[Federal Register: November 10, 2005 (Volume 70, Number 217)]
[Rules and Regulations]
[Page 68515-68980]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10no05-7]
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Part II
Book 2 of 2 Books
Pages 68515-69040
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; Changes to the Hospital Outpatient Prospective
Payment System and Calendar Year 2006 Payment Rates; Final Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 419 and 485
[CMS-1501-FC]
RIN 0938-AN46
Medicare Program; Changes to the Hospital Outpatient Prospective
Payment System and Calendar Year 2006 Payment Rates
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule with comment period.
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SUMMARY: This final rule with comment period revises the Medicare
hospital outpatient prospective payment system 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 final rule with comment period
describes changes to the amounts and factors used to determine the
payment rates for Medicare hospital outpatient services paid under the
prospective payment system. This final rule with comment period also
changes the requirement for physician oversight of mid-level
practitioners in critical access hospitals (CAHs).
In this final rule with comment period, we also are responding to
public comments received on the November 15, 2004, final rule with
comment period pertaining to the ambulatory payment classification
(APC) group assignment of Healthcare Common Procedure Coding System
(HCPCS) codes identified in Addendum B of that rule with the new
interim (NI) comment indicator. These changes are applicable to
services furnished on or after January 1, 2006.
DATES: Effective Date: This final rule with comment period is effective
on January 1, 2006.
Comment Date: We will consider comments on the payment
classification assigned to HCPCS codes identified in Addendum B with
the NI comment code and other areas specified through the preamble if
we receive them at the appropriate address, as provided below, no later
than 5 p.m. on January 9, 2006.
ADDRESSES: In commenting, please refer to file code CMS-1501-FC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this final rule with comment period 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-FC, 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-FC, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (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.
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.
Requirements for Issuance of Regulations: Section 902 of the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(MMA), Pub. L. 108-173, amended section 1871(a) of the Act and requires
the Secretary, in consultation with the Director of the Office of
Management and Budget, to establish and publish timelines for the
publication of Medicare final regulations based on the previous
publication of a Medicare proposed or interim final regulation. Section
902 of Pub. L. 108-173 also states that the timelines for these
regulations may vary but shall not exceed 3 years after publication of
the preceding proposed or interim final regulation except under
exceptional circumstances.
This final rule with comment period finalizes provisions set forth
in the CY 2006 OPPA proposed rule (70 FR 42674, July 25, 2005). In
addition, this final rule has been published within the 3-year time
limit imposed by section 902 of Pub. L. 108-173. This final rule also
finalizes the November 15, 2004 final rule with comment period (69 FR
65681) to address public comments pertaining to the APC group
assignment of HCPCS codes identified in Addendum B of that rule with
the NI comment indicator. Again, we finalized the rule within the 3-
year timeframe imposed under section 902 of Pub. L. 108-173. Therefore,
we believe that the final rule is in accordance with the Congress'
intent to ensure timely publication of final regulations.
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 centers
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
.
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Alphabetical List of Acronyms Appearing in the Final Rule With Comment
Period
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
CMS Centers for Medicare & Medicaid Services (formerly known as the
Health Care Financing Administration)
CNS Clinical nurse specialist
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
DRGY 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
NP Nurse practitioner
OCE Outpatient Code Editor
OMB Office of Management and Budget
OPD (Hospital) Outpatient department
OPPS (Hospital) Outpatient prospective payment system
PA Physician assistant
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 That Will Be Implemented 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 Provisions of the CY 2006 OPPS Proposed Rule
H. Public Comments Received on the CY 2006 OPPS Proposed Rule
I. Public Comments Received on the November 15, 2004 OPPS Final
Rule With Comment Period
II. Updates Affecting Payments for CY 2006
