 to
be billed using the appropriate CPT codes for planning services, into
the Cobalt 60-based SRS treatment service, currently reported under the
OPPS using HCPCS code G0243. Under such a scenario, the SRS treatment
service described by HCPCS code G0243 would be placed in a higher
paying New Technology APC to reflect payment for the costs of the SRS
planning and delivery as an integrated service. Hospitals would be
prohibited from billing other radiation planning services along with
the Cobalt 60-based SRS treatment delivery code. In contrast to Cobalt
60-based SRS coding, we would not consider bundling the planning for
linear accelerator-based SRS with the treatment delivery services,
given the various timeframes for planning that may occur with linear
accelerator-based SRS.
c. Other Services in New Technology APCs
(If you choose to comment on issues in this section, please include
the caption ``Other New Technology Services'' at the beginning of
your comment.)
Other than proton beam and stereotactic radiosurgery services,
there are 10 procedures currently assigned to New Technology APCs for
which we have data adequate to support their assignment to clinical
APCs. We are proposing to reassign these procedures to clinically
appropriate APCs, using CY 2004 claims data to establish median costs
on which payments would be based. These procedures and their proposed
APC assignments are displayed below in Table 11.
Table 11.--Proposed APC Reassignment of New Technology Procedures Into Clinical APCs for CY 2006
----------------------------------------------------------------------------------------------------------------
Proposed
CY 2005 CY 2005 Proposed Proposed CY CY 2005 CY 2006
HCPCS Descriptor APC status CY 2006 2006 status payment payment
indicator APC indicator amount amount
----------------------------------------------------------------------------------------------------------------
0027T.............. Endoscopic 1547 T 0220 T $850 $1,025.57
epidural lysis.
33225.............. L ventric pacing 1525 S 0418 T 3,750 6,457.83
lead add-on.
61623.............. Endovasc tempory 1555 T 0081 T 1,650 2,035.19
vessel occl.
92974.............. Cath place, cardio 1559 T 0103 T 2,250 869.34
brachytx.
93580.............. Transcath closure 1559 T 0434 T 2,250 5,363.85
of asd.
93581.............. Transcath closure 1559 T 0434 T 2,250 5,363.85
of vsd.
95965.............. Meg, spontaneous.. 1528 S 0430 T 5,250 673.76
95966.............. Meg, evoked, 1516 S 0430 T 1,450 673.76
single.
95967.............. Meg, evoked, each 1511 S 0430 T 950 673.76
add'l.
C9713.............. Non-contact laser 1525 S 0429 T 3,750 2,500.01
vap prosta.
----------------------------------------------------------------------------------------------------------------
We are proposing to move these 10 procedures to new or established
clinical APCs that contain services that exhibit clinical and resource
homogeneity. HCPCS code C9713 (Noncontact laser vaporization of
prostate, including coagulation control of intraoperative and post-
operative bleeding) is similar to CPT code 52647 (Noncontact laser
coagulation of prostate, including control of postoperative bleeding,
complete (vasectomy, meatotomy, cystourethroscopy, urethral calibration
and/or dilation, and internal urethrotomy are included)) and CPT code
52648 (Contact laser vaporization with or without transurethral
resection of prostate, including control of postoperative bleeding,
complete (vasectomy, meatotomy, cystourethroscopy, urethral calibration
and/or dilation, and internal urethrotomy are included)) with respect
to their clinical characteristics and hospital resource utilization.
However, instead of mapping HCPCS code C9713 to APC 163 (Level IV
Cystourethroscopy and other Genitourinary Procedures), where CPT codes
52647 and 52648 are currently mapped for CY 2005, we are proposing to
create a Level V APC for Cystourethroscopy and Other Genitourinary
Procedures. These codes are more clinically sound in this new Level V
APC. We are also proposing to map CPT codes 52647 and 52648 to this new
Level V APC. In addition, we are proposing to move CPT codes 50080 and
50081 from APC 0163 to this new Level V APC, since they are similar
clinically and use similar hospital resources. We believe that this
configuration would improve homogeneity as well as result in a
[[Page 42710]]
clinically coherent Level V APC, where the procedures utilize similar
hospital resources.
D. Proposed APC-Specific Policies
1. Hyperbaric Oxygen Therapy (APC 0659)
(If you choose to comment on issues in this section, please include
the caption ``Hyperbaric Oxygen'' at the beginning of your comment.)
When hyperbaric oxygen therapy (HBOT) is prescribed for promoting
the healing of chronic wounds, it typically is prescribed on average
for 90 minutes, which would be billed using multiple units of HBOT to
achieve full body hyperbaric oxygen therapy. In addition to the
therapeutic time spent at full hyperbaric oxygen pressure, treatment
involves additional time for achieving full pressure (descent),
providing air breaks to prevent neurological and other complications
from occurring during the course of treatment, and returning the
patient to atmospheric pressure (ascent). The OPPS recognizes HCPCS
code C1300 (Hyperbaric oxygen under pressure, full body chamber, per 30
minute interval) for HBOT provided in the hospital outpatient setting.
We explained in the August 16, 2004 proposed rule (69 FR 50495)
that our CY 2003 claims data revealed that many providers were
improperly reporting charges for 90 to 120 minutes under only one unit
rather than three or four units of HBOT. This inaccurate coding
resulted in an inflated median cost of $177.96 for HBOT, derived using
single service claims and ``pseudo'' single service claims. Because of
these single claims coding anomalies, we proposed to calculate a ``per
unit'' median cost for APC 0659, using only multiple units or multiple
occurrences of HBOT, excluding claims with only one unit of HBOT and
excluding packaged costs. To convert HBOT charges to costs, we used the
CCR from the respiratory therapy cost center when available; otherwise,
we used the hospital's overall CCR. Using this ``per unit''
methodology, we proposed a median cost for APC 0659 of $82.91 for CY
2005.
In the November 15, 2004 final rule with comment period (69 FR
65758), we agreed with commenters that there was sufficient evidence
that the CCR for HBOT was not reflected solely in the respiratory
therapy cost center; rather, the CCR for HBOT was reflected in a
variety of cost centers. Therefore, we calculated a ``per unit'' median
of $93.26 for HBOT, using only multiple units or multiple occurrences
of HBOT and each hospital's overall CCR.
Our examination of the CY 2004 single procedure claims filed for
HCPCS code C1300 revealed similar coding anomalies to those encountered
in the CY 2003 single procedure claims data. Therefore, for CY 2006
ratesetting, we recalculated a ``per unit'' median cost for HCPCS code
C1300 using only multiple units or multiple occurrences of HBOT and
each hospital's overall CCR, which is the same methodology we used for
setting the CY 2005 payment rate for HBOT. Excluding claims with only
one unit of HBOT, we used a total of 26,556 claims to calculate the
median for APC 0659 for CY 2006. Applying the methodology described
above, we are proposing a median cost for APC 0659 of $93.71 for CY
2006.
2. Allergy Testing (APC 0370)
(If you choose to comment on issues in this section, please include
the caption ``Allergy Testing'' at the beginning of your comment.)
A number of providers have expressed confusion related to the
reporting of units for allergy testing described by CPT codes 95004
through 95078. Most of the CPT codes in the code range are assigned to
APC 0370 (Allergy Tests) for the CY 2005 OPPS. Nine of these CPT codes
assigned to APC 0370 instruct providers to specify the number of tests
or use the singular word ``test'' in their descriptors, while five of
these CPT codes assigned to APC 0370 do not contain such an instruction
or do not contain ``tests'' or ``testing'' in their descriptors. Some
providers have stated that the lack of clarity related to the reporting
of units has resulted in erroneous reporting of charges for multiple
allergy tests under one unit (that is, ``per visit'') for the CPT codes
that instruct providers to specify the number of tests.
In light of the variable hospital billing that may be inconsistent
with the CPT code descriptors, we have examined carefully the CY 2004
single and multiple procedure claims data for the allergy test codes
that reside in APC 0370 to set the CY 2006 payment rates. Our
examination of the CY 2004 claims data revealed that many of the
services for which providers billed multiple units of an allergy test
reported a consistent charge for each unit. Conversely, some providers
that billed only a single unit of an allergy test reported a charge
many times greater than the ``per test'' charge reported by providers
billing multiple units of an allergy test.
Our analysis of the claims data appears to validate reports made by
a number of providers that the charges reported on many of the single
procedure claims represent a ``per visit'' charge, rather than a ``per
test'' charge, including claims for the allergy test codes that
instruct providers to specify the number of tests. Because the OPPS
relies only on these single procedure claims in establishing payment
rates, we believe this inaccurate coding would have resulted in an
inflated CY 2006 median cost of $66.44 for services that are in the CY
2005 configuration of APC 0370.
Therefore, we are proposing to move the allergy test CPT codes that
instruct providers to specify the number of tests or use the singular
word ``test'' in their descriptors from APC 0370 (Allergy Tests) to
proposed APC 0381 (Single Allergy Tests) for CY 2006. We are proposing
to calculate a ``per unit'' median cost for proposed APC 0381 using a
total of 306 claims containing multiple units or multiple occurrences
of a single CPT code. Packaging on the claims was allocated equally to
each unit of the CPT code. Using this ``per unit'' methodology, we are
proposing a median cost for APC 0381 of $11.37 for CY 2006. Because we
believe the single procedure claims for the codes remaining in APC 0370
reflect accurate coding of these services, we are proposing to use the
standard OPPS methodology to calculate the median for APC 0370. Table
12 below lists the proposed assignment of CPT codes to APC 0370 and
proposed APC 0381 for CY 2006.
Table 12.--Proposed Assignment of CPT Codes to APC 0370 and Proposed APC
0381 for CY 2006
------------------------------------------------------------------------
APC 0370 Proposed APC 0381
------------------------------------------------------------------------
95056, Photosensitivity tests...... 95004, Percut allergy skin tests.
95060, Eye allergy tests........... 95010, Percut allergy titrate test.
95078, Provoactive testing......... 95015, ld allergy titrate-drug/bug.
95180, Rapid desensitization....... 95024, ld allergy test, drug/bug.
95199U, Unlisted allergy/clinical 95027, ld allergy titrate-airborne.
immunologic service or procedure.
95028, ld allergy test-delayed
type.
[[Page 42711]]
95044, Allergy patch tests.
95052, Photo patch test.
95065, Nose allergy test.
------------------------------------------------------------------------
3. Stretta Procedure (APC 0322)
(If you choose to comment on issues in this section, please include
the caption ``Stretta'' at the beginning of your comment.)
CPT code 43257, effective January 1, 2005, is used for
esophagoscopy with delivery of thermal energy to the muscle of the
lower esophageal sphincter and/or gastric cardia for the treatment of
gastresophageal reflux disease. This code describes the Stretta
procedure, including use of the Stretta System and all endoscopies
associated with the Stretta procedure. Prior to CY 2005, the Stretta
procedure was recognized under HCPCS code C9701 in the OPPS. For the CY
2005 OPPS, C9701 was deleted and CPT code 43257 was utilized for the
Stretta procedure. In CY 2005, the Stretta procedure was transitioned
from a New Technology APC to clinical APC 0422 (Level II Upper GI
Procedures) based on several years of hospital cost data. Procedures
within APC 0422 were similar to the Stretta procedure in terms of
clinical characteristics and resource use.
For CY 2006, we are proposing to use both CY 2004 single claims for
C9701 and multiple procedure claims containing one unit of HCPCS code
C9701 and one unit of either CPT code 43234 or CPT code 43235 to
calculate the Stretta procedure's contribution to the median for APC
0422. Claims reporting one endoscopy code (43234 or 43235) along with
HCPCS code C9701 are included in the proposed median calculation
because, in CY 2002, CMS authorized the separate and additional billing
of a single endoscopy code with HCPCS code C9701, while CPT code 43257
now includes all endoscopies performed during the procedure.
Using this proposed methodology, we calculated a median for CPT
code 43257 (HCPCS code C9701 in the CY 2004 claims data) of $1669.43.
Using these claims in the calculation of the median cost for APC 0422,
we calculated a median cost of $1385.77. We are proposing to use this
methodology, applied to the more complete final rule claims set, to
calculate the final CY 2006 OPPS median cost for APC 0422.
4. Vascular Access Procedures (APCs 0032, 0109, 0115, 0119, 0124, and
0187)
(If you choose to comment on issues in this section, please include
the caption ``Vascular Access Procedures'' at the beginning of your
comment.)
Many of the codes that currently describe vascular access
procedures were new in the 2004 version of CPT and were assigned into
APC groups by crosswalking the newly created CPT codes to the deleted
codes' APC assignments. Although the new codes were implemented in
January 2004, because of the delay between a bill being submitted to
Medicare and when the bill data are viable for analysis, we did not
have cost and utilization data for the new codes available for analysis
until this year in preparation for the CY 2006 OPPS.
Since those original APC assignments were made, we have received
requests from the public for specific APC assignment changes. We were
reluctant to make changes without data to support reassignments and,
therefore, made few changes to those original APC assignments.
As an outcome of an analysis of procedure-specific median costs and
2 times rule violations in preparation for the CY 2006 update of the
OPPS, we developed a new APC configuration for vascular access
procedure codes and several other related codes. The proposed new
assignments are supported by CY 2004 hospital claims data and are based
on median cost and clinical considerations.
Thus, for CY 2006, we are proposing to reassign many of the CPT
codes that are currently in the following APCs:
APC 0032 (Insertion of Central Venous/Arterial Catheter).
APC 0109 (Removal of Implanted Devices).
APC 0115 (Cannula/Access Device Procedures).
APC 0119 (Implantation of Infusion Pump).
APC 0124 (Revision of Implanted Infusion Pump).
APC 0187 (Miscellaneous Placement/Repositioning).
The configuration that we are proposing places all of the
procedures currently assigned to APC 0187 into more clinically
appropriate APCs. We are also proposing to reassign all of the vascular
access procedure codes currently assigned to any of the identified APCs
to existing or newly reconfigured clinical APCs to create more clinical
and median cost homogeneity. As a result of the proposed reassignments,
those APCs are comprised of a different mix of codes than is currently
the case for the CY 2005 OPPS. There are no codes assigned to APC 0187
because the only procedures that remained in APC 0187 after reassigning
the vascular access procedures as we are proposing were CPT code 75940
(X-ray placement of vein filter) and CPT code 76095 (Stereotactic
breast biopsy), which we reassigned to more clinically appropriate
APCs. We are proposing to reassign CPT code 75940 to APC 0297 (Level II
Therapeutic Radiologic Procedures) and CPT code 76095 to APC 0264
(Level II Miscellaneous Radiology Procedures).
We are proposing to create three new APCs, APC 0621 (Level I
Vascular Access Codes), APC 0622 (Level II Vascular Access Codes), and
APC 0623 (Level III Vascular Access Codes) and assign procedures to
each of these based on median cost and clinical homogeneity. We are
also proposing to rename APCs 0109 and 0115 as follows: APC 0109
(Removal of Implanted Devices); and APC 0115 (Cannula/Access Device
Procedures). Table 13 displays the procedures and their current and the
CY 2006 proposed APC assignments.
[[Page 42712]]
Table 13.--Current and Proposed APC Assignments for Vascular Access Procedures and Related Procedures for CY
2006
----------------------------------------------------------------------------------------------------------------
Proposed CY
CPT code Descriptor CY 2005 APC 2006 APC
----------------------------------------------------------------------------------------------------------------
APC 0621--Level I Vascular Access Procedure
----------------------------------------------------------------------------------------------------------------
36555....................................... Insertion non-tunneled cv cath.... 0187 0621
36556....................................... Insertion non-tunneled cv cath.... 0187 0621
36568....................................... Insert tunneled cv cath........... 0187 0621
36569....................................... Insert tunneled cv cath........... 0187 0621
36575....................................... Repair tunneled cv cath........... 0187 0621
36576....................................... Repair tunneled cv cath........... 0187 0621
36580....................................... Replace tunneled cv cath.......... 0187 0621
36584....................................... Replace tunneled cv cath.......... 0187 0621
36589....................................... Remove tunneled cv cath........... 0109 0621
36590....................................... Remove tunneled cv cath........... 0187 0621
36596....................................... Mech removal tunneled cv cath..... 0187 0621
36597....................................... Reposition venous catheter........ 0187 0621
---------------------------------------------
APC 0622--Level II Vascular Access Procedures
----------------------------------------------------------------------------------------------------------------
36557....................................... Insert tunneled cv cath........... 0032 0622
36558....................................... Insert tunneled cv cath........... 0032 0622
36578....................................... Replace tunneled cv cath.......... 0187 0622
36581....................................... Replace tunneled cv cath.......... 0032 0622
36585....................................... Replace tunneled cv cath.......... 0032 0622
36570....................................... Insert tunneled cv cath........... 0032 0622
36571....................................... Insert tunneled cv cath........... 0032 0622
36595....................................... Mech removal tunneled cv cath..... 0187 0622
36262....................................... Removal intra-arterial inf. Pump.. 0124 0622
---------------------------------------------
APC 0623--Level III Vascular Access Procedures
----------------------------------------------------------------------------------------------------------------
36560....................................... Insert tunneled cv cath........... 0115 0623
36561....................................... Insert tunneled cv cath........... 0115 0623
36563....................................... Insert tunneled cv cath........... 0119 0623
36565....................................... Insert tunneled cv cath........... 0115 0623
36582....................................... Replace tunneled cv cath.......... 0115 0623
36583....................................... Insertion of access device........ 0119 0623
36640....................................... Insertion catheter, artery........ 0032 0623
36260....................................... Insertion of infusion pump........ 0119 0623
36261....................................... Revision of infusion pump......... 0124 0623
---------------------------------------------
APC 0115--Cannula/Access Device Procedures
----------------------------------------------------------------------------------------------------------------
36835....................................... Artery to vein shunt.............. 0115 0115
35903....................................... Excision, graft, extremity........ 0115 0115
36815....................................... Insertion of cannula.............. 0115 0115
36861....................................... Cannula declotting................ 0115 0115
35761....................................... Exploration of artery/vein........ 0115 0115
49419....................................... Insert abdominal cath for chemo... 0115 0115
36800....................................... Insertion of cannula.............. 0115 0115
37204....................................... Transcatheter occlusion........... 0115 0115
36810....................................... Insertion of cannula.............. 0115 0115
---------------------------------------------
APC 0109--Removal of Implanted Devices
----------------------------------------------------------------------------------------------------------------
33284....................................... Remove pt-activated heart recorder 0109 0109
63746....................................... Removal of spinal shunt........... 0109 0109
----------------------------------------------------------------------------------------------------------------
We presented this proposal to the APC Panel at its February, 2005
meeting. The APC Panel was supportive of the proposed reassignments and
recommended that we make these changes. Therefore, for the stated
reasons, we are proposing the APC modifications for CY 2006 OPPS as
summarized in Table 13 above.
E. Proposed Addition of New Procedure Codes
(If you choose to comment on issues in this section, please include
the caption ``New Procedure Codes'' at the beginning of your
comment.)
During the second quarter of CY 2005, we created 11 HCPCS codes
that were not addressed in the November 15, 2004 final rule with
comment period that updated the CY 2005 OPPS. We have designated the
payment status of those codes and added them to the April update of the
CY 2005 OPPS (Transmittal 514). The codes are shown in Table 14 below.
In this proposed rule, we are soliciting comment on the APC assignment
of these services.
Further, consistent with our annual APC updating policy, we are
proposing to assign the new HCPCS codes for CY 2006 to the appropriate
APC's and
[[Page 42713]]
would incorporate them into our final rule for CY 2006.
Table 14.--New HCPCS Codes Implemented in April 2005
------------------------------------------------------------------------
HCPCS code Description
------------------------------------------------------------------------
C9127........................... Injection, paclitaxel protein-bound
particles, per 1 mg.
C9128........................... Injection, pegaptamib sodium, per 0.3
mg.
C9223........................... Injection, adenosine for therapeutic
or diagnostic use, 6 mg (not to be
used to report any adenosine
phosphate compounds, instead use
A9270).
C9440........................... Vinorelbine tartrate, brand name, per
10 mg.
C9723........................... Dynamic infrared blood perfusion
imaging (DIRI).
C9724........................... Endoscopic full-thickness plication in
the gastric cardia using endoscopic
plication system (EPS); includes
endoscopy.
Q4079........................... Injection, natalizumab, 1 mg.
Q9941........................... Injection, Immune Globulin,
Intravenous, Lyophilized, 1g.
Q9942........................... Injection, Immune Globulin,
Intravenous, Lyophilized, 10 mg.
Q9943........................... Injection, Immune Globulin,
Intravenous, Non-Lyophilized, 1g.
Q9944........................... Injection, Immune Globulin,
Intravenous, Non-Lyophilized, 10 mg.
------------------------------------------------------------------------
IV. Proposed Payment Changes for Devices
A. Device-Dependent APCs
(If you choose to comment on issues in this section, please include
the caption ``Device-Dependent APCs'' at the beginning of your
comment.)
Device-dependent APCs are populated by HCPCS codes that usually,
but not always, require that a device be implanted or used to perform
the procedure. For the CY 2002 OPPS, we used external data, in part, to
establish the device-dependent APC medians used for weight setting. At
that time, many devices were eligible for pass-through payment. For the
CY 2002 OPPS, we estimated that the total amount of pass-through
payments would far exceed the limit imposed by statute. To reduce the
amount of a pro rata adjustment to all pass-through items, we packaged
75 percent of the cost of the devices, using external data furnished by
commenters on the August 24, 2001 proposed rule and information
furnished on applications for pass-through payment, into the median
cost for the device-dependent APCs associated with these pass-through
devices. The remaining 25 percent of the cost was considered to be
pass-through payment.
In the CY 2003 OPPS, we determined APC medians for device-dependent
APCs using a three pronged approach. First, we used only claims with
device codes on the claim to set the medians for these APCs. Second, we
used external data, in part, to set the medians for selected device-
dependent APCs by blending that external data with claims data to
establish the APC medians. Finally, we also adjusted the median for any
APC (whether device-dependent or not) that declined more than 15
percent. In addition, in the CY 2003 OPPS, we deleted the device codes
(``C'' codes) from the HCPCS file in the belief that hospitals would
include the charges for the devices on their claims, notwithstanding
the absence of specific codes for devices used.
In the CY 2004 OPPS, we used only claims containing device codes to
set the medians for device-dependent APCs and again used external data
in a 50-percent blend with claims data to adjust medians for a few
device-dependent codes when it appeared that the adjustments were
important to ensure access to care. However, hospital device code
reporting was optional.
In the CY 2005 OPPS, which was based on CY 2003 claims data, there
were no device codes on the claims and, therefore, we could not use
device-coded claims in median calculations as a proxy for completeness
of the coding and charges on the claims. For the CY 2005 OPPS, we
adjusted device-dependent APC medians for those device-dependent APCs
for which the CY 2005 OPPS payment median was less than 95 percent of
the CY 2004 OPPS payment median. In these cases, the CY 2005 OPPS
payment median was adjusted to 95 percent of the CY 2004 OPPS payment
median. We also reinstated the device codes and made the use of the
device codes mandatory where an appropriate code exists to describe a
device utilized in a procedure and also implemented HCPCS code edits to
facilitate complete reporting of the charges for the devices used in
the procedures assigned to the device-dependent APCs.
We are proposing to base the CY 2006 OPPS device-dependent APC
medians on CY 2004 claims, the most current data available. In CY 2004,
the use of device codes was optional. Thus, for the CY 2006 OPPS, we
calculated median costs for these APCs using all single bills without
regard to whether there was a device code on the claim. We calculated
median costs for this set of APCs using the standard median calculation
methodology. This methodology uses single procedure claims to set the
median costs for the APC. We then compared these unadjusted median
costs to the adjusted median costs that we used to set the payment
rates for the CY 2005 OPPS. We found that 21 APCs experienced increases
in median cost compared to the CY 2005 OPPS adjusted median costs, 1
APC median was unchanged, 16 APCs experienced decreases in median
costs, and 8 APCs are proposed to be reconfigured in such a way that no
valid comparison was possible. Table 15 shows the comparison of these
median costs.
As we stated previously, in CY 2004, CMS reissued HCPCS codes for
devices and asked that hospitals voluntarily code devices utilized to
provide services. As part of our development of the proposed medians
for this proposed rule, we examined CY 2004 claims that contained
device codes that met our device edits, as posted on the OPPS Web site
at http://www.cms.hhs.gov/providers/hopps/default.asp. We found that,
in many cases, the number of claims that passed the device edits was
quite small. To use these claims to set medians for the CY 2006 OPPS
would mean that the medians for some of these APCs would be set based
on very small numbers of claims, reflecting the fact that in CY 2004
when device coding was optional under the OPPS relatively few hospitals
chose to code for devices. For example, if we used only claims that
passed the device code edits, the median for APC 0089 (Insertion/
Replacement of Permanent Pacemaker and Electrodes), would be based on
34 claims that passed the device edits (0.78 percent of all claims),
rather than on 1,934 single bills out of 4,424 total bills (43.72
percent of all claims). Median
[[Page 42714]]
costs for insertion/replacement of a permanent pacemaker and electrodes
developed based upon these 34 claims from a small subset of hospitals
are unlikely to be representative of the resource costs of most
hospitals that provided the service. Moreover, there are a few
procedures for which no device codes are required although the
procedures require a device to be used. For this set of services,
subsetting the claims to those that pass the device edits does not
change the group of single bills available for median calculation. For
these reasons, we decided not to use only claims that passed the device
edits to set the median costs for device-dependent APCs for the CY 2006
OPPS.
When we considered whether to base the weights for these APCs on
the unadjusted median costs, we found that for 10 of the 38 APCs for
which the APC composition is stable, basing the payment weight on the
unadjusted median cost would result in a reduction of more than 15
percent in the median cost for the CY 2006 OPPS compared to the CY 2005
OPPS.
We fully expect to use the unadjusted median costs for device-
dependent APCs as the basis of their payment weights for the CY 2007
OPPS because device coding is required for CY 2005 and device editing
is being implemented in CY 2005, so that all CY 2005 claims should
reflect the costs of devices used to provide services. Nevertheless we
recognize that a payment reduction of more than 15 percent from the CY
2005 OPPS to the CY 2006 OPPS may be problematic for hospitals that
provide the services contained in these APCs. Therefore, for the CY
2006 OPPS, as we have consistently done for device-dependent APCs, we
are proposing to adjust the median costs for the device-dependent APCs
listed in Table 15 for which comparisons with prior years are valid to
the higher of the CY 2006 unadjusted APC median or 85 percent of the
adjusted median on which payment was based for the CY 2005 OPPS. This
would result in the use of adjusted medians for 10 device-dependent
APCs. We view this as a transitional step from the adjusted medians of
past years to the use of unadjusted medians based solely on hospital
claims data with device codes in future years.
We expect that this would be the last year in which we would make
an across the board adjustment to the median costs for these device-
dependent APCs based on comparisons to the prior year's payment
medians. We believe that mandatory reporting of device codes for
services furnished in CY 2005, combined with the editing of claims for
the presence of device codes, where such codes are appropriate, would
result in claims data that more fully reflect the relative costs of
these services and that across the board adjustments to median costs
for these APCs would no longer be appropriate.
We recognize that the APC Panel recommended that CMS set a corridor
of median costs for device-dependent APCs at no less than 90 percent of
the CY 2005 payment median nor more than 110 percent of the CY 2005
payment median for purposes of setting the payment rate for the CY 2006
OPPS for these APCs. We do not believe that setting a corridor to
control both increases and decreases in median costs is consistent with
the use of adjusted medians as a means of transitioning hospitals to
the use of the unadjusted claims data. The purpose of the transition is
to moderate the rate of decline in payments so that hospitals can
determine how to best adjust to payments based on unadjusted claims
data. Limiting the rate of increase in payments based on such claims
data would be inconsistent with that purpose. Therefore, we are
proposing to adjust median costs to the greater of the median from
claims data or 85 percent of the CY 2005 median used to set the payment
rate in CY 2005 and not to impose a limit on the extent to which a
median cost can increase.
Table 15.--Proposed Median Cost Adjustments for Device-Dependent APCs for CY 2006
--------------------------------------------------------------------------------------------------------------------------------------------------------
Change from
Adjusted CY 2005 CY 2006 CY 2006
final CY Proposed adjusted to Proposed CY single total
APC Description Status indicator 2005 OPPS unadjusted CY 2006 2006 OPPS frequency frequency
median cost CY 2006 APC unadjusted adjusted (CY 2004 (CY 2004
(percent) median cost median cost median cost claims) claims)
(percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0039..................... Implantation of S.................... $12,878.01 $9,905.38 -23 $10,946.31 809 1,809
Neurostimulator.
0040..................... Level II Implantation of S.................... 2,885.37 3,338.79 16 3,338.79 2,615 11,986
Neurostimulator
Electrodes.
0080..................... Diagnostic Cardiac T.................... 2,123.65 2,240.92 6 2,240.92 267,077 393,166
Catheterization.
0081..................... Non-Coronary Angioplasty T.................... 1,918.04 2,078.67 8 2,078.67 2,046 130,737
or Atherectomy.
0082..................... Coronary Atherectomy.... T.................... 6,035.25 4,819.40 -20 5,129.96 27 359
0083..................... Coronary Angioplasty and T.................... 3,241.85 3,071.03 -5 3,071.03 539 5,492
Percutaneous
Valvuloplasty.
0085..................... Level II T.................... 2,034.82 2,123.46 4 2,123.46 3,088 20,401
Electrophysiologic
Evaluation.
0086..................... Ablate Heart Dysrhythm T.................... 2,637.96 2,670.78 1 2,670.78 919 9,160
Focus.
0087..................... Cardiac T.................... 2,180.19 853.76 -61 1,853.16 330 12,969
Electrophysiologic
Recording/Mapping.
0089..................... Insertion/Replacement of T.................... 6,416.90 6,373.13 -1 6,373.13 1,934 4,424
Permanent Pacemaker and
Electrodes.
0090..................... Insertion/Replacement of T.................... 5,301.99 5,380.07 1 5,380.07 740 6,412
Pacemaker Pulse
Generator.
[[Page 42715]]
0104..................... Transcatheter Placement T.................... 4,750.06 4,767.70 0 4,767.70 1,103 8,137
of Intracoronary Stents.
0106..................... Insertion/Replacement/ T.................... 3,229.10 1,908.38 -41 2,744.73 489 3,938
Repair of Pacemaker and/
or Electrodes.
0107..................... Insertion of T.................... 18,460.10 15,166.64 -18 15,691.08 445 8,073
Cardioverter-
Defibrillator.
0108..................... Insertion/Replacement/ T.................... 24,788.26 18,165.78 -27 21,070.02 520 6,003
Repair of Cardioverter-
Defibrillator Leads.
0115..................... Cannula/device access T.................... 1,502.71 1,899.17 26 1,899.17 3,022 10,115
procedures.
0202..................... Level X Female T.................... 2,322.83 2,437.07 5 2,437.07 7,951 15,303
Reproductive Proc.
0222..................... Implantation of T.................... 12,714.60 9,742.78 -23 10,807.41 1,678 5,629
Neurological Device.
0225..................... Level I Implementation S.................... 12,327.52 14,162.16 15 14,162.16 185 939
of Neurostimulator
Electrodes.
0227..................... Implantation of Drug T.................... 8,806.84 8,236.41 -6 8,236.41 442 2,776
Infusion Device.
0229..................... Transcatherter Placement T.................... 3,638.52 3,889.41 7 3,889.41 778 46,625
of Intravascular Shunts.
0259..................... Level VI ENT Procedures. T.................... 26,006.74 21,424.48 -18 22,105.73 554 964
0315..................... Level II Implantation of T.................... 20,633.70 12,170.26 -41 17,538.65 229 327
Neurostimulator.
0384..................... GI Procedures with T.................... 1,585.92 1,287.07 -19 1,348.03 6,268 20,711
Stents.
0385..................... Level I Prosthetic S.................... 4,080.56 4,564.66 12 4,564.66 553 783
Urological Procedures.
0386..................... Level II Prosthetic S.................... 6,674.53 7,251.44 9 7,251.44 3,213 4,549
Urological Procedures.
0418..................... Left ventricular lead... T.................... 4,363.37 6,595.80 51 6,595.80 202 4,712
0425..................... Level II Arthroplasty T.................... 5,715.97 6,046.77 6 6,046.77 375 882
with prosthesis.
0648..................... Breast Reconstruction T.................... 2,957.76 3,044.08 3 3,044.08 398 1,320
with Prosthesis.
0652..................... Insertion of T.................... 1,626.29 1,743.61 7 1,743.61 3,067 4,986
Intraperitoneal
Catheters.
0653..................... Vascular Reconstruction/ T.................... 1,644.53 1,842.52 12 1,842.52 800 28,788
Fistula Repair with
Device.
0654..................... Insertion/Replacement of T.................... 6,170.83 6,090.43 -1 6,090.43 1,807 20,809
a permanent dual
chamber pacemaker.
0655..................... Insertion/Replacement/ T.................... 7,913.85 8,072.56 2 8,072.56 7,353 13,991
Conversion of a
permanent dual chamber
pacemaker.
0656..................... Transcatheter Placement T.................... 6,156.14 6,633.18 8 6,633.18 2,394 19,898
of Intracoronary Drug
Eluting Stents.
0670..................... Intravenous and S.................... 1,779.08 1,533.52 -14 1,533.52 111 7,041
Intracardiac Ultrasound.
0674..................... Prostate Cryoablation... T.................... 6,569.33 5,780.04 -12 5,780.04 1,248 2,080
0680..................... Insertion of Patient S.................... 3,744.69 3,796.10 1 3,796.10 1,400 2,226
Activated Event
Recorders.
0681..................... Knee Arthroplasty....... T.................... 5,374.98 8,276.89 54 8,276.89 492 683
No adjustment; major
HCPCS migration:
0122..................... Level II Tube changes T.................... 485.26 420.72 ........... 420.72 5,138 14,701
and Repositioning.
0427..................... Level III Tube changes T.................... ........... 615.37 ........... 615.37 2,485 5,376
and Repositioning (new
for 2006).
[[Page 42716]]
0166..................... Level I Urethral T.................... 1,040.53 1,066.53 ........... 1,066.53 778 2,282
procedures (contains
part of deleted DD APC
167).
0167..................... Urethral procedures T.................... 1,664.80 NA ........... NA NA NA
(deleted APC; codes
moved to 167 and 168
for '06).
0168..................... Level II Urethral T.................... 1,801.96 1,705.82 ........... 1,705.82 7,684 10,018
procedures (contains
part of deleted DD APC
167).
0621..................... Level I VAD............. T.................... new in 06 500.77 ........... 500.77 60,115 113,720
0622..................... Level II VAD............ T.................... new in 06 1,283.33 ........... 1,283.33 21,792 54,816
0623..................... Level III VAD........... T.................... new in 06 1,635.94 ........... 1,635.94 23,963 62,538
--------------------------------------------------------------------------------------------------------------------------------------------------------
B. APC Panel Recommendations Pertaining to APC 0107 and APC 0108
The median costs for APC 0107 (Implantation of Cardioverter-
Defibrillator) and APC 0108 (Insertion/Replacement/Repair of
Cardioverter-Defibrillator Leads and Insertion of Cardioverter-
Defibrillator) have been adjusted each year since CY 2003 when pass-
through payment expired for cardioverter-defibrillators, because the
unadjusted medians have differed significantly from the prior year's
payment medians. Moreover, because we use single procedure claims to
set the median costs, the median costs for these APCs have always been
set on a relatively small number of claims as compared to the total
frequency of claims for the services under the OPPS. For example, for
this CY 2006 OPPS proposed rule, the unadjusted median cost for APC
0107 was set based on 445 single procedure claims, which is 5.5 percent
of the 8,073 claims on which a procedure code in the APC was billed.
Similarly, the unadjusted median cost for APC 0108 was set based on 520
single procedure claims, which is 8.7 percent of the 6,003 claims on
which a procedure code in the APC was billed. Commenters have
frequently told us that using the single procedure median costs for
these APCs does not accurately reflect the costs of the procedures
because claims from typical clinical circumstances involving multiple
procedures are not used to establish the medians.
At the February 2005 APC Panel meeting, the APC Panel recommended
that CMS package CPT codes 93640 and 93641 (electrophysiologic
evaluation at time of initial implantation or replacement of
cardioverter-defibrillator leads). The APC Panel recommended that we
always package the costs for these codes because the definitions of the
codes state that these evaluations are done at the time of lead
implantation. Therefore, CPT codes 93640 and 93641 would never be
correctly reported without a code in APC 0107 or APC 0108 also being
reported. In addition, when a service assigned to APC 0107 or APC 0108
is provided, we would expect that CPT codes 93640 or 93641 for
electrophysiologic evaluation and testing would also be performed
frequently, and CY 2004 claims data for services in APC 0107 and APC
0108 confirm this. The APC Panel believed that packaging the costs of
CPT codes 93640 and 93641 would result in more single bills available
for setting the median costs for APC 0107 and APC 0108, and thus would
likely yield more appropriate median costs for those APCs. Those
medians would then include the costs of the electrophysiologic testing
commonly performed at the time of the implantable cardioverter-
defibrillator (ICD) insertion.
The APC Panel further recommended that CMS treat CPT code 33241
(Subcutaneous removal of cardioverter-defibrillator) as a bypass code
when the code appeared on the same claims with services assigned to APC
0107 or APC 0108. The APC Panel recommended bypassing charges for this
code only when it appeared on the same claim with codes in APC 0107 or
APC 0108, because when a cardioverter defibrillator (ICD) is removed
and replaced in the same operative session, it is appropriate to
attribute all of the packaged costs on the claim to the implantation of
the device rather than to the removal of the device. The line costs for
CPT code 33241 that are removed from the claims in this case would be
discarded and would not be used to set the median for APC 0105 (the APC
in which the code is located).
We modeled the median costs that would be calculated for APCs 0107
and 0108, if we were to make the changes recommended by the APC Panel
for these APCs, under four possible scenarios: (1) The cardioverter-
defibrillator device is inserted without removal or testing; (2) the
device is inserted and tested with no removal; (3) the device is
removed and inserted but not tested; and (4) the device is removed,
inserted, and tested. We then compared the sum of the unadjusted median
costs, the sum of the proposed adjusted median costs and the sum of the
costs that we modeled using the APC Panel recommendations. These
results are shown in Table 16 below.
[[Page 42717]]
Table 16.--Total Median Costs for APCs 0107 and 0108
----------------------------------------------------------------------------------------------------------------
APC 0107 APC 0107 APC 0108 APC 0108
Using Using APC 0107 Using Using APC 0108
unadjusted adjusted With panel unadjusted adjusted With panel
median cost median cost changes median cost median cost changes
(1) (2) (3) (4) (5) (6)
-----------------------------------
Median for codes in APC........... $15,166.64 $15,691.08 $15,961.14 $18,165.78 $21,070.02 $21,517.00
50% of median for APC 0105 (CPT 674.90 674.90 674.90 674.90 674.90 674.90
code 33241; removal); multiple
procedure discount...............
Proposed median for APC 0084 (CPT 604.67 604.67 (1) 604.67 604.67 (1)
code 93640/93641; testing).......
(A) Median total if device is 15,166.64 15,691.08 15,961.14 18,165.78 21,070.02 21,517.00
inserted only (neither removal
nor testing).....................
(B) Median total if device is 15,771.31 16,295.75 15,961.14 18,770.45 21,674.69 21,517.00
inserted and tested (no removal).
(C) Median total if device is 15,841.54 16,365.98 16,636.04 18,840.68 21,744.92 22,191.90
removed and inserted (no testing)
(D) Median total if device is 16,446.21 16,970.65 16,636.04 19,445.35 22,349.59 22,191.90
removed, inserted and tested.....
----------------------------------------------------------------------------------------------------------------
\1\ NA (testing is packaged).
We also found that if we were to adopt the APC Panel
recommendations for APCs 0107 and 0108 for the CY 2006 OPPS, the number
of single bills that would be available for use in median setting would
increase significantly, as shown in Table 17.
Table 17.--Single Bills for APC 0107 and APC 0108
----------------------------------------------------------------------------------------------------------------
Single bills Single bills
without with Total
recommended recommended frequency
changes changes
----------------------------------------------------------------------------------------------------------------
APC 0107........................................................ 445 4500 8073
APC 0108........................................................ 520 1447 6003
----------------------------------------------------------------------------------------------------------------
In general, we believe that the recommendations of the APC Panel
show great potential for providing a far more robust set of single
bills for use in setting medians for APCs 0107 and 0108 and, therefore,
for improving the accuracy of the median costs acquired from the claims
data. However, for the CY 2006 OPPS, adopting the APC Panel
recommendations would result in higher total payments for services
related to cardioverter-defibrillator insertion for some possible
clinical scenarios than under the proposed adjustment methodology but
would result in lower total payments in other cases. Moreover, the
effects are not identical for both APCs. Both APCs require the
insertion of an ICD, but the codes in APC 0108 also require the repair,
revision or insertion of leads. Because the APCs are so closely related
clinically and both APCs include payments for expensive implanted
cardioverter-defibrillators, we are proposing to apply the same payment
policy to both APC 0107 and APC 0108. We would like to receive input
from the APC Panel and from the affected parties regarding the results
of modeling the methodology before we decide whether to implement this
multiple procedure claim strategy for both of these APCs.
Specifically, we are proposing to set the medians for these APCs at
85 percent of their CY 2005 payment medians and have based our modeling
of the scaler and the impact analysis on that proposal, although we
believe that the APC Panel recommendations have significant merit,
particularly when we move to complete reliance on claims data in
updating the OPPS for CY 2007. Although we are proposing to adjust the
median costs for these APCs in the same manner as other device-
dependent APCs, we will consider, based on the public comments, whether
it would be appropriate to apply the multiple procedure claims
methodology to these APCs for the CY 2006 OPPS. We look forward to
specifically receiving public comments on the APC Panel recommendations
regarding packaging and bypassing services frequently performed with
procedures assigned to APC 0107 and APC 0108, with the goal of
increasing single bills available for ratesetting in order to improve
the accuracy of median costs based upon hospital claims.
C. Pass-Through Payments for Devices
(If you choose to comment on issues in this section, please include
the caption ``Transitional Pass-Through Payments for Devices'' at
the beginning of your comment.)
1. Expiration of Transitional Pass-Through Payments for Certain Devices
Section 1833(t)(6)(B)(iii) of the Act requires that, under the
OPPS, a category of devices be eligible for transitional pass-through
payments for at least 2, but not more than 3 years. This 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. In our
November 15, 2004 final rule with comment period (69 FR 65773), we
specified three device categories currently in effect that would cease
to be eligible for pass-through payment effective January 1, 2006.
The device category codes became effective April 1, 2001, under the
provisions of the BIPA. Prior to pass-through device categories, we
paid for pass-through devices under the OPPS on a brand-specific basis.
All of the initial 97 category codes that were established as of April
1, 2001, have
[[Page 42718]]
expired; 95 categories expired after CY 2002 and 2 categories expired
after CY 2003. All of the categories listed in Table 18, along with
their expected expiration dates, were created since we published the
criteria and process for creating additional device categories for
pass-through payment on November 2, 2001 (66 FR 55850 through 55857).
We based the expiration dates for the category codes listed in Table 18
on the date on which a category was first eligible for pass-through
payment.
There are three categories for devices that would have been
eligible for pass-through payments for at least 2 years as of December
31, 2005. In the November 15, 2004 final rule with comment period, we
finalized the December 31, 2005 expiration dates for these three
categories--C1814 (Retinal tamponade device, silicone oil), C1818
(Integrated keratoprosthesis), and C1819 (Tissue localization excision
device). Each category includes devices for which pass-through payment
was first made under the OPPS in CY 2003 or 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). For CY 2003, we packaged the costs of the devices
no longer eligible for pass-through payments into the costs of the
procedures with which the devices were billed in CY 2001. There were
few exceptions to this established policy (brachytherapy sources for
other than prostate brachytherapy, which is now also separately paid in
accordance with section 621(b)(2) of Pub. L. 108-173). For CY 2005, we
continued to apply this policy, the same as we did in CY 2003 and 2004,
to categories of devices that expired on December 31, 2004.
2. Proposed Policy for CY 2006
For CY 2006, we are proposing to implement the final decision we
made in the November 15, 2004 final rule with comment period that
finalizes the expiration date for pass-through status for device
categories C1814, C1818, and C1819. Therefore, as of January 1, 2006,
we will discontinue pass-through payment for C1814, C1818, and C1819.
In accordance with our established policy, we are proposing to package
the costs of the devices assigned to these three categories into the
costs of the procedures with which the devices were billed in CY 2004,
the year of hospital claims data used for this proposed OPPS update.
Table 18.--List of Current Pass-Through Device Categories By Expiration Date
----------------------------------------------------------------------------------------------------------------
Date(s) Expiration
HCPCS codes Category long descriptor populated date
----------------------------------------------------------------------------------------------------------------
C1814....................................... Retinal tamponade device, silicone 4/1/03 12/31/05
oil.
C1818....................................... Integrated keratoprosthesis....... 7/1/03 12/31/05
C1819....................................... Tissue localization excision 1/1/04 12/31/05
device.
----------------------------------------------------------------------------------------------------------------
D. Other Policy Issues Relating To Pass-Through Device Categories
(If you choose to comment on issues in this section, please include
the caption ``Pass-Through Device Categories'' at the beginning of
your comment.)
1. Provisions for Reducing Transitional Pass-Through Payments to Offset
Costs Packaged Into APC Groups
a. Background
In the November 30, 2001 final rule, we explained the methodology
we used to estimate the portion of each APC payment rate that could
reasonably be attributed to the cost of the associated devices that are
eligible for pass-through payments (66 FR 59904). Beginning with the
implementation of the CY 2002 OPPS quarterly update (April 1, 2002), we
deducted from the pass-through payments for the identified devices an
amount that reflected the portion of the APC payment amount that we
determined was associated with the cost of the device, as required by
section 1833(t)(6)(D)(ii) of the Act. In the November 1, 2002 interim
final rule with comment period, we published the applicable offset
amounts for CY 2003 (67 FR 66801).
For the CY 2002 and CY 2003 OPPS updates, to estimate the portion
of each APC payment rate that could reasonably be attributed to the
cost of an associated device eligible for pass-through payment, we used
claims data from the period used for recalibration of the APC rates.