A. Recalibration of APC Relative Weights for CY 2006
1. Database Construction
a. Database Source and Methodology
b. Use of Single and Multiple Procedure Claims
2. Calculation of Median Costs for CY 2006
3. Calculation of Scaled OPPS Payment Weights
4. Changes to Packaged Services
a. Background
b. Responses to the APC Panel Recommendations
B. Payment for Partial Hospitalization
1. Background
2. PHP APC Update for CY 2006
3. Separate Threshold for Outlier Payments to CMHCs
C. Conversion Factor Update for CY 2006
D. Wage Index Changes for CY 2006
E. Statewide Average Default Cost-to-Charge Ratios (CCRs)
F. Expiring Hold Harmless Provision for Transitional Corridor
Payments for Certain Rural Hospitals
G. Adjustment for Rural Hospitals
1. Factors Contributing to Unit Cost Differences Between Rural
Hospitals and Urban Hospitals and Associated Explanatory Variables
2. Results
H. Hospital Outpatient Outlier Payments
I. Calculation of the National Unadjusted Medicare Payment
J. Beneficiary Copayments for CY 2006
1. Background
2. Copayment for CY 2006
3. Calculation of the Unadjusted Copayment Amount for CY 2006
III. Ambulatory Payment Classification (APC) Group Policies
A. Introduction
1. Treatment of New HCPCS Codes Discussed in the CY 2006 OPPS
Proposed Rule
2. Treatment of New CY 2006 HCPCS Codes
3. Treatment of New Mid-Year Category III CPT Codes
B. Variations within APCs
1. Background
2. Application of the 2 Times Rule
a. APC 0146: Level I Sigmoidoscopy
b. APC 0342: Level I Pathology
c. Other Comments on the Proposed List of APC Assignments to
Address 2 Times Violations
3. Exceptions to the 2 Times Rule
C. New Technology APCs
1. Introduction
2. Refinement of New Technology Cost Bands
3. Requirements for Assigning Services to New Technology APCs
4. New Technology Services
a. Ablation of Bone Tumors
b. Breast Brachytherapy
c. Enteryx Procedure
d. Extracorporeal Shock Wave Treatment
e. GreenLight Laser
f. Magnetoencephalography (MEG)
g. Positron Emission Tomography (PET) Scans
h. Proton Beam Treatment
i. Smoking Cessation Counseling
j. Stereoscopic Kv X-ray
k. Stereotactic Radiosurgery (SRS)
D. APC-Specific Policies
1. Cardiac and Vascular Procedures
a. Acoustic Heart Sound Recording and Analysis
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b. Cardiac Electrophysiologic Services (APC 0087)
c. Cardioverter-Defibrillator Implantation (APCs 0107 and 0108)
d. Endovenous Ablation (APC 0092)
e. External Counterpulsation Therapy (APC 0678)
f. Intracardiac Echocardiography (APC 0670)
g. Percutaneous Thrombectomy and Thrombolysis (APC 0676)
h. Coronary Flow Reserve (APCs 0416 and 0670)
i. Vascular Access Procedures (APCs 0621, 0622, and 0623)
2. Radiology, Radiation Oncology, and Nuclear Medicine
a. Angiography and Venography (APCs 0279, 0280, and 0668)
b. Brachytherapy (APCs 0312, 0313, and0651)
c. Computed Tomography (APCs 0283 and 0333)
d. Computed Tomographic Angiography (APC 0333)
e. Computed Tomographic Guidance (APC 0332)
f. Computerized Reconstruction (APC 0417)
g. Diagnostic Computed Tomographic Colonography (APC 0333)
h. Intensity Modulated Radiation Therapy (IMRT) (APCs 0310 and
0412)
i. Kidney Imaging (APC 0267)
j. Magnetic Resonance Guided Focused Ultrasound Ablation (APC
0193)
k. Non-Imaging Nuclear Medicine Studies (APC 0389)
l. Therapeutic Radiation Treatment (APC 0304)
m. Urinary Bladder Study (APC 0340)
3. Gastrointestinal and Genitourinary Procedures
a. Cystourethroscopy with Lithotripsy (APC 0163)
b. GI Stenting (APC 0384)
c. Insertion of Uterine Tandems and/or Vaginal Ovoids for
Clinical Brachytherapy (APC 0192)
d. Laparoscopic Ablation Procedures (APC 0131)
e. Plicator Procedure (APC 0422)
f. Prostate Cryosurgery (APC 0674)
g. Stretta Procedure (APC 0422)
h. Urological Stenting Procedures (APCs 0163 and 0164)
4. Other Surgical Services
a. Excision-Malignant Lesions (APCs 0019 and 0020)
b. External Fixation (APCs 0046 and 0050)
c. Intradiscal Annuloplasty (APC 0203)
d. Kyphoplasty (APC 0051)
e. Neurostimulator Electrode Implantation (APCs 0040 and 0225)
f. Neurostimulator Generator Implantation (APC 0222)
g. Thoracentesis/Lavage (APC 0070)
5. Other Services
a. Allergy Testing (APC 0370)
b. Apheresis (APC 0112)
c. Audiology (APCs 0364, 0365, and 0366)
d. Bone Marrow Harvesting (APC 0111)
e. Computer Assisted Navigational Procedures
f. Hyperbaric Oxygen Therapy (APC 0659)
g. Ophthalmology Examinations (APC 0601)
h. Pathology Services
i. Photodynamic Therapy of the Skin (APC 0013)
j. Wound Care
IV. Payment Changes for Devices
A. Device-Dependent APCs
1. Public Comments and Our Responses on the November 15, 2004
Final Rule With Comment Period
2. CY 2006 Proposal, APC Panel Recommendations, and Responses to
Public Comments Received
a. APC Panel Recommendations
b. Public Comments Received and Our Responses
(1) Adjustment of Median Costs
(2) Effects of Inconsistent Markup of Charges
(3) Effects of Multiple Procedure Reduction
(4) Impact of Proposed Rates on Access to Care
(5) Addition of Other APCs as Device-Dependent APCs
(6) Instructions on Reporting Device Charges
(7) Application of Wage Index to Package Containing Device