That is, for CY 2002 OPPS updating, we used CY 2000 claims data and for
CY 2003 OPPS updating, we used CY 2001 claims data. For CY 2002, we
used median cost claims data based on specific revenue centers used for
device related costs because C-code cost data were not available until
CY 2003. For CY 2003, 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 the associated device category C-codes that were
billed with the APC packaged into the median. Comparing the median APC
cost without device packaging to the median APC cost including device
packaging enabled us to determine the percentage of the median APC cost
that is attributable to the associated pass-through devices. By
applying those percentages to the APC payment rates, we determined the
applicable amount to be deducted from the pass-through payment, the
''offset'' amount. We created an offset list comprised of any APC for
which the device cost was at least 1 percent of the APC's cost.
The offset list that we have published each year is a list of
offset amounts associated with those APCs with identified offset
amounts developed using the methodology described above. As a rule, we
do not know in advance which procedures residing in certain APCs may be
billed with new device categories. Therefore, an offset amount is
applied only when a new device category is billed with a HCPCS
procedure code that is assigned to an APC appearing on the offset list.
The list of potential offsets for CY 2005 is currently published on the
CMS Web site: http://www.cms.hhs.gov, as ``Device-Related Portions of
Ambulatory Payment Classification Costs for 2005.''
For CY 2004, we modified our policy for applying offsets to device
pass-through payments. Specifically, we indicated that we would apply
an offset to a new device category only when we could determine that an
APC contains costs associated with the device. We continued our
existing methodology for determining the offset amount, described
earlier. We were able to use this methodology to establish the device
offset amounts for CY 2004 because providers reported device codes (C-
codes) on the CY 2002 claims used for the CY 2004 OPPS update. For the
CY 2005 update to the OPPS, our data consisted of CY 2003 claims that
did not contain device codes and, therefore, for CY 2005 we utilized
the device percentages as developed for CY 2004. In the CY 2004 OPPS
update, we reviewed the device categories eligible
[[Page 42719]]
for continuing pass-through payment in CY 2004 to determine whether the
costs associated with the device categories are packaged into the
existing APCs. Based on our review of the data for the device
categories existing in CY 2004, we determined that there were no close
or identifiable costs associated with the devices relating to the
respective APCs that are normally billed with them. Therefore, for
those device categories, we set the offset to $0 for CY 2004. We
continued this policy of setting offsets to $0 for the device
categories that continued to receive pass-through payment in CY 2005.
For the CY 2006 OPPS update, CY 2004 hospital claims are available
for analysis. Hospitals billed device C-codes in CY 2004 on a voluntary
basis. We have reviewed our CY 2004 data, examining hospital claims for
services that included device C-codes and utilizing the methodology for
calculating device offsets noted above. The numbers of claims for
services in many of the APCs for which we calculated device percentages
using CY 2004 data were quite small. Many of these APCs already had
relatively few single claims available for median calculations compared
with the total bill frequencies because of our inability to use many
multiple bills in establishing median costs for all APCs, and
subsetting the single claims to only those including C-codes often
reduced those single bills by 80 percent or more. Our claims
demonstrate that relatively few hospitals specifically coded for
devices utilized in CY 2004. Thus, we do not feel confident that CY
2004 claims reporting C-codes represent the typical costs of all
hospitals providing the services. Therefore, we do not propose to use
CY 2004 claims with device coding to propose CY 2006 device offset
amounts at this time. In addition, we do not propose to use CY 2005's
methodology, for which we utilized the device percentages as developed
for CY 2004. Two years have passed since we developed the device
offsets for CY 2004, and the device offsets originally calculated from
CY 2002 hospitals' claims data may not appropriately reflect the
contributions of device costs to procedural costs in the current
outpatient hospital environment. In addition, a number of the APCs on
the CY 2004 and CY 2005 device offset percentage lists are either no
longer in existence or have been so significantly reconfigured that the
past device offsets likely do not apply.
b. Proposed Policy for CY 2006
For CY 2006, we are proposing to continue to review each new device
category on a case-by-case basis as we have done in CY 2004 and CY
2005, to determine whether device costs associated with the new
category are packaged into the existing APC structure. If we do not
determine that for any new device category that device costs associated
with the new category are packaged into existing APCs, we are proposing
to continue our current policy of setting the offset for the new
category to $0 for CY 2006. There are currently no established
categories that would continue for pass-through payment in CY 2006.
However, we may establish new categories in any quarter. If we create a
new device category and determine that our data contain a sufficient
number of claims with identifiable costs associated with the devices in
any APC, we would adjust the APC payment if the offset is greater than
$0. If we determine that a device offset greater than $0 is appropriate
for any new category that we create, we are proposing to announce the
offset amounts in the program transmittal that announces the new
category.
For CY 2006, we are proposing to use available partial year or full
year CY 2005 hospital claims data to calculate device percentages and
potential offsets for CY 2006 applications for new device categories.
Effective January 1, 2005, we require hospitals to report device C-
codes and their costs when hospitals bill for services which utilize
devices described by the existing C-codes. In addition, during CY 2005
we are implementing device edits for many services which require
devices and for which appropriate device C-codes exist. Therefore, we
expect that the number of claims including device codes and their
respective costs will be much more robust and representative for CY
2005 than for CY 2004. We also note that offsets would not be used for
any existing categories at this time. If a new device category is
created for payment, for CY 2006 we are proposing to examine the
available CY 2005 claims data, including device costs, to determine
whether device costs associated with the new category are already
packaged into the existing APC structure, as indicated earlier. If we
conclude that some related device costs are packaged into existing
APCs, we are proposing to utilize the methodology described earlier and
first used for the CY 2003 OPPS to determine an appropriate device
offset percentage for those APCs with which the new category would be
reported.
Our proposal not to publish a list of APCs with device percentages
at this time would be a transitional policy for CY 2006 because of the
previously discussed limitations of the CY 2004 OPPS data with respect
to device costs associated with procedures. We expect that we will
reexamine our previous methodology for calculating the device
percentages and offset amounts for the CY 2007 OPPS update, which will
be based on CY 2005 hospitals claims data where device C-code reporting
is required.
2. Criteria for Establishing New Pass-Through Device Categories
a. Surgical Insertion and Implantation Criterion
One of our criteria, as set forth in Sec. 419.66(b)(3) of the
regulations, for establishing a new category of devices for pass-
through payment is that the item be surgically inserted or implanted.
The criterion that a device be surgically inserted or implanted is one
of our original criteria adopted when we implemented the BBRA
requirement that we establish pass-through payment for devices. This
criterion helps us define whether an item is a device, as distinguished
from other items, such as materials and supplies. We further clarified
our definition of the surgical insertion and implantation criterion in
the November 13, 2000 final rule (65 FR 67805). In that rule we stated
that we consider a device to be surgically inserted or implanted if it
is introduced into the human body through a surgically created
incision. We also stated that we do not consider an item used to cut or
otherwise create a surgical opening to be a device that is surgically
inserted or implanted.
In our November 15, 2004 final rule with comment period, we
responded to comments received on our August 16, 2004 proposed rule,
which requested that we revisit our surgical insertion and implantation
criterion for establishing a new device category. The commenters
specifically requested that CMS eliminate the current requirement that
items that are included in new pass-through device categories must be
surgically inserted or implanted through a surgically created incision.
The commenters expressed concern that the current requirement may
prevent access to innovative and less invasive technologies,
particularly in the areas of gynecologic, urologic, colorectal and
gastrointestinal procedures. These commenters asked that CMS change the
surgical insertion or implantation criterion to allow pass-through
payment for potential new device categories that include items
introduced into the human body through a natural orifice, as well as
through a surgically created incision. Several of the commenters
[[Page 42720]]
recommended that CMS allow the creation of a new pass-through category
for items implanted or inserted through a natural orifice, as long as
the other existing criteria are met.
In responding to the commenters, we stated in the November 15, 2004
final rule with comment period (69 FR 65774) that we were also
interested in hearing the views of other parties and receiving
additional information on these issues. While we appreciate and welcome
additional comments on these issues from the medical device makers, we
were also interested in hearing the views of Medicare beneficiaries, of
the hospitals that are paid under the OPPS, and of physicians and other
practitioners who attend to patients in the hospital outpatient
setting. For that reason, we solicited additional comments on this
topic within the 60-day comment period for the November 15, 2004 final
rule with comment period (69 FR 65774 through 65775). In framing their
comments, we asked that commenters consider the following questions
specific to devices introduced into the body through natural orifices:
1. Whether orifices include those that are either naturally or
surgically created, as in the case of ostomies. If you believe this
includes only natural orifices, why do you distinguish between natural
and surgically created orifices?
2. How would you define ``new,'' with respect to time and to
predecessor technology? What additional criteria or characteristics do
you believe distinguish ``new'' devices that are surgically introduced
through an existing orifice from older technology that also is inserted
through an orifice?
3. What characteristics do you consider to distinguish a device
that might be eligible for a pass-through category even if inserted
through an existing orifice from materials and supplies such as
sutures, clips or customized surgical kits that are used incident to a
service or procedure?
4. Are there differences with respect to instruments that are seen
as supplies or equipment for open procedures when those same
instruments are passed through an orifice using a scope?
b. Public Comments Received and Our Responses
Below is a summary of the public comments we received on the four
stated surgical insertion and implantation device criterion questions
and our response to them.
Comment: Most commenters generally framed their responses to the
four questions listed above. Commenters were generally in favor of
modifying our surgical insertion and implantation criterion so that
devices that are placed into patients without the need for a surgical
incision would not be ineligible for pass-through payment, claiming
that devices that are inserted through a natural orifice offer
important benefits to Medicare beneficiaries, such as avoidance of more
costly and more invasive surgery. One commenter stated that procedures
that could be performed with minimal morbidity and on an outpatient
basis are the trend for surgery and should be encouraged. Another
commenter believed that our criterion of surgical insertion or
implantation through a surgically created incision was ineffective as a
clear and comprehensive description of surgical procedures, including
endoscopic and laparoscopic procedures.
Regarding the first specific question we posed, whether devices
introduced into the body through natural orifices includes orifices
that are either naturally or surgically created, commenters generally
stated we should include devices as potentially eligible for pass-
through categories whether they are introduced through orifices that
are either naturally or surgically created, as in the case of ostomies,
if the devices meet other cost and clinical criteria, in order to
encourage the development of new technologies.
Regarding the second question restated above, which asked how the
public would define ``new'' with respect to time and to predecessor
technology, some commenters stated that they believed the current
clinical and cost criteria are sufficient and that no additional
criteria or characteristics are needed. Several commenters indicated
that the timeframe for what we consider ``new'' could be clarified if
the device in question was not FDA approved or in use in the OPD during
the year that hospital claims are used for that calendar year's OPPS
update, that is, it should be considered ``new.'' Some commenters
elaborated by example. They stated that if we change the surgical
insertion or implantation requirement to include devices inserted
through natural orifices in 2005, devices approved by the FDA and in
use in the OPD in 2003 or previously would not be eligible, while
devices approved by FDA in 2004 or later and used in the OPD settings
would be eligible for pass-through consideration. Another commenter
stated that the definition of ``new'' device should include those
devices that require only an FDA investigational device exemption (IDE)
clearance. The commenter further stated that these devices should be
granted ``new'' status at the time of FDA release as an IDE. The
commenter stated that if FDA required a premarket approval (PMA) for
the device, a determination of newness should be made on a case by case
basis.
Regarding the question of what characteristics distinguish a device
that might be eligible for a pass-through category even if inserted
through an existing orifice from materials and supplies that are used
incident to a service or procedure, some commenters generally stated
their belief that the current clinical and cost criteria are sufficient
to distinguish devices that might be eligible from materials and
supplies. Other commenters stated that the device must be an integral
part of the procedure or that it should include the characteristic of
having a diagnostic or therapeutic purpose, without which the procedure
could not be performed. Thus, according to these commenters, the device
must function for a specific procedure, while supplies may be used for
many procedures. One commenter pointed out that many devices are now
implanted through the use of naturally occurring orifices or without
significant incisions. This commenter indicated that the requirement of
a ``traditional incision'' no longer serves the purpose of
distinguishing between devices that are and are not implanted, or
between devices and supplies and instruments. The commenter stated that
retaining the requirement of a traditional incision could create
incentives to use more invasive technology, if that is the technology
that is eligible for pass-through payments and less invasive technology
is not. This commenter suggested excluding tools and disposable
supplies by excluding any item that is used primarily for the purpose
of cutting or delivering an implantable device. However, the commenter
recommended not reducing payment when delivery systems are packaged
with the device. The commenter further recommended that the term
incision be clearly defined to include all procedures involving the
cutting, breaking or puncturing of tissue or skin, regardless of how
small that cut is, provided that the device is attached to or inserted
into the body via this cut or puncture or break. Another commenter
stated that there are items included in a surgical kit that have
significant cost and are single use, for example, guide wires, implying
that it is sometimes difficult to determine what a supply is.
Regarding our question about whether there are differences with
respect to instruments that are seen as supplies or equipment for open
procedures when those same instruments are passed through an orifice
using a scope,
[[Page 42721]]
commenters believed that the definitions of supplies and eligible
devices are independent of the use of a scope during a procedure, and
stated there were no distinguishing features of supplies or equipment.
A commenter reiterated that the current clinical and cost criteria are
sufficient to distinguish eligible devices (that is, those with ``a
specific therapeutic use'') from materials and supplies. Commenters
believed that the use of a scope should not be a factor in the
distinction between devices and supplies.
One commenter urged us to consider the points that the surgical
incision requirement is not mandated by statute and that CMS's
criterion to limit devices to only those that are surgically inserted
or implanted may have been based upon concern that less restrictive
criteria would cause spending on pass-though items to exceed the pool
of money set to fund the pass-though payments. This commenter indicated
that this concern would no longer be valid, given the relatively few
items currently paid on a pass-through basis.
Response: As we stated in the November 15, 2004 final rule, we
share the view that it is important to ensure access for Medicare
beneficiaries to new technologies that offer substantial clinical
improvement in the treatment of their medical conditions. We also
recognize that since the beginning of the OPPS, there have been
beneficial advances in technologies and services for many conditions,
which have both markedly altered the courses of medical care and
ultimately improved the health outcomes of many beneficiaries.
We carefully considered the comments and are proposing to maintain
our current criterion that a device must be surgically inserted or
implanted, but are also proposing to modify the way we currently
interpret this criterion under Sec. 419.66(b)(3) of the regulations.
We are proposing to consider eligible those items that are surgically
inserted or implanted either through a natural orifice or a surgically
created orifice (such as through an ostomy), as well as those that are
inserted or implanted through a surgically created incision. We will
maintain all of our other criteria in Sec. 419.66 of the regulations,
as elaborated in our various rules, such as the November 1, 2002 final
rule (67 FR 66781 through 66787). Specifically, the clarification made
at the time we clarified the surgically inserted or implanted criterion
in our August 3, 2000 interim final rule with comment period, namely,
that we do not consider an item used to cut or otherwise create a
surgical opening to be a device that is surgically implanted or
inserted (65 FR 67805).
With this revision of our definition of devices that are surgically
inserted or implanted, we remind the public that device category
eligibility for transitional pass-through payment continues to depend
on meeting our substantial clinical improvement criterion, where we
compare the clinical outcomes of treatment options using the device to
currently available treatments, including treatments using devices in
existing or previously established pass-through device categories. We
expect that requested new pass-through device categories that
successfully demonstrate substantial clinical improvement for Medicare
beneficiaries would describe new devices, where the additional device
costs would not be reflected in the hospital claims data providing the
costs of treatments available during the time period used for the most
recent OPPS update.
c. Existing Device Category Criterion
One of our criteria, as set forth in Sec. 419.66(c)(1) of the
regulations, to establish a new device category for pass-through
payment, is that the devices that would populate the category not be
described by any existing or previously existing category. Commenters
to our various proposed rules, as well as applicants for new device
categories, have expressed concern that some of our existing and
previously existing device category descriptors are overly broad, and
that the category descriptors as they are currently written may
preclude some new technologies from qualifying for establishment of a
new device category for pass-through payment. Such parties have
recommended that we consider modifying the descriptors for existing
device categories, especially when a device would otherwise meet all
the other criteria for establishing a new device category to qualify
for pass-through payment.
We agree that implementation of the requirement that a new device
category not be described by an existing or previously existing
category merits review. Beginning with CY 2006, 3 years will have
elapsed since 95 of the 97 initial device categories we established on
April 1, 2001 will have expired: 95 categories expired after December
31, 2002, and 2 categories expired after December 31, 2003. Several
additional years will have passed since those categories were first
populated in CY 2000 or CY 2001. Thus, while some of the initial device
category descriptors sufficed at the time they were first created,
further clarification as to the types of devices that they are meant to
describe is indicated. Therefore, we are proposing to create an
additional category for devices that meet all of the criteria required
to establish a new category for pass-through payment in instances where
we believe that an existing or previously existing category descriptor
does not appropriately describe the new type of device. This may entail
the need to clarify or refine the short or long descriptors of the
previous category. We would evaluate each situation on a case by case
basis. We are proposing that any such clarification would be made
prospectively from the date the new category would be made effective.
We are also proposing to revise Sec. 419.66(c)(1) of the
regulations, accordingly, to reflect as one of the criteria for
establishing a device category our determination that a device is not
appropriately described by any of the existing categories or by any
category previously in effect. In order to determine if a ``new''
device is appropriately described by an existing or previously existing
category of devices, we are proposing to apply two tests based upon our
evaluation of information provided to us in the device category
application. First, we will expect an applicant for a new device
category to show that their device is not similar to devices (including
related predicate devices) whose costs are reflected in our OPPS claims
data in the most recent OPPS update. Second, we will require an
applicant for a new device category to demonstrate that utilization of
their device provides a substantial clinical improvement for Medicare
beneficiaries compared with currently available treatments, including
procedures utilizing devices in existing or previously existing device
categories. We would consider a new device that meets both of these
tests not to be appropriately described by one of the existing or
previously existing pass-through device categories.
V. Proposed Payment Changes for Drugs, Biologicals, and
Radiopharmaceutical Agents
A. Transitional Pass-Through Payment for Additional Costs of Drugs and
Biologicals
(If you choose to comment on issues in this section, please include
the caption ``Pass-Through'' at the beginning of your comment.)
1. Background
Section 1833(t)(6) of the Act provides for temporary additional
payments or ``transitional pass-through payments'' for certain drugs
and biological agents. As originally enacted by the BBRA, this
[[Page 42722]]
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 (Pub. L. 107-186); current
drugs and biological agents and brachytherapy used for the treatment of
cancer; and current radiopharmaceutical drugs and biological products.
For those drugs and biological agents referred to as ``current,'' the
transitional pass-through payment began on the first date the hospital
OPPS was implemented (before enactment of BIPA (Pub. L. 106-554), on
December 21, 2000).
Transitional pass-through payments are also required for certain
``new'' drugs, devices, and biological agents that were not being paid
for as a hospital OPD 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 drug, device, or
biological. Under the statute, transitional pass-through payments can
be made for at least 2 years but not more than 3 years. In Addenda A
and B to this proposed rule, pass-through drugs and biological agents
are identified by status indicator ``G.''
The process to apply for transitional pass-through payment for
eligible drugs and biological agents can be found on our CMS Web site:
http://www.cms.hhs.gov. If we revise the application instructions in
any way, we will post the revisions on our Web site and submit the
changes to the Office of Management and Budget (OMB) for approval, as
required under the Paperwork Reduction Act (PRA). Notification of new
drugs and biologicals application processes is generally posted on the
OPPS Web site at: http://www.cms.hhs.gov/providers/hopps.
2. Expiration in CY 2005 of Pass-Through Status for Drugs and
Biologicals
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 and no longer than 3 years. The drugs whose pass-
through status will expire on December 31, 2005, meet that criterion.
Table 19 below lists the 10 drugs and biologicals for which we are
proposing that pass-through status would expire on December 31, 2005.
Table 19.--Proposed List of Drugs and Biologicals for Which Pass-Through
Status Expires December 31, 2005
------------------------------------------------------------------------
HCPCS APC Short descriptor
------------------------------------------------------------------------
C9123........................ 9123 Transcyte, per 247 sq cm.
C9205........................ 9205 Oxaliplatin.
C9211........................ 9211 Inj, alefacept, IV.
C9212........................ 9212 Inj, alefacept, IM.
J0180........................ 9208 Agalsidase beta injection.
J1931........................ 9209 Laronidase injection.
J2469........................ 9210 Palonosetron HCl.
J3486........................ 9204 Ziprasidone mesylate.
J9041........................ 9207 Bortezomib injection.
Q9955........................ 9203 Inj perflexane lip micros, ml.
------------------------------------------------------------------------
3. Drugs and Biologicals With Proposed Pass-Through Status in CY 2006
We are proposing to continue pass-through status in CY 2006 for 14
drugs and biologicals. These items, which are listed in Table 20 below,
were given pass-through status as of April 1, 2005. The APCs and HCPCS
codes for drugs and biologicals that we are proposing to continue with
pass-through status in CY 2006 are assigned status indicator ``G'' in
Addendum A and Addendum B of this proposed rule.
Section 1833(t)(6)(D)(i) of the Act sets the payment rate for pass-
through eligible drugs (assuming that no pro rata reduction in pass-
through payment is necessary) as the amount determined under section
1842(o) of the Act. We note that this section of the Act also states
that if a drug or biological is covered under a competitive acquisition
contract under section 1847(B), then the payment rate be equal to the
average price for the drug or biological for all competitive
acquisition areas and year established as calculated and adjusted by
the Secretary. The competitive acquisition program has not yet been
implemented as of the development of this proposed rule; therefore, we
do not have payment rates for certain drugs and biologicals that would
be covered under this program at this time. Section 1847(A) of the Act,
as added by section 303(c) of Pub. L. 108-173, establishes the use of
the average sales price (ASP) methodology as the basis for payment of
drugs and biologicals described in section 1842(o)(1)(C) of the Act and
furnished on or after January 1, 2005. This payment methodology is set
forth in Sec. 419.64 of the regulations. Similar to the payment policy
established for pass-through drugs and biologicals in CY 2005, we are
proposing to pay under the OPPS for drugs and biologicals with pass-
through status in CY 2006 consistent with the provisions of section
1842(o) of the Act, as amended by section 621 of Pub. L. 108-173, at a
rate that is equivalent to the payment these drugs and biologicals
would receive in the physician office setting.
Section 1833(t)(6)(D)(i) of the Act also sets the amount of
additional payment for pass-through eligible drugs and biologicals (the
pass-through payment amount). The pass-through payment amount is the
difference between the amount authorized under section 1842(o) of the
Act, and the portion of the otherwise applicable fee schedule amount
(that is, the APC payment rate) that the Secretary determines is
associated with the drug or biological.
As we explain in section V.B. of this proposed rule, we are
proposing to continue to make separate payment in CY 2006 for new drugs
and biologicals with a HCPCS code consistent with the provisions of
section 1842(o) of the Act, as amended by section 621 of Pub. L. 108-
173, at a rate that is equivalent to the payment they would receive in
a physician office setting, whether or not we have received a pass-
through application for the item. Accordingly, in CY 2006, the pass-
through payment amount would equal zero for those new drugs and
biologicals that we determine have pass-through status. That is, when
we subtract the amount to be paid for pass-through drugs and
biologicals under section 1842(o) of the Act, as amended by section 621
of Pub. L. 108-173, from the portion of the otherwise applicable fee
schedule amount, or the APC payment rate associated with the drug or
biological that would be the amount paid for drugs and biologicals
under section 1842(o) of the Act as amended by section 621 of Pub. L.
108-173, the resulting difference is equal to zero.
We are proposing to use payment rates based on the ASP data from
the fourth quarter of 2004 for budget neutrality estimates, impact
analyses, and to complete Addenda A and B of this proposed rule because
these are the most recent numbers available to us during the
development of this proposed rule. These payment rates were also the
basis for drug payments in the physician office setting effective April
1, 2005. To be consistent with the ASP-based payments that would be
made when these drugs and biologicals are furnished in physician
offices, we plan to make any appropriate adjustments to the amounts
shown in Addenda A and B of this proposed rule when we publish our
final rule and also on a quarterly basis on our Web site during CY 2006
if later quarter ASP submissions indicate that adjustments to the
payment rates for these pass-
[[Continued on page 42723]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 42723-42772]] Medicare Program; Proposed Changes to the Hospital Outpatient
Prospective Payment System and Calendar Year 2006 Payment Rates
[[Continued from page 42722]]
[[Page 42723]]
through drugs and biologicals are necessary.
Table 20 lists the drugs and biologicals for which we are proposing
that pass-through status continue in CY 2006. We assigned pass-through
status to these drugs and biologicals as of April 1, 2005. We also have
included in Addenda A and B to this proposed rule the proposed CY 2006
APC payment rates for these pass-through drugs and biologicals.
Table 20.--Proposed List of Drugs and Biologicals With Pass-Through
Status in CY 2006
------------------------------------------------------------------------
HCPCS code APC Short descriptor
------------------------------------------------------------------------
C9220........................ 9220 Sodium hyaluronate.
C9221........................ 9221 Graftjacket Reg Matrix.
C9222........................ 9222 Graftjacket SftTis.
J0128........................ 9216 Abarelix injection.
J0878........................ 9124 Daptomycin injection.
J2357........................ 9300 Omalizumab injection.
J2783........................ 0738 Rasburicase.
J2794........................ 9125 Risperidone, long acting.
J7518........................ 9219 Mycophenolic acid.
J8501........................ 0868 Oral aprepitant.
J9035........................ 9214 Bevacizumab injection.
J9055........................ 9215 Cetuximab injection.
J9305........................ 9213 Pemetrexed injection.
Q4079........................ 9126 Injection, Natalizumab, 1 MG.
------------------------------------------------------------------------
B. Proposed Payment for Drugs, Biologicals, and Radiopharmaceuticals
Without Pass-Through Status
(If you choose to comment on issues in this section, please include
the caption ``NonPass-Throughs'' at the beginning of your comment.)
1. Background
Under the OPPS, we currently pay for drugs, biologicals including
blood and blood products, and radiopharmaceuticals that do not have
pass-through status in one of two ways: packaged payment and separate
payment (individual APCs). We explained in the April 7, 2000 final rule
(65 FR 18450) that we generally package the cost of drugs and
radiopharmaceuticals into the APC payment rate for the procedure or
treatment with which the products are usually furnished. Hospitals do
not receive separate payment from Medicare for packaged items and
supplies, and hospitals may not bill beneficiaries separately for any
packaged items and supplies whose costs are recognized and paid for
within the national OPPS payment rate for the associated procedure or
service. (Program Memorandum Transmittal A-01-133, issued on November
20, 2001, explains in greater detail the rules regarding separate
payment for packaged services.)
Packaging costs into a single aggregate payment for a service,
procedure, or episode of care is a fundamental principle that
distinguishes a prospective payment system from a fee schedule. In
general, packaging the costs of items and services into the payment for
the primary procedure or service with which they are associated
encourages hospital efficiencies and also enables hospitals to manage
their resources with maximum flexibility. Notwithstanding our
commitment to package as many costs as possible, we are aware that
packaging payments for certain drugs, biologicals, 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.
Section 1833(t)(16)(B) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, requires that the threshold for establishing separate
APCs for drugs and biologicals be set at $50 per administration for CYs
2005 and 2006. For CY 2005, we finalized our policy to continue paying
separately for drugs, biologicals, and radiopharmaceuticals whose
median cost per day exceeds $50 and packaging the cost of drugs,
biologicals, and radiopharmaceuticals whose median cost per day is less
than $50 into the procedures with which they are billed. For CY 2005,
we also adopted an exception policy to our packaging rule for one
particular class of drugs, the oral and injectible 5HT3 forms of anti-
emetic treatments (69 FR 65779 through 65780).
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
For CY 2006, the threshold for establishing separate APCs for drugs
and biologicals is required to be set at $50 per administration
according to section 1833(t)(16)(B) of the Act. Therefore, we are
proposing to continue our existing policy of paying separately for
drugs, biologicals, and radiopharmaceuticals whose per day cost exceeds
$50 and packaging the cost of drugs, biologicals, and
radiopharmaceuticals whose per day cost is less than $50 into the
procedures with which they are billed. We are also proposing to
continue our policy of exempting the oral and injectible 5HT3 anti-
emetic products from our packaging rule (Table 21), thereby making
separate payment for all of the 5HT3 anti-emetic products. As stated in
our CY 2005 final rule with comment period (69 FR 65779 through 65780),
chemotherapy is very difficult for many patients to tolerate as the
side effects are often debilitating. In order for beneficiaries to
achieve the maximum therapeutic benefit from chemotherapy and other
therapies with side effects of nausea and vomiting, anti-emetic use is
often an integral part of the treatment regimen. We want to continue to
ensure that our payment rules do not impede a beneficiary's access to
the particular anti-emetic that is most effective for him or her as
determined by the beneficiary and his or her physician.
Table 21.--Proposed Anti-Emetics To Exempt From $50 Packaging
Requirement
------------------------------------------------------------------------
HCPCS code Short description
------------------------------------------------------------------------
J2405.............................. Ondansetron HCl injection.
Q0179.............................. Ondansetron HCl 8 mg oral.
Q0180.............................. Dolasetron mesylate oral.
J1260.............................. Dolasetron mesylate.
J1626.............................. Granisetron HCl injection.
Q0166.............................. Granisetron HCl 1 mg oral.
J2469.............................. Palonosetron HCl.
------------------------------------------------------------------------
For the CY 2006 proposed payment rates, we calculated the per day
cost of all drugs, biologicals, and radiopharmaceuticals that had a
HCPCS code in CY 2004 and were paid (via packaged or separate payment)
under the OPPS using claims data from January 1, 2004, to December 31,
2004. In CY 2004, multisource drugs and radiopharmaceuticals had two
HCPCS codes that distinguished the innovator multisource (brand) drug
or radiopharmaceutical from the noninnovator multisource (generic) drug
or radiopharmaceutical. We aggregated claims for both the brand and
generic HCPCS codes in our packaging analysis of these multisource
products. Items such as single indication orphan drugs, certain
vaccines, and blood and blood products were excluded from these
calculations and our treatment of these items is discussed separately
in sections V.F., E., and I., respectively, of this preamble.
In order to calculate the per day cost for drugs, biologicals, and
radiopharmaceuticals to determine their packaging status in CY 2006, we
are proposing several changes in the methodology that was described in
detail in the CY 2004 OPPS proposed rule (68 FR 47996 through 47997)
and finalized in the CY 2004 final rule with comment period (68 FR
63444 through 63447). For CY 2006, to calculate the per day cost of the
drugs, biologicals, and radiopharmaceuticals, we took the following
steps:
[[Page 42724]]
Step 1. 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 product. This resulted in creation of 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.
Step 2. We then created a separate record for each drug or
radiopharmaceutical by date of service, regardless of the number of
lines on which the drug or radiopharmaceutical was billed on 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
two line-items with a cost of $10 and 5 units for each line-item. In
this case, the computer program would create two records for this drug,
and each record would have a total cost of $20 and 10 units of the
product.
Step 3. We trimmed records with unit counts per day greater or less
than 3 standard deviations from the geometric mean (This is a new step
in the methodology we are proposing for CY 2006).
Step 4. For each remaining record for a drug or
radiopharmaceutical, we calculated the cost per unit of the drug. If
the HCPCS descriptor for ``drug X'' 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. We then weighted this unit cost by the total number of
units in the record. We did this by generating a number of line-items
equivalent to the number of units in that particular claim. Thus, a
claim with 100 units of ``drug X'' and a total cost of $200 would be
given 100 line-items, each with a cost of $2, while a claim of 50 units
with a cost of $50 would be given 50 line items, each with a cost of
$1.
Step 5. We then trimmed the unit records with cost per unit greater
or less than 3 standard deviations from the geometric mean.
Step 6. We aggregated the remaining unit records to determine the
mean cost per unit of the drug or radiopharmaceutical.
Step 7. Using only the records that remained after records with
unit counts per day greater or less than 3 standard deviations from the
geometric mean were trimmed (step 3), the total number of units billed
for each item and the total number of unique per-day records for each
item were determined. We divided the count of the total number of units
by the total number of unique per-day records for each item to
calculate an average number of units per day.
Step 8. Instead of using median cost as done in previous years, we
used the payment rate for each drug and biological effective April 1,
2005 furnished in the physician office setting, which was calculated
using the ASP methodology, and multiplied the payment rate by the
average number of units per day for each drug or biological to arrive
at its per day cost. For items that did not have an ASP-based payment
rate, we used their mean unit cost derived from the CY 2004 hospital
claims data to determine their per day cost. Our reasoning for using
these cost data is discussed in section V.B.3.a. of this preamble.
Step 9. We then packaged the items with per day cost based on the
ASP methodology or mean cost less than $50 and made items with per day
cost greater than $50 separately payable.
In the past, many commenters have alleged that hospitals do not
accurately bill the number of units for drugs and radiopharmaceuticals.
We have consistently decided not to identify which hospital claims
contain correctly coded units because we do not believe we should be
identifying when a dosage is clinically appropriate from hospital
claims information. Variations among patients with respect to
appropriate doses, the variety of indications with different dosing
regimens for some agents, and the possibility of off-label uses make it
difficult to know when units are incorrect. However, we do believe that
trimming the units would improve the accuracy of estimates by removing
those records with the most extreme units, without requiring us to
speculate about clinically appropriate dosing. Therefore, we believe
that trimming the records with unit counts greater or less than 3
standard deviations from the geometric mean will eliminate claims from
our analysis that may not appropriately represent the actual number of
units of a drug or radiopharmaceutical furnished by a hospital to a
patient during a specific clinical encounter. Because it reduces
extreme variation, trimming on greater or less than 3 standard
deviations from the geometric mean makes this trim more conservative
and removes fewer records. This change in methodology gives us even
greater confidence in the cost estimates we use for our packaging
decisions. We are seeking comments on the changes that we are proposing
in our methodology for packaging drugs and radiopharmaceuticals.
Section 1833(t)(16)(B) of the Act that requires the threshold for
establishing separate APCs for drugs and biologicals to be set at $50
per administration will expire at the end of CY 2006. Therefore, we
will be evaluating other packaging thresholds for these products for
the CY 2007 OPPS update. We are specifically requesting comments on the
use of alternative thresholds for packaging drugs and
radiopharmaceuticals in CY 2007.
3. Proposed Payment for Drugs, Biologicals, and Radiopharmaceuticals
Without Pass-Through Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs
(1) Background
Section 1833(t)(14) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, requires special classification of certain separately
paid radiopharmaceutical agents, drugs, and biologicals and mandates
specific payments for these items. Under section 1833(t)(14)(B)(i) of
the Act, a ``specified covered outpatient drug'' is a covered
outpatient drug, as defined in section 1927(k)(2) of the Act, for which
a separate APC exists and that either is a radiopharmaceutical agent or
is a drug or biological for which payment was made on a pass-through
basis on or before December 31, 2002.
Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and
biologicals are designated as exceptions and are not included in the
definition of ``specified covered outpatient drugs.'' These exceptions
are--
A drug or biological for which payment is first made on or
after January 1, 2003, under the transitional pass-through payment
provision in section 1833(t)(6) of the Act.
A drug or biological for which a temporary HCPCS code has
not been assigned.
During CYs 2004 and 2005, an orphan drug (as designated by
the Secretary).
Section 1833(t)(14)(F) of the Act defines the categories of drugs
based on section 1861(t)(1) and sections 1927(k)(7)(A)(ii),
(k)(7)(A)(iii), and (k)(7)(A)(iv) of the Act. The categories of drugs
are ``sole source drugs (includes a biological product or a single
source drug),'' ``innovator multiple source drugs,'' and ``noninnovator
multiple source drugs.'' The definitions of these specified categories
for drugs, biologicals, and radiopharmaceutical agents were discussed
in the January 6, 2004 OPPS interim final rule with comment period (69
FR 822), along with our use of the Medicaid average manufacturer price
database to determine the appropriate classification
[[Page 42725]]
of these products. Because of the many comments received on the January
6, 2004 interim final rule with comment period, the classification of
many of the drugs, biologicals, and radiopharmaceuticals changed from
that initially published. We announced these changes to the public on
February 27, 2004, Transmittal 112, Change Request 3144. We also
implemented additional classification changes through Transmittals 132
(Change Request 3154, released March 30, 2004) and Transmittal 194
(Change Request 3322, released June 4, 2004).
Section 1833(t)(14)(A) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, also provides that payment for these specified covered
outpatient drugs for CYs 2004 and 2005 is to be based on its
``reference average wholesale price.'' Section 1833(t)(14)(G) of the
Act) defines reference AWP as the AWP determined under section 1842(o)
of the Act as of May 1, 2003. Section 1833(t)(14)(A)(ii) of the Act, as
added by section 621(a) of Pub. L. 108-173 requires that in CY 2005--
A sole source drug must be paid no less than 83 percent
and no more than 95 percent of the reference AWP.
An innovator multiple source drug must be paid no more
than 68 percent of the reference AWP.
A noninnovator multiple source drug must be paid no more
than 46 percent of the reference AWP.
Section 1833(t)(14)(G) of the Act defines ``reference AWP'' as the
AWP determined under section 1842(o) the Act as of May 1, 2003. We
interpreted this to mean the AWP set under the CMS single drug pricer
(SDP) based on prices published in the Red Book on May 1, 2003.
For CY 2005, we finalized our policy to determine the payment rates
for specified covered outpatient drugs under the provisions of Pub. L.
108-173 by comparing the payment amount calculated under the median
cost methodology as done for procedural APCs to the AWP percentages
specified in section 1833(t)(14)(A)(ii) of the Act.
(2) Proposed Changes for CY 2006 Related to Pub. L. 108-173
Section 1833(t)(14)(A)(iii) of the Act, as added by section
621(a)(1) of Pub. L. 108-173, requires that payment for specified
covered outpatient drugs in CY 2006 be equal to the average acquisition
cost for the drug for that year as determined by the Secretary but
subject to any adjustment for overhead costs and taking into account
the hospital acquisition cost survey data collected by the GAO in 2004
and 2005. If hospital acquisition cost data are not available, then the
law requires that payment be equal to payment rates established under
the methodology described in section 1842(o), section 1847(A), or
section 1847(B) of the Act as calculated and adjusted by the Secretary
as necessary.
(3) Data Sources Available for Setting CY 2006 Payment Rates
Section 1833(t)(14)(D) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, outlines the provisions of the hospital outpatient
drug acquisition cost survey mandated for the GAO. This provision
directs the GAO to collect data on hospital acquisition costs of
specified covered outpatient drugs and to provide information based on
these data that can be taken into consideration for setting CY 2006
payment rates for these products under the OPPS. Accordingly, the GAO
conducted a survey of 1,400 acute care, Medicare-certified hospitals
requesting hospitals to provide purchase prices for specified covered
outpatient drugs purchased from July 1, 2003 to June 30, 2004. The
survey yielded a response rate of 83 percent where 1,157 hospitals
provided usable information. To ensure that its methodology for data
collection and analysis were sound, the GAO consulted an advisory panel
of experts in pharmaceutical economics, pharmacy, medicine, survey
sampling and Medicare payment.
The GAO reported the average and median purchase prices for 55
specified covered outpatient drug categories for the period July 1,
2003 to June 30, 2004. These items represented 86 percent of the
Medicare spending for specified covered outpatient drugs during the
first 9 months of 2004. The initial GAO data did not include any
radiopharmaceuticals. The report noted that the purchase price
information accounted for volume and other discounts provided at the
time of purchase, but excluded subsequent rebates from manufacturers
and payments from group purchasing organizations.
Another source of drug pricing information that we have is the ASP
data from the fourth quarter of 2004, which were used to set payment
rates for drugs and biologicals in the physician office setting
effective April 1, 2005. We have ASP-based prices for approximately 475
drugs and biologicals (including contrast agents) payable under the
OPPS; however, we currently do not have any ASP data on
radiopharmaceuticals. Payments for most of the drugs and biologicals
paid in the physician office setting are based on the ASP+6 percent.
Payments for items with no reported ASP are based on wholesale
acquisition cost (WAC).
Lastly, the third source of cost data we have for drugs,
biologicals, and radiopharmaceuticals are the mean and median costs
derived from the CY 2004 hospital claims data. In our data analysis, we
compared the payment rates for drugs and biologicals using data from
all three sources described above. As section 1833(t)(14)(A)(iii) of
the Act clearly specifies that payment for specified covered outpatient
drugs in CY 2006 be equal to the ``average'' acquisition cost for the
drug, we limited our analysis to the mean costs of drugs determined
using the GAO acquisition cost survey and the hospital claims data,
instead of using median costs.
We estimated aggregate expenditures for all drugs and biologicals
(excluding radiopharmaceuticals) that would be separately payable in CY
2006 and for the 55 drugs and biologicals reported by the GAO using
mean cost from the claims data, the GAO mean purchase price, and the
ASP-based payment amount (ASP+6 percent in most cases), and then
calculated the equivalent average ASP-based payment rate under each of
the three payment methodologies. The results are presented in Table 22
below.
Table 22.--Comparison of Relative Pricing for OPPS Drugs and Biologicals Under Various Payment Methodologies
----------------------------------------------------------------------------------------------------------------
ASP equivalent (all
Type of pricing data Time period of ASP equivalent (55 GAO separately billable
pricing data drugs only) (percent) drugs)
----------------------------------------------------------------------------------------------------------------
GAO mean purchase price........... 12 months ending June ASP+3 N/A
2004.
ASP+6%............................ 4th quarter of 2004.. ASP+6 ASP+6%
[[Page 42726]]
Mean cost from claims data........ 1st 9 months of 2004. ASP+8 ASP+8%
----------------------------------------------------------------------------------------------------------------
Prior to any adjustments for the differing time periods of the
pricing data, the results indicated that using the GAO mean purchase
prices as the basis for paying the 55 drugs and biologicals would be
equivalent to paying for those drugs and biologicals, on average, at
ASP+3 percent. Additionally, using mean unit cost to set the payment
rates for the drugs and biologicals that would be separately payable in
CY 2006 would be equivalent to basing their payment rates, on average,
at ASP+8 percent.
In determining the payment rates for drugs and biologicals in CY
2006, we are not proposing to use the GAO mean purchase prices for the
55 drugs and biologicals because the GAO data reflect hospital
acquisition costs from a less recent period of time. The survey was
conducted from July 1, 2003 to June 30, 2004; thus, the purchase prices
are generally reflective of the time that is the midpoint of this
period, which is January 1, 2004. The hospital purchase price data also
does not fully account for rebates from manufacturers or payments from
group purchasing organizations made to hospitals. We also note that it
would be difficult to update the GAO mean purchase prices during CY
2006 and in future years.
We are also not proposing, in general, to use mean costs from CY
2004 hospital claims data to set payment rates for drugs and
biologicals in CY 2006. In previous OPPS rules, we stated that pharmacy
overhead costs are captured in the pharmacy revenue cost centers and
reflected in the median cost of drug administration APCs, and the
payment rate we established for a drug, biological, or
radiopharmaceutical APC was intended to pay only for the cost of
acquiring the item (66 FR 59896 and 67 FR 66769). However, findings
from a MedPAC survey of hospital charging practices indicated that
hospitals set charges for drugs, biologicals, and radiopharmaceuticals
high enough to reflect their handling costs as well as their
acquisition costs; therefore, the mean costs calculated using charges
from hospital claims data converted to costs are representative of
hospital acquisition costs for these products, as well as their
overhead costs. For CY 2006, the statute specifies that payments for
specified covered outpatient drugs are required to be equal to the
``average'' acquisition cost for the drug. Payments based on mean costs
would represent the products' acquisition costs plus overhead costs,
instead of acquisition costs only. Therefore, we believe that it is
appropriate for us to use a source of cost information other than the
CY 2004 hospital claims data to set the payment rates for most drugs
and biologicals in CY 2006.
We are proposing to pay ASP+6 percent for separately payable drugs
and biologicals in CY 2006. Given the data as described above, we
believe this is our best estimate of average acquisition costs for CY
2006. We note that the comparison between the GAO purchase price data
and the ASP data indicated that the GAO data on average were equivalent
to ASP+3 percent. However, as noted earlier, this comparison is
problematic for two reasons. First, there are differences in the time
periods for two sources of data. The GAO data are from the 12 months
ending June 2004 and the ASP data are from the fourth quarter of 2004.
It could be argued that prices increased in the intervening time
period. However, we do not have a source of reliable information on
specific price changes for this time period for the drugs studied by
the GAO. In the future, we will have better information on price trends
for Medicare Part B drugs as more quarters of pricing information are
reported under the ASP system.
We also note the comparison between the GAO data and the ASP data
is problematic as the ASP data include rebates and other price
concessions and the GAO data do not. Inclusion of these rebates and
price concession in the GAO data would decrease the GAO prices relative
to the ASP prices, suggesting that ASP+6 percent may be an overestimate
of hospitals' average acquisition costs. Unfornately, we do not have a
source of information on the magnitude of the rebates and price
concessions for the specific drugs in the GAO data at this time.
At the present time, therefore, it is difficult to adjust the GAO
prices for inflation, rebates, and price concessions to make the
comparison with ASP more precise. We will continue to examine new data
to improve our future estimates of acquisition costs. In future years,
our proposed pricing will be modified as appropriate to reflect the
most recent data and analyses available. We also note that, in addition
to the importance of making accurate estimates of acquisition costs for
drug pricing, there are important implications for prices of other
services due to the required budget neutrality of the OPPS. For
example, drugs and biological prices set at ASP+3 percent instead of
ASP+6 percent would have made available approximately an additional $60
million for other items and services under the OPPS.
We note that ASP data are unavailable for some drugs and
biologicals. For the few drugs and biologicals, other than
radiopharmaceuticals as discussed later, where ASP data are
unavailable, we are proposing to use the mean costs from the CY 2004
hospital claims data to determine their packaging status for
ratesetting. Until we receive ASP data for these items, payment will be
based on their mean cost.
Our proposal uses payment rates based on ASP data from the fourth
quarter of 2004 because these are the most recent numbers available to
us during the development of this proposed rule. To be consistent with
the ASP-based payments that would be made when these drugs and
biologicals are furnished in physician offices, we plan to make any
appropriate adjustments to the amounts shown in Addenda A and B to this
proposed rule for these items based on more recent ASP data from the
second quarter of 2005, which will be the basis for setting payment
rates for drugs and biologicals in the physician office setting
effective October 1, 2005, prior to our publication of the CY 2006 OPPS
final rule and also on a quarterly basis on our Web site during CY
2006. We note that we would determine the packaging status of each drug
or biological only once during the year during the update process;
however, for the separately payable drugs and biologicals, we would
update their ASP-based payment rates on a quarterly basis.