(8) Recalls of High Cost Devices
(9) Separate Payment for High Cost Devices
B. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
2. Proposed and Final Policy for CY 2006
C. 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. Policy for CY 2006
2. Criteria for Establishing New Pass-Through Device Categories
a. Surgical Insertion and Implantation Criterion
(1) Public Comments Received on November 15, 2004 OPPS Final
Rule with Comment Period and Our Responses
(2) Public Comments Received on the CY 2006 OPPS Proposed Rule
and Our Responses
b. Existing Device Category Criterion
V. Payment Changes for Drugs, Biologicals, and Radiopharmaceutical
Agents
A. Transitional Pass-Through Payment for Additional Costs of
Drugs and Biologicals
1. Background
2. Expiration in CY 2005 of Pass-Through Status for Drugs and
Biologicals
3. Drugs and Biologicals With Pass-Through Status in CY 2006
B. Payment for Drugs, Biologicals, and Radiopharmaceutical
Agents Without Pass-Through Status
1. Background
2. Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceutical Agents
3. Payment for Drugs, Biologicals, and Radiopharmaceutical
Agents Without Pass-Through Status That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs
(1) Background
(2) Changes for CY 2006 Related to Pub. L. 108-173
(3) Data Sources Available for Setting CY 2006 Payment Rates
(4) CY 2006 Payment Policy for Radiopharmaceutical Agents
(5) MedPAC Report on APC Payment Rate Adjustment of Specified
Covered Outpatient Drugs
b. CY 2006 Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceutical Agents With HCPCS Codes But Without OPPS
Hospital Claims Data
C. Coding and Billing Changes for Specified Covered Outpatient
Drugs
1. Background
2. CY 2006 Payment Policy
D. Payment for New Drugs, Biologicals, and Radiopharmaceutical
Agents Before HCPCS Codes Are Assigned
1. Background
2. CY 2006 Payment Policy
E. Payment for Vaccines
F. 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. Brachytherapy Payment Changes
A. Background
B. Changes Related to Pub. L. 108-173
C. CY 2006 Payment Policy
VIII. Coding and Payment for Drug Administration
A. Background
B. Policy Changes for Drug Administration for CY 2006
C. Policy Changes for Vaccine Administration for CY 2006
IX. Hospital Coding for Evaluation and Management (E/M) Services
X. Payment for Blood and Blood Products
A. Background
B. Policy Changes for CY 2006
XI. Payment for Observation Services
A. Background
B. CY 2006 Coding Changes for Observation Services and Direct
Admission to Observation
C. Criteria for Separate Payment for Direct Admission to
Observation
D. Criteria for Separately Payable Observation Services (APC
0339)
1. Diagnosis Requirements
2. Observation Time
3. Additional Hospital Services
4. Physician Evaluation
XII. Procedures That Will Be Paid Only as Inpatient Procedures
A. Background
B. Policy Changes to the Inpatient List
C. Ancillary Outpatient Services When Patient Expires
XIII. Indicator Assignments
A. Status Indicator Assignments
B. Comment Indicators for the CY 2006 OPPS Final Rule
XIV. Nonrecurring Policy Changes
A. Payment for Multiple Diagnostic Imaging Procedures
B. Interrupted Procedure Payment Policies (Modifiers -52, -73,
and -74)
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XV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
1. Report to the Congress: Medicare Payment Policy (March 2005)
2. Report to the Congress: Issues in a Modernized Medicare
Program--Payment for Pharmacy Handling Costs in Hospitals
B. APC Panel Recommendations
C. GAO Recommendations
XVI. Physician Oversight of Nonphysician Practitioners in Critical
Access Hospitals
A. Background
B. Proposed Policy Change in Proposed Rule
C. Public Comments Received on Proposed Rule and Our Responses
D. Final Policy
XVII. Files Available to the Public via the Internet
XVIII. Collection of Information Requirements
XIX. 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 Changes in this Final Rule with Comment Period
C. Alternatives Considered
1. Option Considered for Payment Policy for Separately Payable
Drugs and Biologicals
2. Payment Adjustment for Rural SCHs
3. Change in the Percentage of Total OPPS Payments Dedicated to
Outlier Payments
D. Limitations of Our Analysis
E. Estimated Impacts of this Final Rule with Comment Period on
Hospitals
F. Estimated Impact of the Change in Outlier Policy
G. Accounting Statement
H. Estimated Impacts of this Final Rule with Comment Period on
Beneficiaries
XX. Waiver of Proposed Rulemaking
Regulation Text
Addenda
Addendum A--List of Ambulatory Payment Classification (APCs)
with Status Indicators, Relative Weights, Payment Rates, and
Copayment Amounts--CY 2006
Addendum B--Payment Status by HCPCS Code and Related
Information--CY 2006
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 L-Out-Migration Wage Adjustment for CY 2006
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 II.C., II.F., II.G., and V.B.3.a.(2) of this final rule with
comment period.) 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 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 final rule with comment period.