[[Page 42727]]
We intend for the quarterly updates of the ASP-based payment rates
for separately payable drugs and biologicals to function as future
surveys of hospital acquisition cost data, as section
1833(t)(14)(D)(ii) of the Act instructs us to conduct periodic
subsequent surveys to determine hospital acquisition cost for each
specified covered outpatient drug.
We are specifically requesting comments on our proposal to pay for
drugs and biologicals (including contrast agents) under the OPPS using
the ASP-based methodology that is also used to set the payment rates
for drugs and biologicals furnished in physician offices and the
adequacy of the payment rates to account for acquisition costs of the
drugs and biologicals.
In CY 2005, we applied an equitable adjustment to determine the
payment rate for darbepoetin alfa (Q0137) pursuant to section
1833(t)(2)(E) of the Act. However, for CY 2006, we are proposing to
establish the payment rate for this biological using the ASP
methodology. The ASP data represents market prices for this biological;
therefore, we believe it is appropriate to use the ASP methodology to
establish payment rates for darbepoetin alfa because this method will
permit market forces to determine the appropriate payment for this
biological. We are seeking comments on the proposed payment policy for
this biological.
Effective April 1, 2005, several HCPCS codes were created to
describe various concentrations of low osmolar contrast material
(LOCM). These new codes are Q9945 through Q9951. However, in
Transmittal 514 (April 2005 Update of the OPPS), we instructed
hospitals to continue reporting LOCM in CY 2005 using the existing
HCPCS codes A4644, A4645, and A4646 and made Q9945 through Q9951 not
payable under the OPPS. For CY 2006, we are proposing to activate the
new Q-codes for hospitals and discontinue the use of HCPCS codes A4644
through A4646 for billing LOCM products. We have CY 2004 hospital
claims data for HCPCS codes A4644 through A4646, which show that the
mean costs per day for these products are greater than $50. Because we
do not have CY 2004 hospital claims data for HCPCS codes Q9945 through
Q9951, we crosswalked the cost data for the HCPCS A-codes to the new Q-
codes. There is no predecessor code which crosswalks to HCPCS code
Q9951 for LOCM with a concentration of 400 or greater mg/ml of iodine.
Therefore, our general payment policy of paying separately for new
codes while hospital data are being collected applies to HCPCS code
Q9951. As our historical hospital mean per day costs for the three A
codes exceed the packaging threshold and our payment policy for new
codes without predecessors applies to one of the new codes, we are
proposing to pay for the HCPCS codes Q9945 through Q9951 separately in
CY 2006 at payment rates calculated using the ASP methodology. We note
that because the new Q-codes describing LOCM are more descriptively
discriminating and have different units than the previous A-codes for
LOCM as well as widely varying ASPs, we expect that the packaging
status of these Q-codes may change in future years when we have
specific OPPS claims data for these new codes. We are seeking comments
specifically on our proposed policy to pay separately for LOCM
described by HCPCS codes Q9945 through Q9951 in CY 2006.
(4) CY 2006 Proposed Payment Policy for Radiopharmaceutical Agents
We do not have ASP data for radiopharmaceuticals. Therefore, for CY
2006, we are proposing to calculate per day costs of
radiopharmaceuticals using mean unit cost from the CY 2004 hospital
claims data to determine the items' packaging status similar to the
drugs and biologicals with no ASP data. In a separate report, the GAO
provided CMS with hospital purchase price information for nine
radiopharmaceutical agents. As part of the GAO survey described
earlier, the GAO surveyed 1,400 acute-care, Medicare-certified
hospitals requesting hospitals to provide purchase prices for
radiopharmaceuticals from July 1, 2003 to June 30, 2004. The
radiopharmaceutical part of the survey yielded a response rate of 61
percent, where 808 hospitals provided usable information. The GAO
reported the average and median purchase prices for nine
radiopharmaceuticals for the period July 1, 2003 to June 30, 2004.
These items represented 9 percent of the Medicare spending for
specified covered outpatient drugs during the first 9 months of 2004.
The report noted that the purchase price information accounted for
volume and other discounts provided at the time of purchase, but
excluded subsequent rebates from manufacturers and payments from group
purchasing organizations.
When we examined differences between the CY 2005 payment rates for
these nine radiopharmaceutical agents and their GAO mean purchase
prices, we saw that the GAO purchase prices were substantially lower
for several of these agents. We also saw similar patterns when we
compared the CY 2005 payment rates for radiopharmaceutical agents with
their CY 2004 median and mean costs from hospital claims data. Our
intent is to maintain consistency, whenever possible between the
payment rates for these agents from CY 2005 to CY 2006, because such
rapid reductions could adversely affect beneficiary access to services
utilizing radiopharmaceuticals.
As we do not have ASPs for radiopharmaceuticals that best represent
market prices, we are proposing as a temporary 1-year policy for CY
2006 to pay for radiopharmaceutical agents that are separately payable
in CY 2006 based on the hospital's charge for each radiopharmaceutical
agent adjusted to cost. As MedPAC has indicated that hospitals
currently include the charge for pharmacy overhead costs in their
charge for the radiopharmaceutical, if we pay for these items using
charges converted to cost, we believe that payment at cost would be the
best available proxy for the average acquisition cost of the
radiopharmaceutical along with its handling cost until we receive ASP
information and overhead information on these agents. We expect that
hospitals' different purchasing and preparation and handling practices
for radiopharmaceuticals would be reflected in their charges, which
would be converted to costs using hospital-specific cost-to-charge
ratios. To better identify the separately payable radiopharmaceutical
agents to which this policy would apply, we propose to assign them to
status indicator ``H'' in Addendum B of this rule. Should ASP data be
unavailable for radiopharmaceuticals for CY 2007, it is not apparent to
us what methodology we could use to establish payment rates for these
items in CY 2007 other than the hospital CY 2006 claims-based
methodology. We are seeking comments specifically on the proposed
payment policy for separately payable radiopharmaceutical agents in CY
2006.
Section 303(h) of Pub. L. 108-173 exempted radiopharmaceuticals
from ASP pricing in the physician office setting where the fewer
numbers (relative to the hospital outpatient setting) of
radiopharmaceuticals are priced locally by Medicare contractors.
However, radiopharmaceuticals are subject to ASP reporting. We
currently do not require reporting for radiopharmaceuticals because we
do not pay for any of the radiopharmaceuticals using the ASP
methodology. However, for CY 2006, we are proposing to begin collecting
ASP data on all radiopharmaceutical agents for purposes of ASP-based
payment of
[[Page 42728]]
radiopharmaceuticals beginning in CY 2007.
We recognize that there are significant complex issues surrounding
the reporting of ASPs for radiopharmaceutical agents. Most
radiopharmaceuticals must be compounded from a ``cold kit'' containing
necessary nonradioactive materials for the final product to which a
radioisotope is added. There are critical timing issues, given the
short half-lives of many radioisotopes used for diagnostic or
therapeutic purposes. Significant variations in practices exist with
respect to what entity purchases the constituents and who then
compounds the radiopharmaceutical to develop a final product for
administration to a patient. For example, manufacturers may sell the
components of a radiopharmaceutical to independent radiopharmacies.
These radiopharmacies may then sell unit or multi-doses to many
hospitals; however, some hospitals also may purchase the components of
the radiopharmaceutical and prepare the radiopharmaceutical themselves.
In some cases, hospitals may generate the radioisotope on-site, rather
than purchasing it. The costs associated with acquiring the
radiopharmaceutical in these instances may significantly vary. Also,
there may only be manufacturer pricing for the components; however, the
price set by the manufacturer for one component of a
radiopharmaceutical may not directly translate into the acquisition
cost of the ''complete'' radiopharmaceutical, which may result from the
combination of several components. In general, for drugs other than
radiopharmaceuticals, the products sold by manufacturers with National
Drug Codes (NDCs) correspond directly with the HCPCS codes for the
products administered to patients so ASPs may be directly calculated
for the HCPCS codes. In the case of radiopharmaceuticals this 1:1
relationship may not hold, potentially making the calculation of ASPs
for radiopharmaceuticals more complex. In addition, some hospitals may
generate their own radioisotopes, which they then use for
radiopharmaceutical compounding, and they may sell these complete
products to other sites. The costs associated with this practice could
be difficult to capture through ASP reporting. We seek very specific
comments on these and all other relevant issues surrounding
implementation of ASP reporting for radiopharmaceuticals. We discuss in
section V.B.3.a.(5) of this preamble under the MedPAC report on APC
payment rate adjustments, our CY 2006 proposed payment policies for
overhead costs of drugs, biologicals, and radiopharmaceuticals.
In section V.D. of the preamble we discuss the methodology that we
are proposing to use to determine the CY 2006 payment rates for new
drugs, biologicals, and radiopharmaceuticals.
While payments for drugs, biologicals and radiopharmaceuticals are
taken into account when calculating budget neutrality, we note that we
are proposing to pay for drugs, biologicals and radiopharmaceuticals
without scaling these payment amounts. We believe that these payment
amounts are the best proxies we have for the average acquisition costs
of drugs, biologicals, and radiopharmaceuticals for CY 2006; therefore,
Congress would not have intended for us to scale these payment rates.
In section V.B.3.a.(5) of this preamble, we also discuss that we
propose to add 2 percent of the ASP to the payment rates for drugs and
biologicals with rates based on the ASP methodology to provide payment
to hospitals for pharmacy overhead costs associated with furnishing
these products. We are proposing to scale these additional payment
amounts for pharmacy overhead costs. We are seeking comments on whether
it is appropriate to exempt payment rates for drugs, biologicals, and
radiopharmaceuticals from scaling and scale the additional payment
amount for pharmacy overhead costs.
We note that further discussion of the budget neutrality
implications of the various drug payment proposals that we considered
is included in section XIV.C. of this preamble.
(5) MedPAC Report on APC Payment Rate Adjustment of Specified Covered
Outpatient Drugs
Section 1833(t)(14)(E) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, requires MedPAC to submit a report to the Secretary,
not later than July 1, 2005, on adjusting the APC rates for specified
covered outpatient drugs to take into account overhead and related
expenses, such as pharmacy services and handling costs. This provision
also requires that the MedPAC report include the following: A
description and analysis of the data available for adjusting such
overhead expenses; recommendation as to whether a payment adjustment
should be made; and the methodology for adjusting payment, if an
adjustment is recommended. Section 1833(t)(14)(E)(ii) of the Act, as
added by section 621(a)(1) of Pub. L. 108-173, authorizes the Secretary
to adjust the APC weights for specified covered outpatient drugs to
reflect the MedPAC recommendation.
The statute mandates MedPAC to report on whether drug APC payments
under the OPPS should be adjusted to account for pharmacy overhead and
nuclear medicine handling costs associated with providing specified
covered outpatient drugs. In creating its framework for analysis,
MedPAC interviewed stakeholders, analyzed cost report data, conducted
four individual hospital case studies, and received technical advice on
grouping items with similar handling costs from a team of experts in
hospital pharmacy, hospital finance, cost accounting, and nuclear
medicine.
MedPAC concluded that the handling costs for drugs, biologicals,
and radiopharmaceuticals delivered in the hospital outpatient
department are not insignificant, as medications typically administered
in outpatient departments generally require greater pharmacy
preparation time than do those provided to inpatients. MedPAC found
that little information is currently available about the magnitude of
these costs. According to the MedPAC analysis, hospitals historically
set charges for drugs, biologicals, and radiopharmaceuticals at levels
that reflected their respective handling costs, and payments covered
both drug acquisition and handling. Moreover, hospitals vary
considerably in their likelihood of providing services which utilize
drugs, biologicals, or radiopharmaceuticals with different handling
costs.
MedPAC developed seven drug categories for pharmacy and nuclear
medicine handling costs, according to the level of resources used to
prepare the products (Table 23). Characteristics associated with the
level of handling resources required included radioactivity, toxicity,
mode of administration, and the need for special handling. Groupings
ranged from dispensing an oral medication on the low end of relative
cost to providing radiopharmaceuticals on the high end. MedPAC
collected cost data from four hospitals that were then used to develop
relative median costs for all categories but radiopharmaceuticals
(Category 7+). The case study facilities were not able to provide
sufficient cost information regarding the handling of outpatient
radiopharmaceuticals to develop a cost relative for Category 7+. The
MedPAC study classified about 230 different drugs, biologicals, and
radiopharmaceuticals into the seven categories based on input from
their expert panel and each case study facility.
[[Page 42729]]
Table 23.--MedPAC Recommended Drug Categories and Median Cost Relatives
------------------------------------------------------------------------
Median cost
Drug category Description relative
------------------------------------------------------------------------
Category 1................. Orals (oral tablets, 0.36
capsules, solutions).
Category 2................. Injection/Sterile 1.00
Preparation (draw up a
drug for administration).
Category 3................. Single IV Solution/Sterile 1.28
Preparation (adding a drug
or drugs to a sterile IV
solution) or Controlled
Substances.
Category 4................. Compounded/Reconstituted IV 1.61
Preparations (requiring
calculations performed
correctly and then
compounded correctly).
Category 5................. Specialty IV or Agents 2.70
requiring special handling
in order to preserve their
therapeutic value or
Cytotoxic Agents, oral
(chemotherapeutic,
teratogenic, or toxic)
requiring PPE.
Category 6................. Cytotoxic Agents 5.33
(chemotherapeutic,
teratogenic, or toxic) in
all formulations except
oral requiring personal
protective equipment (PPE).
Category 7+................ Radiopharmaceuticals: Basic (\1\)
and Complex Diagnostic
Agents, PET Agents,
Therapeutic Agents, and
Radioimmunoconjugates.
------------------------------------------------------------------------
\1\ Not available.
In its report, MedPAC recommended the following:
(1) Establish separate, budget neutral payments to cover the costs
hospitals incur for handling separately payable drugs, biologicals, and
radiopharmaceuticals; and
(2) Define a set of handling fee APCs that group drugs,
biologicals, and radiopharmaceuticals based on attributes of the
products that affect handling costs; instruct hospitals to submit
charges for these APCs; and base payment rates for the handling fee
APCs on submitted charges reduced to costs.
MedPAC found some differences in the categorizations of drug and
radiopharmaceutical products by different experts and across the case
study sites. In the majority of cases where groupings disagreed,
hospitals used different forms of the products which were coded with
the same HCPCS code. For example, a drug may be purchased as a
prepackaged liquid or as a powder requiring reconstitution. Such a drug
would vary in the handling resources required for its preparation and
would fall into a different drug category depending on its form. In
addition, the handling cost groupings may vary depending on the
intended method of drug delivery, such as via intravenous push or
intravenous infusion. For a number of commonly used drugs, MedPAC
provided two categories in their final consensus categorizations, with
the categories 2 and 3 reported as the most frequent combination. For
example, MedPAC placed HCPCS codes J1260 (Injection, dolasetron
mesylate, 10 mg) and J2020 (Injection, linezolid, 200 mg) in consensus
categories 2 and 3, acknowledging that the appropriate categorization
could vary depending on the clinical preparation and use of the drug.
We note that we have no information regarding hospitals' frequencies of
use of various forms of drugs provided in the outpatient department
under the OPPS, as the case studies only included four facilities and
the technical advisory committee was similarly small. Thus, in many
cases it is impossible to exclusively and appropriately assign a drug
to a certain overhead category that would apply to all hospital
outpatient uses of the drug because of the different handling resources
required to prepare different forms of the drugs.
There are over 100 separately payable drugs, biologicals, and
radiopharmaceuticals that are separately payable under the OPPS but for
which MedPAC provided no consensus categorizations in its seven drug
groups. We independently examined these products and considered the
handling cost categories that could be appropriately assigned to each
product as described by an individual HCPCS code. As discussed above,
many of the drugs had several forms which would place them in different
handling cost groupings depending on the specific form of the drug
prepared by the hospital pharmacy for a patient's treatment.
Additionally, we believe that hospitals may have difficulty
discriminating among the seven categories for some drugs, because the
applicability of a given category description to a specific clinical
situation may be ambiguous. Indeed, in the MedPAC study, initially only
about 80 percent of the case study pharmacists agreed with the expert
panel category assignments; however, concurrence increased that
percentage to almost 90 percent after discussion and review.
Nevertheless, there remained a number of drugs for which differences in
categorization by the case study facilities and the expert panel
persisted.
In light of our concerns over our ability to appropriately assign
drugs to the seven MedPAC drug categories so that the categories
accurately describe the drugs' attributes in all of the OPPS hospitals
and the MedPAC recommendations, for CY 2006 we are proposing to
establish three distinct HCPCS C-codes and three corresponding APCs for
drug handling categories to differentiate overhead costs for drugs and
biologicals, by combining several of the categories identified in the
MedPAC report. We collapsed the MedPAC categories 2, 3, and 4 into a
single category described by HCPCS code CXXXX, and MedPAC categories 5
and 6 into another category described by HCPCS code CYYYY, while
maintaining MedPAC category 1 as described by HCPCS code CWhttp://WWW. Our
rationale for not creating an overhead payment category for
radiopharmaceuticals is discussed below. We believe that merging
categories in this way generally resolves the categorization dilemmas
resulting from the most common scenarios where drugs may fall into more
than one grouping and minimizes the administrative burden on hospitals
to determine which category applies to the handling of a drug in a
specific clinical situation. In addition, these broader handling cost
groupings minimize any undesirable payment policy incentives to utilize
particular forms of drugs or specific preparation methods. We have only
collapsed those categories whose MedPAC relative weights differ by less
than a factor of two, consistent with the principle outlined in section
1833(t)(2) of the Act that provides that items and services within an
APC group cannot be considered comparable with respect to the use of
resources if the median of the highest cost item or service within an
APC group is more than 2 times greater than the median of the lowest
cost item or service within that same group.
As noted previously, we believe that pharmacy overhead costs are
captured in the pharmacy revenue cost centers and reflected in the
median cost of drug
[[Page 42730]]
administration APCs, and the payment rate we established for a drug,
biological, or radiopharmaceutical APC was intended to pay only for the
cost of acquiring the item (66 FR 59896 and 67 FR 66769). As a MedPAC
survey of hospital charging practices indicated that hospitals' charges
for drugs, biologicals, and radiopharmaceuticals reflect their handling
costs as well as their acquisition costs, we believe pharmacy overhead
costs would be incorporated into the OPPS payment rates for drugs,
biologicals, and radiopharmaceuticals if the rates are based on
hospital claims data. However, in light of our proposal to establish
three distinct C-codes for drug handling categories, we are proposing
to instruct hospitals to charge the appropriate pharmacy overhead C-
code for overhead costs associated with each administration of each
separately payable drug and biological based on the code description
which best reflects the service the hospital provides to prepare the
product for administration to a patient. We would then collect hospital
charges for these C-codes for 2 years, and consider basing payment for
the corresponding drug handling APCs on the charges reduced to costs in
CY 2008, similar to the payment methodology for other procedural APCs.
Median hospital costs for the drug handling APCs should reflect the CY
2006 practice patterns across all OPPS hospitals of handling drugs
whose preparation is described by each of the C-codes, reflecting the
differential utilization of various forms of drugs and alternative
methods of preparation and delivery through hospitals' billing and
charges for the C-codes. Table 24 contains the drug handling
categories, C-codes, and APCs we are proposing for CY 2006.
Table 24.--Proposed CY 2006 Drug Handling Categories, C-Codes, and APCs
----------------------------------------------------------------------------------------------------------------
Drug handling category C code Drug candling APC Description
----------------------------------------------------------------------------------------------------------------
Category 1................ CWhttp://WWW..................... WWWW...................... Orals (oral
tablets, capsules,
solutions).
Category 2................ CXXXX..................... XXXX...................... Injection/Sterile
Preparation (draw up a drug
for administration).
Single IV Solution/
Sterile Preparation (adding
a drug or drugs to a
sterile IV solution) or
Controlled Substances.
Compounded/
Reconstituted IV
Preparations (requiring
calculations performed
correctly and then
compounded correctly).
Category 3................ CYYYY..................... YYYY...................... Specialty IV or
Agents requiring special
handling in order to
preserve their therapeutic
value or Cytotoxic Agents,
oral (chemotherapeutic,
teratogenic, or toxic)
requiring PPE.
Cytotoxic Agents
(chemotherapeutic,
teratogenic, or toxic) in
all formulations except
oral requiring personal
protective equipment (PPE).
----------------------------------------------------------------------------------------------------------------
We believe that these three categories are sufficiently distinct
and reflective of the resources necessary for drug handling to permit
appropriate hospital billing and to capture the varying overhead costs
of the drugs and biologicals separately payable under the OPPS. We are
not proposing to adopt the median cost relatives reported for MedPAC's
six categories (excluding radiopharmaceuticals). It is very difficult
to accurately crosswalk the cost relatives for the six categories to
the three categories we are proposing. In addition, we are not
confident that the cost relatives that were based on cost data from
four hospitals appropriately reflect the median relative resource costs
of all hospitals that would bill these drug handling services under the
OPPS. Instead, we believe it is most appropriate to collect hospital
charges for the drug handling services based on attributes of the
products that affect the hospital resources required for their
handling, and consider making future payments under the OPPS using the
proposed C-codes based on the medians of charges converted to costs for
the drug handling APC associated with each administration of a
separately payable drug or biological.
For CY 2006, pursuant to section 1833(t)(14)(E)(ii) of the Act, we
propose an adjustment to cover the costs hospitals incur for handling
separately payable drugs and biologicals. As we do not currently have
separate hospital charge data on pharmacy overhead, we are proposing
for CY 2006 to pay for drug and biological overhead costs based on 2
percent of the ASP. As described earlier, we estimated aggregate
expenditure for all separately payable OPPS drugs and biologicals
(excluding radiopharmaceuticals) using mean costs from the claims data
and then determined the equivalent average ASP-based rates. Our
calculations indicated that using mean unit costs to set the payment
rates for all separately payable drugs and biologicals would be
equivalent to basing their payment rates on the ASP+8 percent. As noted
previously, because pharmacy overhead costs are already built into the
charges for drugs, biologicals, and radiopharmaceuticals as indicated
by the MedPAC study described above, we believe that payment for drugs
and biologicals and overhead at a combined ASP+8 percent would serve as
a proxy for representing both the acquisition cost and overhead cost of
each of these products. Moreover, as we are proposing to pay for all
separately payable drugs and biologicals using the ASP methodology,
where payment rates for most of these items are set at the ASP+6
percent, we believe that an additional 2 percent of the ASP would
provide adequate additional payment for the overhead cost of these
products and be consistent with historical hospital costs for drug
acquisition and handling. Even though we are not proposing to scale the
payment rates for drugs and biologicals based on the ASP methodology,
we are proposing to scale the additional payment amount of 2 percent of
the ASP for pharmacy overhead costs. Therefore, for CY 2006, we are
proposing to pay an additional 2 percent of the ASP scaled for budget
neutrality for overhead costs associated with separately payable drugs
and biologicals, along with paying ASP+6 percent for the acquisition
costs of the drugs and biologicals. The payment rate for a separately
payable drug or biological shown in Addenda A and B to this proposed
rule represents the payment rate for the drug or biological in addition
to payment for its overhead costs. We are specifically seeking comments
on this proposed policy for paying for pharmacy overhead costs in CY
2006 and on the proposed policy regarding hospital billing of drug
handling charges associated with each administration of each separately
payable drug or biological using the proposed C-codes.
As discussed earlier, we are proposing to pay for separately
payable radiopharmaceutical agents based on their charges in the claims
submitted by hospitals converted to costs. MedPAC found that the
handling resource costs
[[Page 42731]]
associated with radiopharmaceuticals were especially difficult to study
because of the varying resource requirements for handling them in a
variety of hospital outpatient settings for different clinical uses.
These various methods of preparation of radiopharmaceuticals, and the
individual radiopharmaceuticals themselves, differ significantly in the
costs of their handling, with substantial variation in such factors as
site of preparation, personnel time, shielding, transportation,
equipment, waste disposal, and regulatory compliance requirements.
However, as MedPAC also found that handling costs for drugs,
biologicals, and radiopharmaceuticals were built into hospitals'
charges for the products themselves, we believe that the charges from
hospital claims converted to costs are representative of hospital
acquisition costs for these agents, as well as their overhead costs.
These costs would appropriately reflect each hospital's potentially
diverse patterns of acquisition or production of radiopharmaceuticals
for use in the outpatient hospital setting and their related handling
costs that vary across radiopharmaceutical products and the
circumstances of their production and use. Therefore, we are not
proposing to create separate handling categories for
radiopharmaceutical agents for CY 2006.
However, because we are proposing to collect ASP information for
radiopharmaceuticals in CY 2006, we are seeking specific comments on
appropriate categories for potentially capturing radiopharmaceutical
handling costs. We believe that these handling costs may vary depending
on many factors. The handling cost categories should exclude any
resources covered by specific diagnostic procedures or administration
codes for patient services that utilize the radiopharmaceuticals.
However, the handling cost categories should include all aspects of
radiopharmaceutical handling and preparation, including transportation,
storage, compounding, required shielding, inventory management,
revision of dosages based on patient conditions, documentation,
disposal, and regulatory compliance. The MedPAC study contractor
suggested a variety of discriminating factors which may be related to
the magnitude of radiopharmaceutical handling costs, including the
complexity of the calculations and manipulations involved with
compounding, the intended use of the product for diagnostic or
therapeutic purposes, the item's status as a radioimmunoconjugate or
non-radioimmunoconjugate, short-lived agents produced in-house, and
preparation of the radiopharmaceutical in-house versus production in a
commercial radiopharmacy. We are seeking comments on the construction
of radiopharmaceutical handling cost categories that would meaningfully
reflect differences in the levels of necessary hospital resources and
that could easily be understood and applied by hospitals characterizing
their preparation of radiopharmaceuticals.
b. Proposed CY 2006 Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims
Data
Pub. L. 108-173 does not address the OPPS payment in CY 2005 and
after for new drugs, biologicals, and radiopharmaceuticals that have
assigned HCPCS codes, but that do not have a reference AWP or approval
for payment as pass-through drugs or biologicals. Because there is no
statutory provision that dictated payment for such drugs and
biologicals in CY 2005, and because we had no hospital claims data to
use in establishing a payment rate for them, we investigated several
payment options for CY 2005 and discussed them in detail in the CY 2005
OPPS final rule with comment period (69 FR 65797 through 65799).
For CY 2006, we are proposing to use the same methodology that we
used in CY 2005. That is, we are proposing to pay for these new drugs
and biologicals with HCPCS codes but which do not have pass-through
status at a rate that is equivalent to the payment they would receive
in the physician office setting, which would be established in
accordance with the ASP methodology described in the CY 2005 Medicare
Physician Fee Schedule final rule (69 FR 66299). As discussed in the
OPPS CY 2005 final rule (69 FR 65797), new drugs, biologicals, and
radiopharmaceuticals may be expensive and we are concerned that
packaging these new items may jeopardize beneficiary access to them. In
addition, we do not want to delay separate payment for these items
solely because a pass-through application was not submitted. We note
that this payment methodology is the same as the methodology that would
be used to calculate the OPPS payment amount that pass-through drugs
and biologicals would be paid in CY 2006 in accordance with section
1842(o) of the Act, as amended by section 303(b) of Pub. L. 108-173,
and section 1847A of the Act. Thus, we are proposing to continue to
treat new drugs, biologicals, and radiopharmaceuticals with established
HCPCS codes the same, irrespective of whether pass-through status has
been determined. We are also proposing to assign status indicator ``K''
to HCPCS codes for new drugs and biologicals for which we have not
received a pass-through application.
There are several drugs, biologicals, and radiopharmaceuticals that
were payable during CY 2004 or their HCPCS codes were created effective
January 1, 2005 for which we do not have any CY 2004 hospital claims
data. In order to determine the packaging status of these items for CY
2006, we calculated an estimate of per day cost of each of these items
by multiplying the payment rate for each product as determined using
the ASP methodology by an estimated average number of units of each
product that would be furnished to a patient during one administration.
We are proposing to package items for which we estimated the per
administration cost to be less than $50 and pay separately for items
with estimated per administration cost greater than $50. Payment for
the separately payable items would be based on rates determined using
the ASP methodology established in the physician office setting. There
are two codes 90393 (Vaccina ig, im) and Q9953 (Inj Fe-based MR
contrast, ml) for which we were not able to determine payment rates
based on the ASP methodology. Because we are unable to estimate the per
administration cost of these items, we are proposing to package them in
CY 2006. We are specifically seeking comments on our proposed policy
for determining per administration cost of these drugs, biologicals,
and radiopharmaceuticals that are payable under the OPPS, but do not
have any CY 2004 claims data.
[[Page 42732]]
Table 25.--Proposed CY ASP Payment Rate for Drugs, Biologicals, and Radiopharmaceuticals Without CY 2004 Claims
Data
----------------------------------------------------------------------------------------------------------------
Est. average
ASP-based number of Proposed 2006
HCPCS code Description APC payment rate units per status
administration indicator
----------------------------------------------------------------------------------------------------------------
C1093...................... TC99M fanolesomab. 1093 $1,197.00 1 H
C9206...................... Integra, per cm2.. 9206 9.06 19 K
J0135...................... Adalimumab 1083 294.63 2 K
injection.
J0288...................... Ampho b 0735 12.00 35 K
cholesteryl
sulfate.
J0395...................... Arbutamine HCl 9031 160.00 1 K
injection.
J1180...................... Dyphylline 9166 7.59 8.4 K
injection.
J1457...................... Gallium nitrate 1085 1.28 340 K
injection.
J3315...................... Triptorelin 9122 363.24 1 K
pamoate.
J7350...................... Injectable human 9055 3.47 33 K
tissue.
J9357...................... Valrubicin, 200 mg 9167 369.60 4 K
Q2012...................... Pegademase bovine, 9168 158.05 56 K
25 iu.
Q2018...................... Urofollitropin, 75 7037 43.87 2 K
iu.
90581...................... Anthrax vaccine, 9169 126.46 1 K
sc.
J0200...................... Alatrofloxacin .............. 14.75 2.5 N
mesylate.
J7674...................... Methacholine .............. 0.40 8.875 N
chloride, neb.
J0190...................... Inj biperiden .............. 3.16 1 N
lactate/5 mg.
J3530...................... Nasal vaccine .............. 15.00 1 N
inhalation.
----------------------------------------------------------------------------------------------------------------
C. Proposed Coding and Billing Changes for Specified Covered Outpatient
Drugs
(If you choose to comment on issues in this section, please include
the caption ``Drug Coding and Billing'' at the beginning of your
comment.)
1. Background
As discussed in the January 6, 2004 interim final rule with comment
period (69 FR 826), we instructed hospitals to bill for sole source
drugs using the existing HCPCS codes, which were priced in accordance
with the provisions of section 1833(t)(14)(A)(i) of the Act, as added
by Pub. L. 108-173. However, at that time, the existing HCPCS codes did
not allow us to differentiate payment amounts for innovator multiple
source and noninnovator multiple source forms of the drug. Therefore,
effective April 1, 2004, we implemented new HCPCS codes via Program
Transmittal 112 (Change Request 3144, February 27, 2004) and Program
Transmittal 132 (Change Request 3154, March 30, 2004) that providers
were instructed to use to bill for innovator multiple source drugs in
order to receive appropriate payment in accordance with section
1833(t)(14)(A)(i)(II) of the Act. We also instructed providers to
continue to use the existing HCPCS codes to bill for noninnovator
multiple source drugs to receive payment in accordance with section
1833(t)(14)(A)(i)(III) of the Act. These coding policies allowed
hospitals to appropriately code for drugs, biologicals, and
radiopharmaceuticals based on their classification and to be paid
accordingly. We continued this coding practice in CY 2005 with payment
made in accordance with section 1833(t)(14)(A)(ii) of the Act.
2. Proposed Policy for CY 2006
For CY 2006, we are proposing to base the payment rates for drugs
and biologicals and their pharmacy overhead costs on the ASP
methodology that is used to set payment rates for these items in the
physician office setting. Under this methodology, a single payment rate
for the drug is calculated by considering the prices for both the
innovator multiple source (brand) and noninnovator multiple source
(generic) forms of the drug. Therefore, under the OPPS, we believe that
there is no longer a need to differentiate between the brand and
generic forms of a drug. Thus, we are proposing to discontinue use of
the C-codes that were created to represent the innovator multiple
source drugs. In CY 2006, hospitals would use the HCPCS codes for
noninnovator multiple source (generic) drugs to bill for both the brand
and generic forms of a drug as they did prior to implementation of
section 1833(t)(14)(A) in Pub. L. 108-173. We are specifically
requesting comments on this proposed policy.
D. Proposed Payment for New Drugs, Biologicals, and
Radiopharmaceuticals Before HCPCS Codes Are Assigned
(If you choose to comment on issues in this section, please include
the caption ``HCPCS Codes'' at the beginning of your comment.)
1. Background
Historically, hospitals have used a HCPCS code for an unlisted or
unclassified drug, biological, or radiopharmaceutical or used an
appropriate revenue code to bill for drugs, biologicals, and
radiopharmaceuticals furnished in the outpatient department that do not
have an assigned HCPCS code. The codes for not otherwise classified
drugs, biologicals, and radiopharmaceuticals are assigned packaged
status under the OPPS. That is, separate payment is not made for the
code, but charges for the code would be eligible for an outlier payment
and, in future OPPS updates, the charges for the code are packaged with
the separately payable service with which the code is reported for the
same date of service.
Drugs and biologicals that are newly approved by the FDA and for
which a HCPCS code has not yet been assigned by the National HCPCS
Alpha-Numeric Workgroup could qualify for pass-through payment under
the OPPS. An application must be submitted to CMS in order for a drug
or biological to be assigned pass-through status, a temporary C-code
assigned for billing purposes, and an APC payment amount to be
determined. Pass-through applications are reviewed on a flow basis, and
payment for drugs and biologicals approved for pass-through status is
implemented throughout the year as part of the quarterly updates of the
OPPS.
2. Proposed Policy for CY 2006
Section 1833(t)(15) of the Act, as added by section 621(a)(1) of
Pub. L. 108-173, provides for payment for new drugs and biologicals
until HCPCS codes are assigned under the OPPS. Under this provision, we
are required to make payment for an outpatient drug or
[[Page 42733]]
biological that is furnished as part of the covered OPD services for
which a HCPCS code has not been assigned in an amount equal to 95
percent of AWP. This provision applies only to payments made under the
OPPS on or after January 1, 2004.
We initially adopted the methodology for determining payment under
section 1833(t)(15) of the Act on an interim basis on May 28, 2004, via
Transmittal 188, Change Request 3287, and finalized the methodology for
CY 2005 in our CY 2005 OPPS final rule with comment period. In that
final rule with comment period, we also expanded the methodology to
include payment for new radiopharmaceuticals to which a HCPCS code is
not assigned (69 FR 65804 through 65807). We instructed hospitals to
bill for a drug or biological that is newly approved by the FDA by
reporting the NDC for the product along with a new HCPCS code, C9399
(Unclassified drug or biological). When HCPCS code C9399 appears on a
claim, the OCE suspends the claim for manual pricing by the fiscal
intermediary. The fiscal intermediary prices the claim at 95 percent of
its AWP using the Red Book or an equivalent recognized compendium, and
processes the claim for payment. This approach enables hospitals to
bill and receive payment for a new drug, biological, or
radiopharmaceutical concurrent with its approval by the FDA. The
hospital does not have to wait for the next OPPS quarterly release or
for approval of a product-specific HCPCS code to receive payment for a
newly approved drug, biological, or radiopharmaceutical. In addition,
the hospital does not have to resubmit claims for adjustment. Hospitals
would discontinue billing HCPCS code C9399 and the NDC upon
implementation of a HCPCS code, status indicator, and appropriate
payment amount with the next OPPS quarterly update.
For CY 2006, we are proposing to continue the same methodology for
paying for new drugs, biologicals, and radiopharmaceuticals without
HCPCS codes.
E. Proposed Payment for Vaccines
(If you choose to comment on issues in this section, please include
the caption ``Vaccines'' at the beginning of your comment.)
Outpatient hospital departments administer large numbers of
immunizations 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 the
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 the OPPS rates as a major concern.
They indicated 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 costs 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, which were paid for these vaccines under the OPPS in CY 2002,
have been receiving payment at reasonable cost for these vaccines since
CY 2003.
Influenza, pneumococcal, and hepatitis B vaccines and their
administration are specifically covered by Medicare under section
1861(s)(10) of the Act. We are proposing to continue to pay influenza
and pneumococcal vaccines at reasonable cost in CY 2006. However,
hepatitis B vaccines so far have been paid under clinical APCs that
also include other vaccines. For CY 2006, we are proposing to pay for
all hepatitis B vaccines at reasonable cost, consistent with the
payment methodology for influenza and pneumococcal vaccines. Influenza
and pneumococcal vaccines are exempt from coinsurance and deductible
payments under sections 1833(a)(3) and 1833(b) of the Act and have been
assigned to status indicator ``L''. However, hepatitis B vaccines have
no similar coinsurance or deductible exemption. Therefore, we are
proposing to assign these items to status indicator ``F''.
Previously, under the OPPS, separately payable vaccines other than
influenza and pneumococcal were grouped into clinical APCs 355 and 356
for payment purposes. Payment rates for these APCs were based on the
APCs' median costs, calculated from the costs of all of the vaccines
grouped within the APCs. For CY 2006, we are proposing to pay for each
separately payable vaccine under its own APC, consistent with our
policy for separately payable drugs other than vaccines, instead of
aggregating them into clinical APCs with other vaccines. We believe
this policy would allow us to more appropriately establish a payment
rate for each separately payable vaccine based on the ASP methodology.
We are specifically requesting comments on our proposed vaccine
policies for CY 2006. Proposed policy changes to coding and payments
for the administration of these vaccines are discussed in section VIII.
of this preamble.
F. Proposed Changes in Payment for Single Indication Orphan Drugs
(If you choose to comment on issues in this section, please include
the caption ``Orphan Drugs'' at the beginning of your comment.)
Section 1833 (t)(1)((B)(i) of the Act gives the Secretary the
authority to designate the hospital outpatient services to be covered.
The Secretary has specified coverage for certain drugs as orphan drugs
(section 1833(t)(14)(B)(ii)(III) of the Act, as added by section
621(a)(1) of Pub. L. 108-173). Section 1833 (t)(14)(C) of the Act, as
added by section 621(a)(1) of Pub. L. 108-173, gives the Secretary the
authority in CYs 2004 and 2005 to specify the amount of payment for an
orphan drug that has been designated as such by the Secretary.
We recognize that orphan drugs that are used solely for an orphan
condition or conditions are generally expensive and, by definition, are
rarely used. We believe that if the costs of these drugs were packaged
into the payment for an associated procedure or visit, the payment for
the procedure might be insufficient to compensate a hospital for the
typically high costs of this special type of drug. Therefore, we are
proposing to continue paying for them separately.
In the November 1, 2002 final rule (67 FR 66772), we identified 11
single indication orphan drugs that are used solely for orphan
conditions by applying the following criteria:
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).
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).
Eleven single indication orphan drugs were identified as having met
these criteria and payments for these drugs were made outside of the
OPPS on a reasonable cost basis.
In the November 7, 2003 final rule with comment period (68 FR
63452), we discontinued payment for orphan drugs on a reasonable cost
basis and made separate payments for each single indication orphan drug
under its own APC. Payments for the orphan drugs were made at 88
percent of the AWP listed for these drugs in the April 1, 2003 single
drug pricer, unless we were presented with verifiable information
[[Page 42734]]
that showed that our payment rate did not reflect the price that was
widely available to the hospital market. For CY 2004, Ceredase
(alglucerase) and Cerezyme (imiglucerase) were paid at 94 percent of
the AWP because external data submitted by commenters on the August 12,
2003 proposed rule caused us to believe that payment at 88 percent of
the AWP would be insufficient to ensure beneficiaries' access to these
drugs.
In the December 31, 2003 correction of the November 7, 2003 final
rule with comment period (68 FR 75442), we added HCPCS code J9017
(Arsenic trioxide, 1 mg) to our list of single indication orphan drugs.
In the November 15, 2004 final rule with comment period (69 FR 65807),
we retained the same criteria for identifying single indication orphan
drugs and added two HCPCS codes to our list--C9218 (Injection,
Azactidine, per 1 mg) and J9010 (Alemtuzumab, 10 mg) (69 FR 65808). As
of CY 2005, the following are the 14 orphan drugs that we have
identified as meeting our criteria: C9218 (Injection, Azactidine, per 1
mg); J0205 (Injection, Alglucerase, per 10 units); J0256 (Injection,
Alpha 1-proteinase inhibitor, 10 mg); J9300 (Gemtuzumab ozogamicin,
5mg); J1785 (Injection, Imiglucerase, per unit); J2355 (Injection,
Oprelvekin, 5 mg); J3240 (Injection, Thyrotropin alpha, 0.9 mg); J7513
(Daclizumab, parenteral, 25 mg); J9010 (Alemtuzumab, 10 mg); J9015
(Aldesleukin, per single use vial); J9017 (Arsenic trioxide, 1 mg);
J9160 (Denileukin diftitox, 300 mcg); J9216 (Interferon, gamma 1-b, 3
million units); and Q2019 (Injection, Basiliximab, 20 mg).
In the November 15, 2004 final rule with comment period (69 FR
65808), we stated that had we not classified these drugs as single
indication orphan drugs for payment under the OPPS, they would have met
the definition of single source specified covered outpatient drugs and
received lower payments, which could have impeded beneficiary access to
these unique drugs dedicated to the treatment of rare diseases.
Instead, for CY 2005, under our authority at section 1833(t)(14)(C) of
the Act, we set payment for all 14 single indication orphan drugs at
the higher of 88 percent of the AWP or the ASP+6 percent. For CY 2005,
we also updated on a quarterly basis the payment rates through
comparison of the most current ASP and AWP information available to us.
Given that CY 2005 was the first year of mandatory ASP reporting by
manufacturers, we did not want potential significant fluctuations in
the ASPs to affect payments to hospitals furnishing these drugs, which
in turn might cause access problems for beneficiaries. Therefore, in
the November 15, 2004 final rule, we did not implement the proposed 95
percent AWP cap on payments for single indication orphan drugs which
was described in the August 16, 2004 proposed rule (69 FR 50518), as we
intended to monitor the impact of our payment policy and consider the
need for a cap in future OPPS updates if appropriate (69 FR 65809).
As a part of the GAO study on hospital acquisition costs of
specified covered outpatient drugs, the GAO provided the average
hospital purchase prices for four orphan drugs: J0256 (Injection, Alpha
1-proteinase inhibitor, 10 mg), J1785 (Injection, Imiglucerase, per
unit), J9160 (Denileukin difitox, 300 mcg), and J9010 (Alemtuzumab, 10
mg).
For alpha 1-proteinase inhibitor (J0256), the hospitals in the
study sample represented only about 14 percent of the estimated total
number of hospitals purchasing the drug. The mean hospital purchase
price was about 73 percent of the payment rate based on ASP+6 percent
rate and about 63 percent of the CY 2005 payment rate updated in April
2005. We believe the GAO acquisition data for alpha 1-proteinase
inhibitor are likely not representative of hospital acquisition costs
for the drug because the number of hospitals providing data was so
small compared to the total number of hospitals expected to utilize the
drug. Furthermore, we recognize that the GAO data on hospital drug
acquisition costs do not reflect the current acquisition costs
experienced by hospitals but instead, rely on past cost data from late
CY 2003 through early CY 2004. On the other hand, the ASP data are more
current and thus are likely more reflective of present hospital
acquisition costs for alpha 1-proteinase inhibitor.
In contrast to the GAO data for alpha 1-proteinase inhibitor, the
GAO data for imiglucerase (J1785) reflect hospital purchase prices from
about 69 percent of the hospitals expected to utilize the drug. For
this drug, the mean hospital purchase price was about 93 percent of the
CY 2005 payment rate for imiglucerase updated in April 2005, which was
based on ASP+6 percent rate. Thus, the ASP-based payment rate also
would appear to be appropriately reflective of hospital acquisition
costs for imiglucerase, and to be consistent with the GAO mean purchase
price.
For denileukin difitox (J9160) and alemtuzumab (J9010), the GAO
data for these drugs reflect hospital purchase prices from about 77
percent and 66 percent of the hospitals expected to acquire these
drugs, respectively. The mean hospital purchase price for denileukin
difitox was about 94 percent of the payment rate based on the ASP+6
percent rate and about 79 percent of the CY 2005 payment rate. As for
alemtuzumab, the mean hospital purchase price was about 95 percent of
the payment rate based on the ASP+6 percent rate and about 89 percent
of the CY 2005 payment rate. For both of these drugs, the ASP-based
payment rates also appear to be appropriately reflective of their
hospital acquisition costs, based on confirmation by the GAO average
purchase price data from over two-thirds of the hospitals expected to
acquire the drugs.
During the quarterly updates to payment rates for single indication
orphan drugs for CY 2005, we observed significant improvement in the
accuracy and consistency of manufacturers' reporting of the ASPs for
these orphan drugs. Overall, we found that the ASPs as compared to the
AWPs were less likely to experience dramatic fluctuations in prices
from quarter to quarter. We expect that as the ASP system continues to
mature, manufacturers will further refine their quarterly reporting,
leading to even greater stability and accuracy in their reporting of
sales prices. As the ASPs reflect the average sales prices to all
purchasers, the ASP data also include drug sales to hospitals. Past
commenters have indicated to us that some orphan drugs are administered
principally in hospitals, and to the extent that this is true their
ASPs should predominantly be based upon the sales of drugs used by
hospitals. For three of the orphan drugs for which the GAO provided
average purchase prices from a large percentage of hospitals expected
to acquire the drugs, the GAO data were very consistent with the ASP+6
percent. For the fourth drug, the GAO mean was significantly lower than
the ASP+6 percent and the confidence interval around that mean was
quite tight, although only a small proportion of hospitals expected to
acquire the drug reported their purchase prices. Thus, we believe that
proposing to pay for orphan drugs based on an ASP methodology is
appropriate for the CY 2006 OPPS and should assure patients' continued
access to these orphan drugs in the hospital outpatient department.
Therefore, for CY 2006, we are proposing to pay for single indication
orphan drugs at the ASP+6 percent. We believe that paying for orphan
drugs using the ASP methodology is consistent with our proposed general
drug payment policy for other separately payable drugs and
[[Page 42735]]
biologicals in the CY 2006 and reflects our general view that ASP-based
payment rates serve as the best proxy for the average acquisition cost
for these items as described in this section V. of the preamble. In
addition, we are proposing to pay an additional 2 percent of the ASP
scaled for budget neutrality to cover the handling costs of these
drugs, also consistent with our proposed general pharmacy overhead
payment policy for handling costs associated with separately payable
drugs and biologicals. We believe that the ASPs plus 6 percent for
orphan drugs will provide appropriate payment for hospital acquisition
costs for these drugs that are administered by a relatively small
number of providers, so that patients will continue to have access to
orphan drugs in the hospital outpatient setting. Hospitals will also
receive additional payments for costs associated with their storage,
handling, and preparation of orphan drugs. Payment rates will be
updated on a quarterly basis to reflect the most current ASPs available
to us. Appropriate adjustments to the payment amounts shown in Addendum
A and B would be made if the ASP submissions in a later quarter
indicate that adjustments to the payment rates are necessary. These
changes to the Addenda would be announced in our program instructions
released on a quarterly basis and posted on our Web site at http://www.cms.hhs.gov.
We are specifically requesting comments on our
proposed payment policy for orphan drugs in CY 2006.
VI. Estimate of Transitional Pass-Through Spending in CY 2006 for
Drugs, Biologicals, and Devices
(If you choose to comment on issues in this section, please include
the caption ``Estimated Transitional Pass-Through Spending'' at the
beginning of your comment.)
A. Total Allowed Pass-Through Spending
Section 1833(t)(6)(E) of the Act limits the total projected amount
of transitional pass-through payments for drugs, biologicals,
radiopharmaceuticals, and categories of devices for a given year to an
``applicable percentage'' of projected total Medicare and beneficiary
payments under the hospital OPPS. For a year before CY 2004, the
applicable percentage was 2.5 percent; for CY 2005 and subsequent
years, we specify the applicable percentage up to 2.0 percent.
If we estimate before the beginning of the calendar year that the
total amount of pass-through payments in that year would exceed the
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a
uniform 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 payments exceed the applicable percentage, but also to
determine the appropriate reduction to the conversion factor for the
projected level of pass-through spending in the following year.
For devices, making an estimate of pass-through spending in CY 2006
entails estimating spending for two groups of items. The first group
consists of those items for which we have claims data for procedures
that we believe used devices that were eligible for pass-through status
in CY 2004 and CY 2005 and that would continue to be eligible for pass-
through payment in CY 2006. The second group consists of those items
for which we have no direct claims data, that is, items that became, or
would become, eligible in CY 2005 and would retain pass-through status
in CY 2006, as well as items that would be newly eligible for pass-
through payment beginning in CY 2006.
B. Estimate of Pass-Through Spending for CY 2006
We are proposing to set the applicable percentage cap at 2.0
percent of the total OPPS projected payments for CY 2006. As we discuss
in section IV.C. of this preamble, the three remaining device
categories receiving pass-through payment in CY 2005 will expire on
December 31, 2005. Therefore, we estimate pass-through spending
attributable to the first group of items described above to equal zero.
To estimate CY 2006 pass-through spending for device categories in
the second group, that is, items for which we have no direct claims
data, we are proposing to use the following approach: For additional
device categories that are approved for pass-through status after July
1, 2005, but before January 1, 2006, we are proposing to use price
information from manufacturers and volume estimates based on claims for
procedures that would most likely use the devices in question because
we would have no CY 2004 claims data upon which to base a spending
estimate. We are proposing to project these data forward to CY 2006
using inflation and utilization factors based on total growth in OPPS
services as projected by CMS' Office of the Actuary (OACT) to estimate
CY 2006 pass-through spending for this group of device categories. For
device categories that become eligible for pass-through status in CY
2006, we are proposing to use the same methodology. We anticipate that
any new categories for January 1, 2006, would be announced after the
publication of this proposed rule, but before publication of the final
rule. Therefore, the estimate of pass-through spending in the CY 2006
OPPS final rule would incorporate any pass-through spending for device
categories made effective January 1, 2006, and during subsequent
quarters of CY 2006.
With respect to CY 2006 pass-through spending for drugs and
biologicals, as we explain in section V.A.3. of this proposed rule, the
pass-through payment amount for new drugs and biologicals that we
determine have pass-through status would equal zero. Therefore, our
estimate of pass-through spending for drugs and biologicals with pass-
through status in CY 2006 equals zero.
In accordance with the methodology described above and the
methodology for estimating pass-through spending discussed in the
August 16, 2004 proposed rule (69 FR 50526), we estimate that total
pass-through spending for device categories that first become eligible
for pass-through status after publication of this proposed rule for
which pass-through payment continues in CY 2006 or become eligible
during CY 2006 would equal approximately $12.5 million, which
represents 0.05 percent of total OPPS projected payments for CY 2006.
This figure includes estimates for the current device categories
continuing into CY 2006, which equals zero, in addition to projections
for categories that first become eligible during the second half of CY
2005 or in CY 2006.
This estimate of total pass-through spending for CY 2006 is
significantly lower than previous years' estimates both because of the
method we are proposing in section V.A.3. of this preamble for
determining the amount of pass-through payment for drugs and
biologicals with pass-through status, and the fact that there are no CY
2005 pass-through device categories that are being carried over to CY
2006.
Because we estimate pass-through spending in CY 2006 would not
amount to 2.0 percent of total projected OPPS CY 2006 spending, we are
proposing to return 1.95 percent of the pass-through pool to adjust the
conversion factor, as we discuss in section II.C. of this preamble.
[[Page 42736]]
VII. Proposed Brachytherapy Payment Changes
(If you choose to comment on issues in this section, please include
the caption ``Brachytherapy'' at the beginning of your comment.)
A. Background
Section 1833(t)(16)(C) and section 1833(t)(2)(H) of the Act, as
added by sections 621(b)(1) and (b)(2) of Pub. L. 108-173,
respectively, establish separate payment for devices of brachytherapy
consisting of a seed or seeds (or radioactive source) based on a
hospital's charges for the service, adjusted to cost. Charges for the
brachytherapy devices may not be used in determining any outlier
payments under the OPPS. In addition, consistent with our practice
under the OPPS to exclude items paid at cost from budget neutrality
consideration, these items must be excluded from budget neutrality as
well. The period of payment under this provision is for brachytherapy
sources furnished from January 1, 2004, through December 31, 2006.
Section 621(b)(3) of Pub. L. 108-173 requires the Government
Accountability Office (GAO) to conduct a study to determine appropriate
payment amounts for devices of brachytherapy, and to submit a report on
its study to the Congress and the Secretary, including recommendations.
We are awaiting the report and any recommendations on the payment of
brachytherapy, which would pertain to brachytherapy payments after
December 31, 2006.
In the OPPS interim final rule with comment period published on
January 6, 2004 (69 FR 827), we implemented sections 621(b)(1) and
(b)(2)(C) of Pub. L. 108-173. In that rule, we stated that we will pay
for the brachytherapy sources listed in Table 4 of the interim final
rule with comment period (69 FR 828) on a cost basis, as required by
the statute. The status indicator for brachytherapy sources was changed
to ``H.'' The definition of status indicator ``H'' was for pass-through
payment only for devices, but the brachytherapy sources affected by
sections 1833(t)(16)(C) and 1833(t)(2)(H) of the Act are not pass-
through device categories. Therefore, we also changed, for CY 2004, the
definition of payment status indicator ``H'' to include nonpass-through
brachytherapy sources paid on a cost basis. This use of status
indicator ``H'' was a pragmatic decision that allowed us to pay for
brachytherapy sources in accordance with section 1833(t)(16)(C) of the
Act, effective January 1, 2004, without having to modify our claims
processing systems. We stated in the January 6, 2004 interim final rule
with comment period that we would revisit the use and definition of
status indicator ``H'' for this purpose in the OPPS update for CY 2005.
In the November 15, 2004 final rule with comment period, we finalized
this policy for CY 2005 (69 FR 65838).
As we indicated in the January 6, 2004 interim final rule with
comment period, we began payment for the brachytherapy source in HCPCS
code C1717 (Brachytx source, HCR lr-192) based on the hospital's charge
adjusted to cost beginning January 1, 2004. Prior to enactment of Pub.
L. 108-173, these sources were paid as packaged services in APC 0313.
As a result of the requirement under Pub. L. 108-173 to pay for HCPCS
code C1717 separately, we adjusted the payment rate for APC 0313,
Brachytherapy, to reflect the unpackaging of the brachytherapy source.
We finalized this payment methodology in our November 15, 2004 final
rule with comment period (69 FR 65839).
Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C)
of Pub. L. 108-173, mandated the creation of separate groups of covered
OPD services that classify brachytherapy devices separately from other
services or groups of services. The additional groups must be created
in a manner that reflects the number, isotope, and radioactive
intensity of the devices of brachytherapy furnished, including separate
groups for Palladium-103 and Iodine-125 devices. At its meetings in
February 2004, the APC Panel heard from parties that recommended the
addition of two new codes to describe brachtherapy sources in a manner
that reflects the number, radioisostope, and radioactive intensity of
the sources. The presenters recommended two new brachytherapy HCPCS
codes and APCs for high activity Iodine-125 and high activity
Palladium-103. The APC Panel, in turn, recommended that CMS establish
new HCPCS codes and new APCs, on a per source basis, for these two
brachytherapy sources.
We considered this recommendation and agreed with the APC Panel.
Therefore, in the November 15, 2004 final rule with comment period, we
established the following two new brachytherapy source codes for CY
2005:
C2634 Brachytherapy source, High Activity Iodine-125, greater than
1.01 mCi (NIST), per source
C2635 Brachytherapy source, High Activity Palladium-103, greater
than 2.2 mCi (NIST), per source
In addition, we believed the APC Panel's recommendation to
establish new HCPCS codes that would distinguish high activity Iodine-
125 from high activity Palladium-103 on a per source basis should have
been implemented for other brachytherapy code descriptors, as well.
Therefore, beginning January 1, 2005, we included ``per source'' in the
HCPCS code descriptors for all those brachytherapy source descriptors
for which units of payment were not already delineated. Table 40
published in the November 15, 2004 final rule with comment period
included a complete listing of the HCPCS codes, long descriptors, APC
assignments, and status indicators that we used for brachytherapy
sources paid under the OPPS in CY 2005 (69 FR 65840 through 65841).
Further, for CY 2005, we added the following code of linear source
Palladium-103 to be paid at cost: C2636 Brachytherapy linear source,
Palladium-103, per 1 mm. We had indicated in our August 16, 2004
proposed rule that we were aware of a new linear source Palladium-103,
which came to our attention in CY 2003 through an application for a new
device category for pass-through payment. We stated that, while we
decided not to create a new category for pass-through payment, we
believed that the new linear source fell under the provisions of Pub.
L. 108-173. Therefore, we made final our proposal to add HCPCS code
C2636 as a new brachytherapy source to be paid at cost in CY 2005.
B. Proposed Changes Related to Pub. L. 108-173
We have consistently invited the public to submit recommendations
for new codes to describe brachytherapy sources in a manner reflecting
the number, radioisotope, and radioactivity intensity of the sources.
We requested that commenters provide a detailed rationale to support
recommended new codes and to send recommendations to us. We stated that
we would endeavor to add new brachytherapy source codes and descriptors
to our systems for payment on a quarterly basis. We have only very
recently received one such request for coding and payment of a new
brachytherapy source since we added separate APC payment beginning in
CY 2005 for the three brachytherapy sources discussed above. We will
evaluate this source prior to our final rule for CY 2006. Therefore, we
are not proposing any coding changes to the sources of brachytherapy
for CY 2006 at this time. Table 26 below includes a list of the
separately payable brachytherapy
[[Page 42737]]
sources that we are proposing to continue for CY 2006.
Table 26.--Proposed Separately Payable Brachytherapy Sources for CY 2006
----------------------------------------------------------------------------------------------------------------
New status
HCPCS Long descriptor APC APC title indicator
----------------------------------------------------------------------------------------------------------------
C1716....................... Brachytherapy source, 1716 Brachytx source, Gold H
Gold 198, per source. 198.
C1717....................... Brachytherapy source, 1717 Brachytx source, HDR Ir- H
High Dose Rate Iridium 192.
192, per source.
C1718....................... Brachytherapy source, 1718 Brachytx source, Iodine H
Iodine 125, per source. 125.
C1719....................... Brachytherapy source, 1719 Brachytx source, Non- H
Non-High Dose Rate HDR Ir-192.
Iridium 192, per
source.
C1720....................... Brachytherapy source, 1720 Brachytx source, H
Palladium 103, per Palladium 103.
source.
C2616....................... Brachytherapy source, 2616 Brachytx source, H
Yttrium-90, per source. Yttrium-90.
C2632....................... Brachytherapy solution, 2632 Brachytx sol, I-125, H
Iodine 125, per mCi. per mCi.
C2633....................... Brachytherapy source, 2633 Brachytx source, Cesium- H
Cesium-131, per source. 131.
C2634....................... Brachytherapy source, 2634 Brachytx source, HA, I- H
High Activity, Iodine- 125.
125, greater than 1.01
mCi (NIST), per source.
C2635....................... Brachytherapy source, 2635 Brachytx source, HA, P- H
High Activity, 103.
Palladium-103, greater
than 2.2 mCi (NIST),
per source.
----------------------------------------------------------------------------------------------------------------
VIII. Proposed Coding and Payment for Drug Administration
(If you choose to comment on issues in this section, please include
the caption ``Drug Administration'' at the beginning of your
comment.)
A. Background
From the start of the OPPS until the end of CY 2004, three HCPCS
codes were used to bill drug administration services provided in the
hospital outpatient department:
Q0081 (Infusion therapy, using other than chemotherapeutic
drugs, per visit)
Q0083 (Chemotherapy administration by other than infusion
technique only, per visit)
Q0084 (Chemotherapy administration by infusion technique
only, per visit) A fourth OPPS drug administration HCPCS code, Q0085
(Administration of chemotherapy by both infusion and another route, per
visit) was active from the beginning of the OPPS through the end of CY
2003.
Each of these four HCPCS codes mapped to an APC (that is, Q0081
mapped to APC 0120, Q0083 mapped to APC 0116, Q0084 mapped to APC 0117,
and Q0085 mapped to APC 0118), and APC payment rates for these codes
were made on a per-visit basis. The per-visit payment included payment
for all hospital resources (except separately payable drugs) associated
with the drug administration procedures. For CY 2004, we discontinued
using HCPCS code Q0085 to identify drug administration services, moving
to a combination of HCPCS codes Q0083 and Q0084 that allowed more
accurate calculations when determining OPPS payment rates.
In response to comments we received concerning the available
opportunities to gather additional drug administration data (and
subsequently facilitate development of more accurate payment rates for
drug administration services in future years) and to reduce hospital
administrative burden, we proposed for the CY 2005 OPPS to change our
coding and payment methodologies related to drug administration
services.
After examining comments and suggestions, including recommendations
of the APC Panel, we adopted a crosswalk for the CY 2005 OPPS that
identified all active CPT drug administration codes and the
corresponding Q-codes, which hospitals had previously used to report
their charges for the procedures. Hospitals were instructed to begin
billing CPT codes for drug administration services in the hospital
outpatient department effective January 1, 2005.
Payment rates for CY 2005 drug administration services were set
using CY 2003 claims data. These data reflected per-visit costs
associated with the four Q-codes listed above. To allow for the time
necessary to collect data at the more specific CPT code level and to
continue accurate payments based on available claims data, we used the
Q-code crosswalk to map CPT drug administration codes to existing drug
administration APCs. While hospitals were instructed to bill all
relevant CPT codes that describe the services provided, the Outpatient
Code Editor (OCE) collapsed payments for drug administration services
attributed to the same APC and paid a single APC amount for those
services for each visit, unless a modifier was used to identify drug
administration services provided more than once in a separate encounter
on the same day.
B. Proposed Changes for CY 2006
In 2004, the CPT Editorial Panel approved several new drug
administration codes and revised several existing codes for use
beginning in 2006. For use in the physician office setting in CY 2005,
we established HCPCS G-codes that correspond with the expected new CPT
codes that will become active in 2006.
For CY 2006 OPPS billing purposes, we are proposing to continue our
policy of using CPT codes to bill for drug administration services
provided in the hospital outpatient department. We anticipate that the
current CPT codes will no longer be effective in CY 2006, and,
therefore, we are proposing a CY 2006 crosswalk that maps current CPT
codes to the CPT drug administration codes approved by the CPT
Editorial Panel in 2004, which correspond to the G-codes used in the
physician office setting for CY 2005 and which we expect to become
active CPT codes for 2006.
The OPPS drug administration payment rates that we are proposing
for CY 2006 are dependent on CY 2004 data
[[Page 42738]]
containing per-visit charges for HCPCS codes Q0081, Q0083, and Q0084.
While HCPCS code Q0085 was used to inform payment rates for drug
administration APCs for CY 2005, there are no data from this code to
develop payment rates for drug administration APCs for CY 2006 because
this code was not used in CY 2004. We are proposing to map the new CPT
codes to existing drug administration APC groups (APC 0116, APC 0117,
and APC 0120) as we did in CY 2005. Again, hospitals would be expected
to bill all relevant CPT codes for services provided, but payment for
services within the same APC group would be collapsed by the OCE into a
single per-visit APC payment, unless a modifier is used to identify
drug administration services provided more than once in a separate
encounter on the same day.
Table 27 shows the crosswalk from the CY 2005 CPT codes to the
expected CY 2006 CPT codes (indicated by definition and 2005 HCPCS G-
code) and includes the proposed CY 2006 status indicators and APC
payment groups for these services. At its February 2005 meeting, the
APC Panel recommended that this crosswalk be used to establish drug
administration payments for the CY 2006 OPPS. Therefore, we are
proposing to use the crosswalk as illustrated in Table 27 to assign
drug administration services to APC payment groups for CY 2006 OPPS.
Table 27.--Proposed Crosswalk From Expected CY 2006 Drug Administration CPT Codes to Drug Administration APCs
[Note: G-codes are only for use in the physician office setting in CY 2005]
--------------------------------------------------------------------------------------------------------------------------------------------------------
OCE
maximum APC OCE
CY 2006 Proposed units maximum APC
2005 CPT code 2005 HCPCS code Description status indicator APC without units with
modifier modifier
59 59
--------------------------------------------------------------------------------------------------------------------------------------------------------
90780......................... G0345......................... Intravenous Infusion, S 0120 1 4
Hydration; Initial, up
to one hour.
90781......................... G0346......................... Intravenous Infusion, N ........... 0 0
Hydration; each
additional hour, up to
eight (8) hours.
90780......................... G0347......................... Intravenous Infusion, for S 0120 1 4
Therapeutic/Diagnostic;
Initial, up to one hour.
90781......................... G0348......................... Intravenous Infusion, for N ........... 0 0
Therapeutic/Diagnostic;
each additional hour, up
to eight (8) hours.
G0349......................... Intravenous Infusion, for N ........... 0 0
Therapeutic/Diagnostic;
additional sequential
infusion, up to one hour.
G0350......................... Intravenous Infusion, for N ........... 0 0
Therapeutic/Diagnostic;
concurrent infusion.
90782......................... G0351......................... Therapeutic or Diagnostic X 0353 N/A N/A
Injection; subcutaneous
or intramuscular.
90784......................... G0353......................... Intravenous Push; single X 0359 N/A N/A
or initial substance/
drug.
90784......................... G0354......................... Intravenous Push; each X 0359 N/A N/A
additional sequential
intravenous push.
90783......................... 90783......................... Injection, ia............ X 0359 N/A N/A
90788......................... 90788......................... Injection of antibiotic.. X 0359 N/A N/A
96549......................... 96549......................... Chemotherapy, unspecified S 0116 1 2
96400......................... G0355......................... Chemotherapy S 0116 1 2
Administration,
subcutaneous or
intramuscular non-
hormonal antineoplastic.
96400......................... G0356......................... Chemotherapy S 0116 1 2
Administration,
subcutaneous or
intramuscular hormonal
antineoplastic.
96542......................... 96542......................... Chemotherapy injection... S 0116 1 2
96405......................... 96405......................... Intralesional chemo admin S 0116 1 2
96406......................... 96406......................... Intralesional chemo admin S 0116 1 2
96408......................... G0357......................... Intravenous, push S 0116 1 2
technique, single or
initial substance/drug.
96408......................... G0358......................... Intravenous, push S 0116 1 2
technique, each
additional substance/
drug.
96420......................... 96420......................... Chemotherapy, push S 0116 1 2
technique.
96440......................... 96440......................... Chemotherapy, S 0116 1 2
intracavitary.
96445......................... 96445......................... Chemotherapy, S 0116 1 2
intracavitary.
96450......................... 96450......................... Chemotherapy, into CNS... S 0116 1 2
96410......................... G0359......................... Chemotherapy S 0117 1 2
Administration,
Intravenous Infusion
Technique; up to one
hour, single or initial
substance/drug.
96412......................... G0360......................... Chemotherapy N ........... 0 0
Administration,
Intravenous Infusion
Technique; Each
additional hour, one to
eight (8) hours.
G0362......................... Chemotherapy N ........... 0 0
Administration,
Intravenous Infusion
Technique; Each
additional sequential
infusion (different
substance/drug), up to
one hour.
96414......................... G0361......................... Initiation of prolonged S 0117 1 2
chemotherapy infusion
(more than eight hours),
requiring use of a
portable or implantable
pump.
96422......................... 96422......................... Chemotherapy, infusion S 0117 1 2
method.
[[Page 42739]]
96423......................... 96423......................... Chemo, infuse method add- N ........... 0 0
on.
96425......................... 96425......................... Chemotherapy, infusion S 0117 1 2
method.
G0363......................... Irrigation of Implanted N ........... 0 0
Venous Access Device for
Drug Delivery Systems.
96520......................... 96520......................... Port pump refill & main.. T 0125 N/A N/A
96530......................... 96530......................... Syst pump refill & main.. T 0125 N/A N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
C. Proposed Changes to Vaccine Administration
Hospitals currently use three HCPCS G-codes to indicate the
administration of the following vaccines that have specific statutory
coverage:
G0008--Administration of Influenza Virus Vaccine
G0009--Administration of Pneumococcal Vaccine
G0010--Administration of Hepatitis B Vaccine
HCPCS codes G0008 and G0009 are exempt from beneficiary coinsurance
and deductible applications and, as such, payment has been made outside
of the OPPS since CY 2003 based on reasonable cost. We have made
payment for HCPCS code G0010 through a clinical APC (that is, APC 0355)
that included vaccines along with this vaccine administration code.
Additional vaccine administration codes have been packaged or not paid
under the OPPS.
We believe that HCPCS codes G0008, G0009 and G0010 are clinically
similar and comparable in resource use to one another and to the
administration of other immunizations and other therapeutic,
prophylactic, or diagnostic injections. The appropriate APC assignment
for these vaccine administration services is newly reconfigured APC
0353 (``Injection, Level II''). However, because of their statutory
exemption regarding beneficiary deductible and coinsurance, for
operational reasons we are unable to include HCPCS codes G0008 and
G0009 in an APC with codes that do not share this exemption.
Therefore, for CY 2006, we are proposing to map HCPCS codes G0008
and G0009 to new APC 0350 (Administration of flu and PPV vaccines). As
dictated by statute, HCPCS codes G0008 and G0009 will continue to be
exempt from beneficiary coinsurance and deductible.
We are also proposing to change the status indicator for HCPCS code
G0010 from ``K'' (Separate APC Payment) to ``B'' (Not paid under OPPS;
Alternate code may be available), and to change the status indicators
for vaccine administration codes 90471 and 90472 from ``N'' (Packaged)
to ``X'' (Separate APC Payment), in agreement with the recommendation
of the APC Panel to unpackage these services. Hospitals would code for
hepatitis B vaccine administration using codes 96471 or 96472 (as
appropriate), and payment would be mapped to reconfigured APC 0353
(``Injection, Level II'') that will include other injection services
that are clinically similar and comparable in resource use.
Additionally, in order to pay appropriately for services that we
believe are clinically similar and comparable in resource use and,
barring technical restrictions, would otherwise be assigned to the same
APC, we are proposing to calculate a combined median cost for all
services assigned to APC 0350 and APC 0353 that would then serve as the
median cost for both APCs. This combined median would be calculated
using charges converted to costs from claims for services in both APCs
and would have the effect of making the OPPS payment rates for APC 0350
and APC 0353 identical, although beneficiary copayment and deductible
would not be applied to services in APC 0350.
In addition, we are proposing to change the status indicators for
vaccine administration codes 90473 and 90474 from ``E'' (Not paid under
OPPS) to ``S'' (Paid under OPPS) and make payments for these services
when they are covered through proposed APC 1491 (New Technology--Level
IA ($0-$10)). Finally, we are proposing to change the status indicators
for the four remaining vaccine administration codes involving physician
counseling (90465, 90466, 90467 and 90468) from ``N'' (Packaged) to
``B'' (Not paid under OPPS; Alternate code may be available). Hospitals
providing immunization services with physician counseling would use the
vaccine administration codes 90471, 90472, 90473, and 90473 to report
such services, as we do not believe the provision of physician
counseling significantly affects the hospital resources required for
administration of immunizations. Table 28 displays the changes that we
are proposing for CY 2006.
Table 28.--Proposed CY 2006 Vaccine Administration Codes and APC Median Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
CY 2005 CY 2006
HCPCS Description --------------------------------------------------------------------------------------------------
SI APC SI APC Median
--------------------------------------------------------------------------------------------------------------------------------------------------------
G0008......................... Influenza Vaccine L Reasonable Cost............... X 0350 $24.00
Administration.
G0009......................... Pneumococcal Vaccine L Reasonable Cost............... X 0350 24.00
Administration.
G0010......................... Hepatitis B Vaccine K 0355.......................... B ........... ...........
Administration.
90465......................... Immunization Admin, N .............................. B ........... ...........
under 8 yrs old,
with counseling;
first injection.
90466......................... Immunization Admin, N .............................. B ........... ...........
under 8 yrs old,
with counseling;
each additional
injection.
[[Page 42740]]
90467......................... Immunization Admin, N .............................. B ........... ...........
under 8 yrs old,
with counseling;
first intranasal or
oral.
90468......................... Immunization Admin, N .............................. B ........... ...........
under 8 yrs old,
with counseling;
each additional
intranasal or oral.
90471......................... Immunization Admin, N .............................. X 0353 24.00
one vaccine
injection.
90472......................... Immunization Admin, N .............................. X 0353 24.00
each additional
vaccine injection.
90473......................... Immunization Admin, E .............................. S 1491 5.00
one vaccine by
intranasal or oral.
90474......................... Immunization Admin, E .............................. S 1491 5.00
each additional
vaccine by
intranasal or oral.
--------------------------------------------------------------------------------------------------------------------------------------------------------
IX. Hospital Coding for Evaluation and Management (E/M) Services
(If you choose to comment on issues in this section, please include
the caption ``E/M Services'' at the beginning of your comment.)
In the November 15, 2004 final rule with comment period (69 FR
65838), we noted our primary concerns and direction for developing the
proposed coding guidelines for emergency department and clinic visits.
We intend to make available for public comment the proposed coding
guidelines that we are considering through the CMS OPPS Web site as
soon as we have completed them. We will notify the public through our
listserve when these proposed guidelines become available. To subscribe
to this listserve, please go to the following CMS Web site: http://www.cms.hhs.gov/medlearn/listserv.asp
and follow the directions to the
OPPS listserve. We will provide ample opportunity for the public to
comment on the proposal.
We will continue to be considerate of the time necessary to educate
clinicians and coders on the use of the new codes and guidelines and
for hospitals to modify their systems. We anticipate providing a
minimum notice of between 6 and 12 months prior to implementation of
the new evaluation and management codes and guidelines. We will
continue developing and testing the new codes even though we have not
yet made plans for their implementation.
X. Proposed Payment for Blood and Blood Products
(If you choose to comment on issues in this section, please include
the caption ``Blood and Blood Products'' at the beginning of your
comment.)
A. Background
Since the implementation of the OPPS in August 2000, separate
payments have been made for blood and blood products through APCs
rather than packaging them into payments for the procedures with which
they were administered. Hospital payments for the costs of blood and
blood products, as well as the costs of collecting, processing, and
storing blood and blood products, are made through the OPPS payments
for specific blood product APCs. On April 12, 2001, CMS issued the
original billing guidance for blood products to hospitals (Program
Transmittal A-01-50). In response to requests for clarification of
these instructions, CMS issued Transmittal 496 on March 4, 2005. The
comprehensive billing guidelines in the Transmittal also addressed
specific concerns and issues related to billing for blood-related
services, which the public had brought to our attention.
In CY 2000, payments for blood and blood products were established
based on external data provided by commenters due to limited Medicare
claims data. From CY 2000 to CY 2002, payment rates for blood and blood
products were updated for inflation. For CY 2003, as described in the
November 1, 2002 final rule with comment period (67 FR 66773), we
applied a special dampening methodology to blood and blood products
that had significant reductions in payment rates from CY 2002 to CY
2003, when median costs were first calculated from hospital claims.
Using the dampening methodology, we limited the decrease in payment
rates for blood and blood products to approximately 15 percent. For CY
2004, as recommended by the APC Panel, we froze payment rates for blood
and blood products at CY 2003 levels as we studied concerns raised by
commenters and presenters at the August 2003 and February 2004 APC
Panel meetings.
For CY 2005, we established new APCs that allowed each blood
product to be assigned to its own separate APC, as several of the
previous blood product APCs contained multiple blood products with no
clinical homogeneity or whose product-specific median costs may not
have been similar. Some of the blood product HCPCS codes were
reassigned to the new APCs (Table 34 of the November 15, 2004 final
rule with comment period (69 FR 65819)).
We also noted in the November 15, 2004 final rule with comment
period that public comments to previous OPPS rules had stated that the
CCRs that were used to adjust charges to costs for blood products in
past years were too low. Past commenters indicated that this approach
resulted in an underestimation of the true hospital costs for blood and
blood products. In response to these comments and APC Panel
recommendations from their February 2004 and September 2004 meetings,
we conducted a thorough analysis of the OPPS CY 2003 claims (used to
calculate the CY 2005 APC payment rates) to compare CCRs between those
hospitals reporting a blood-specific cost center and those hospitals
defaulting to the overall hospital CCR in the conversion of their blood
product charges to costs. As a result of this analysis, we observed a
significant difference in CCRs utilized for conversion of blood product
charges to costs for those hospitals with and without blood-specific
cost centers. The median hospital blood-specific CCRs were almost two
times the median overall hospital CCR. As discussed in the November 15,
2004 final rule with comment period, we applied a methodology for
hospitals not reporting a blood-specific cost center, which simulated a
blood-specific CCR for each hospital that we then used to convert
charges to costs for blood products. Thus, we developed simulated
medians for all blood and blood products based on CY 2003 hospital
claims data (69 FR 65816).
[[Page 42741]]
For CY 2005, we also identified a subset of blood products that had
less than 1,000 units billed in CY 2003. For these low-volume blood
products, we based the CY 2005 payment rate on a 50/50 blend of CY 2004
product-specific OPPS median costs and the CY 2005 simulated medians
based on the application of blood-specific CCRs to all claims. We were
concerned that, given the low frequency in which these products were
billed, a few occurrences of coding or billing errors may have led to
significant variability in the median calculation. The claims data may
not have captured the complete costs of these products to hospitals as
fully as possible. This low-volume adjustment methodology also allowed
us to further study the issues raised by commenters and by presenters
at the September 2004 APC Panel meeting, without putting beneficiary
access to these low-volume blood products at risk.
B. Proposed Changes for CY 2006
For CY 2006, we are proposing to continue to make separate payments
for blood and blood products under the OPPS through individual APCs for
each product. We are also proposing to establish payment rates for
these blood and blood products by using the same simulation methodology
described in the November 15, 2004 final rule with comment period (69
FR 65816), which utilized hospital-specific actual or simulated CCRs
for blood cost centers to convert hospital charges to costs, with an
adjustment applied to some products. We continue to believe that using
blood-specific CCRs applied to hospital claims data will result in
reasonably accurate payments that more fully reflect hospitals' true
costs of providing blood and blood products than our general
methodology of defaulting to the overall hospital CCR when more
specific CCRs are unavailable.
For blood and blood products whose CY 2006 simulated medians
experienced a decrease of more than 10 percent in comparison to their
CY 2005 payment medians, we are proposing to limit the decrease in
medians to 10 percent. Therefore, overall we are proposing to base
median costs for blood and blood products in CY 2006 on the greater of:
(1) Simulated medians calculated using CY 2004 claims data; or (2) 90
percent of the APC payment median for CY 2005 for such products. We
recognize that possible errors in hospital billing or coding for blood
products in CY 2004 may have contributed to these decreases in medians.
In particular, hospitals may have been uncertain about which of their
many different costs for providing blood and blood products should be
captured in their charges for the products, based on variations in the
specific circumstances of the services they provided. In addition, the
six products affected by the proposed CY 2006 adjustment policy all
were relatively low volume with fewer than 7,000 units billed in CY
2004. Three of these products were affected by the low-volume payment
adjustment for CY 2005 because there were less than 1,000 units billed,
and their CY 2005 payment medians would have decreased without the
adjustment. In the interim, as hospitals become more familiar with the
comprehensive billing guidelines for blood and blood products that are
described in Program Transmittal 496, (Change Request 3681 dated March
4, 2005), we acknowledge the need to protect beneficiaries' access to a
safe blood supply and are proposing to do so by limiting significant
decreases in payment rates for blood and blood products from CY 2005 to
CY 2006. We expect that our billing guidance will assist hospitals in
more fully including all appropriate costs for providing blood and
blood products in their charges for those products, so that our data
for CY 2005, which will be used to set median costs for blood and blood
products in the CY 2007 OPPS, should more accurately capture the
hospital costs associated with each different blood product.
Displayed in Table 29 is the list of blood product HCPCS codes with
their proposed CY 2006 payment medians. Overall, medians from CY 2005
and CY 2006 were relatively stable, and we expect that as hospitals
improve their billing and coding practices, medians based on historical
hospital claims data should continue to become more consistent and
reflective of all hospital costs. For blood and blood products whose CY
2006 simulated median would have experienced a decrease from CY 2005 to
CY 2006 of greater than 10 percent, the adjusted median is shown.
Therefore, for CY 2006, we are proposing to establish payment rates
for blood and blood products under the OPPS by using the same
simulation methodology described in the November 15, 2004 final rule
with comment period (69 FR 65816). For blood and blood products whose
2006 medians would have otherwise experienced a decrease of more than
10 percent in comparison with their CY 2005 payment rates, we are
proposing to adjust the simulated medians by limiting their decrease to
10 percent.
Table 29.--Proposed CY 2006 Payment Medians for Blood and Blood Products by HCPCS/APC Codes
----------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2005 2006
HCPCS APC CY 2004 Description payment median,
units median (limited if
applicable)
----------------------------------------------------------------------------------------------------------------
P9016........................... 0954 609026 RBC leukocytes reduced.... $170.28 $165.16
P9021........................... 0959 158964 Red blood cells unit...... 116.42 122.50
P9040........................... 0969 46732 RBC leukoreduced 211.28 219.96
irradiated.
P9035........................... 9501 37199 Platelet pheres 486.18 491.77
leukoreduced.
P9019........................... 0957 37079 Platelets, each unit...... 49.50 50.19
P9017........................... 9508 36807 Plasma 1 donor frz w/in 8 65.10 72.64
hr.
P9031........................... 1013 21899 Platelets leukocytes 88.78 96.69
reduced.
P9037........................... 1019 13873 Plate pheres leukoredu 603.62 574.05
irrad.
P9034........................... 9507 10419 Platelets, pheresis....... 449.86 416.30
P9033........................... 0968 6031 Platelets leukoreduced 158.50 *142.65
irrad.
P9044........................... 1009 5635 Cryoprecipitate reduced 63.20 78.82
plasma.
P9012........................... 0952 5264 Cryoprecipitate each unit. 49.58 *44.62
P9055........................... 1017 4546 Plt, aph/pher, l/r, cmv- 489.46 518.94
neg.
P9056........................... 1018 3759 Blood, l/r, irradiated.... 187.76 *168.98
P9038........................... 9505 3149 RBC irradiated............ 122.09 144.08
P9010........................... 0950 3012 Whole blood for 115.97 121.43
transfusion.
[[Page 42742]]
P9051........................... 1010 2854 Blood, l/r, cmv-neg....... 172.35 179.17
P9022........................... 0960 2086 Washed red blood cells 199.18 *179.26
unit.
P9059........................... 0955 1863 Plasma, frz between 8-24 76.28 78.05
hour.
P9052........................... 1011 1603 Platelets, hla-m, l/r, 583.87 661.91
unit.
P9036........................... 9502 1166 Platelet pheresis 343.02 313.15
irradiated.
P9058........................... 1022 1081 RBC, l/r, cmv-neg, irrad.. 280.94 258.88
P9032........................... 9500 1080 Platelets, irradiated..... 91.11 *82.00
P9020........................... 0958 944 Plaelet rich plasma unit.. 155.53 312.67
P9039........................... 9504 862 RBC deglycerolized........ 305.13 388.09
P9050........................... 9506 793 Granulocytes, pheresis 1,046.99 *942.29
unit.
P9023........................... 0949 776 Frozen plasma, pooled, sd. 80.16 *72.14
P9054........................... 1016 681 Blood, l/r, froz/degly/ 275.72 317.59
wash.
P9053........................... 1020 549 Plt, pher, l/r cmv-neg, 573.06 612.79
irr.
P9048........................... 0966 524 Plasmaprotein fract, 5%, 332.32 *299.09
250 ml.
P9060........................... 9503 488 Fr frz plasma donor 76.86 98.00
retested.
P9043........................... 0956 43 Plasma protein fract, 5%, 68.62 67.74
50 ml.
P9057........................... 1021 27 RBC, frz/deg/wsh, l/r, 327.11 *294.40
irrad.
----------------------------------------------------------------------------------------------------------------
* Indicates adjusted median.
In addition, we are proposing to change the status indicator for
CPT code 85060 (Blood smear, peripheral, interpretation by physician
with written report) from ``X'' (separately paid under the OPPS) to
``B'' (not paid under the OPPS). When a hospital provides a physician
interpretation of an abnormal peripheral blood smear interpretation for
a hospital outpatient, the charge for the facility resources associated
with the interpretation should be bundled into the charge reported for
the ordered hematology lab service, such as, CPT code 85007 (Blood
count; blood smear, microscopic examination with manual differential
WBC count) or CPT code 85008 (Blood count; blood smear, microscopic
examination without manual differential WBC count), which are paid
under the Clinical Laboratory Fee Schedule (CLFS). A physician
interpretation of an abnormal peripheral blood smear is considered a
routine part of the ordered hematology lab service, such as CPT codes
85007 and 85008 paid under the CLFS, so hospitals would receive
duplicate payment for the facility resources associated with a
physician's blood smear interpretation if we were to continue to pay
separately for CPT code 85060 under the OPPS for hospital outpatients.
Therefore, for CY 2006, we are proposing to discontinue payment under
the OPPS for CPT code 85060 by changing its status indicator from ``X''
to ``B.''
XI. Proposed Payment for Observation Services
(If you choose to comment on issues in this section, please include
the caption ``Observation Services'' at the beginning of your
comment.)
A. Background
Observation care is a well-defined set of specific, clinically
appropriate services, which include ongoing short-term treatment,
assessment, and reassessment, before a decision can be made regarding
whether patients will require further treatment as hospital inpatients
or if they are able to be discharged from the hospital. Observation
status is commonly assigned to patients with unexpectedly prolonged
recovery after surgery and to patients who present to the emergency
department and who then require a significant period of treatment or
monitoring before a decision is made concerning their next placement.
For a detailed discussion of the clinical and payment history of
observation services, refer to the November 1, 2002 final rule with
comment period (67 FR 66794).
Before the implementation of the OPPS in CY 2000, payment for
observation care was made on a reasonable cost basis. With the
initiation of the OPPS, costs for observation services were packaged
into payments for the services with which the observation care was
associated but no separate payment for observation services was
implemented.
For CY 2002, we implemented separate payment for observation
services (APC 0339) under the OPPS for three medical conditions (chest
pain, congestive heart failure, and asthma). Additional criteria, such
as the billing of select diagnosis codes, an evaluation and management
service, a minimum and maximum number of observation hours, and
provision of certain condition-specific diagnostic tests, along with
documentation of the physician's determination that the patient would
benefit from observation care, were also required in order for
hospitals to receive the separate APC payment (APC 0339) for
observation services.
Taking into account numerous comments from providers about the
increased administrative burden caused by reporting requirements
associated with payment for APC 0339 and after reviewing comments and
recommendations by the APC Panel, we removed the mandated diagnostic
testing requirements beginning in CY 2005 (Transmittal 514, Change
Request 3756, released March 30, 2005). Hospitals were instructed to
rely on clinical judgment in combination with internal and external
quality review processes to ensure that appropriate diagnostic testing
is provided for patients receiving high quality, medically necessary
observation care. In an effort to further reduce administrative burden
related to accurate billing and in response to suggestions from
hospitals and the APC Panel, effective January 1, 2005, we clarified
our instructions for counting time in observation care to end at the
time the outpatient is actually discharged from the hospital or
admitted as an inpatient. Our expectation was that specific, medically
necessary observation services were being provided to the patient up
until
[[Page 42743]]
the time of discharge. However, we did not expect reported observation
time to include the time patients remain in the observation area after
treatment is finished for reasons such as waiting for transportation
home.
In updating the CY 2005 OPPS, we also looked at CY 2003 claims data
for all packaged visit-related observation care for all medical
conditions in order to determine whether or not there were other
diagnoses that would be candidates for separately payable observation
services. This year, we again reviewed the most recent claims data (CY
2004) for packaged and unpackaged observation services to assess the
current appropriateness of the three medical conditions for separately
payable observation services and to determine if the list of diagnosis
codes was complete for those conditions. The APC Panel recommended at
the February 2005 APC Panel meeting that CMS expand the list of
diagnoses eligible for separate observation payments.
The diagnoses currently associated with the three medical
conditions continue to be frequently reported on OPPS visit-related
claims with packaged observation services, and there are a large number
of claims for separately payable observation care for the three medical
conditions. At this time, our data show almost 80,000 claims from CY
2004 for separately payable observation services, compared with 67,182
for CY 2003 hospital claims. We have also explored other diagnoses that
appeared in hospital claims data with packaged observation services.
However, the data on packaged observation services continue to be
incomplete and unreliable, reported using a number of different CPT
codes with ``per day'' in their code descriptors. Some hospitals appear
to be reporting observation services per day, while others appear to be
reporting each hour of observation care as one unit, as we instructed
them to do when reporting HCPCS code G0244 for separately payable
observation. As described in section XI.B. of this preamble, we are
proposing to make changes to hospital coding for all observation
services for CY 2006, both separately payable and packaged. We are
currently not convinced that there are other conditions for which there
is a well-defined set of hospital services that are distinct from the
services provided during a clinic or emergency visit. Moreover,
hospital data from CY 2004 do not reflect our CY 2005 changes in
separately payable observation policy. We also seek to gain additional
experience with more consistent hospital billing for observation
services, both packaged and separately payable, to guide our future
analyses of observation care. Thus, we believe it is premature to
expand the conditions for which we would separately pay for visit-
related observation services.
B. Proposed CY 2006 Coding Changes for Observation Services
In response to comments received regarding the continuing
administrative burden on hospitals when attempting to differentiate
between packaged and separately payable observation services for
purposes of billing correctly, and recommendations put forward by the
APC Panel and participants at the February 2005 APC Panel meeting, we
are proposing two changes in payment policy for observation services in
CY 2006. First, we are proposing to discontinue HCPCS codes G0244
(Observation care by facility to patient), G0263 (Direct admission with
CHF, CP, asthma), and G0264 (Assessment other than CHF, CP, asthma) and
to create two new HCPCS codes to be used by hospitals to report all
observation services whether separately payable or packaged, and direct
admission for observation care:
GXXXX--Hospital observation services, per hour
GYYYY--Direct admission of patient for hospital
observation care
Second, we are proposing to shift determination of whether or not
observation services are separately payable under APC 0339 from the
hospital billing department to the OPPS claims processing logic. That
is, hospitals would bill GXXXX when observation services are provided
to any patient admitted to ``observation status,'' regardless of the
patient's status as an inpatient or outpatient. Hospitals would
additionally bill GYYYY when observation services are the result of a
direct admission to ``observation status'' without an associated
emergency room visit, hospital outpatient clinic visit, or critical
care service on the day of or day before the observation services. Both
of these new HCPCS codes would be assigned a new status indicator that
would trigger OCE logic during the processing of the claim to determine
if the observation service is packaged with the other separately
payable hospital services provided or if a separate APC payment for
observation services is appropriate in accordance with the criteria
discussed below in section XI.C. of this preamble. In addition, we are
proposing to change the status indicator for CPT codes 99217 through
99220 and 99234 through 99236 from ``N'' (packaged) to ``B'' (code not
recognized by OPPS). We will expect hospitals to utilize GXXXX to
accurately report all observation services provided to beneficiaries,
whether the observation would be packaged or separately payable, to
assist us in developing consistent and complete hospital claims data
regarding the utilization and costs of observation services. The units
of service reported with GXXXX would equal the number of hours the
patient is in observation status.
C. Proposed Criteria for Separately Payable Observation Services (APC
0339)
For CY 2006, we are proposing to continue applying the existing CY
2005 criteria (69 FR 65830), which determine if hospitals may receive
separate payment for medically necessary observation care provided to a
patient with congestive heart failure, chest pain, or asthma. In
addition, we are proposing to continue our policy of packaging payment
for all other observation services into the payments for the separately
payable services with which the observation service is reported. As
explained previously in section XI.B. of this section, the only changes
we are proposing are related to the codes hospitals would use to report
observation services, and the point at which a payment determination is
made. Rather than requiring the hospital to determine prior to claims
submission whether patient condition and the services furnished meet
the criteria for payment of APC 0339, that determination would shift to
the claims processing modules installed by the fiscal intermediaries to
process all OPPS bills, thereby reducing the administrative burden on
hospitals.
Criteria for separate observation service payments include
documentation of specific ICD-9-CM diagnostic codes (International
Classification of Diseases, Ninth Edition, Clinical Modification); the
length of time a patient is in observation status; hospital services
provided bef