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-
[[Page 68520]]
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; services and procedures that require an inpatient stay
that are paid under the hospital inpatient prospective payment system
(IPPS); and certain services furnished to inpatients of hospitals that
do not submit claims for outpatient services under Medicare Part B. 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 NI comment
indicator; 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
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 may be composed of up to 15 representatives of
hospitals and other Medicare providers subject to the OPPS (currently
employed full-time and in their respective areas of expertise), reviews
and advises CMS about the clinical integrity of the APC groups and
their weights. For purposes of this Panel, consultants or independent
contractors are not considered to be full-time employees. 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 1, 2004. The renewed charter indicates that the
APC Panel continues to be technical in nature; is governed by the
provisions of FACA with a Designated Federal Official (DFO) 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 four APC Panel members' terms of office expired
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. Consequently, 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). From
a total of 26 nominees from the two notices, we
[[Page 68521]]
chose 6 new members who were announced in the Federal Register on
August 26, 2005 (70 FR 50358). 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 seven
subsequent meetings. The most recent meeting took place on August 17
and 18, 2005, which was announced in the meeting notice published on
July 8, 2005 (70 FR 39514). 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), December 30, 2004 (69 FR 78464), and July
8, 2005 (70 FR 39514).
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, February
11, 2005, and August 15, 2005. The Observation Subcommittee, which was
established on June 24, 2003, and reestablished with new members on
March 8, 2004, February 11, 2005, and August 15, 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, and August 15, 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 and August 2005 meetings 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 That Will Be Implemented 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 final rule with comment period.
Moreover, in this final rule with comment period, we finalize our
proposal 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 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 proposed 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. In accordance with these provisions, effective January
1, 2006, as we proposed, we are implementing an adjustment for rural
sole community hospitals (SCHs), as discussed below.
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
[[Page 68522]]
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
As we indicated in the CY 2006 proposed rule, 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 or technologies, or both,
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 the CY 2006 OPPS proposed rule, we proposed
enhancements to both the OPPS pass-through payment criteria for devices
as discussed in section IV.D.2. of that rule and the qualifying process
for assignment of new services to New Technology APCs or regular
clinical APCs discussed in section III.C.3. of that rule. In the CY
2006 OPPS proposed rule, we proposed to make device pass-through
eligibility available to a broader range of qualifying devices. We also
proposed 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.
We received a large number of public comments generally supporting
our commitment to new technologies. Many of these comments in support
of this commitment were stated in the context of our proposals to
enhance the OPPS pass-through payment criteria for devices or the
application requirements for assignment of a service to a New
Technology APC. Specific comments are addressed in those respective
sections.
G. Summary of the Provisions of the CY 2006 OPPS Proposed Rule
On July 25, 2005, we published a proposed rule in the Federal
Register (70 FR 42674) that set forth proposed changes to the Medicare
hospital OPPS for CY 2006 to implement statutory requirements and
changes arising from our continuing experience with the system, to
implement provisions of Pub. L. 108-173 specified in sections II.C.,
II.F., II.G., and V.B.3.a.(2) of this preamble, and to change the
requirement for physician oversight of nonphysician practitioners in
CAHs that will be effective for services furnished on or after January
1, 2006. Subsequent to publishing the proposed rule, we published a
correction of the proposed rule on August 26, 2005 (70 FR 50679) that
corrected technical errors that appeared in the proposed rule. The
following is a summary of the major changes included in the CY 2006
OPPS proposed rule that we proposed to make:
1. Updates to Payments for CY 2006
In the proposed rule, 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
CMHCs.
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 SCHs for CY 2006.
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. Ambulatory Payment Classification (APC) Group Policies
In the proposed rule, we discussed establishing a number of new
APCs and making 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 discussed 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. Payment Changes for Devices
In the proposed rule, we discussed proposed changes to the device-
dependent APCs, to related regulations under Sec. Sec. 419.66(b)(3)
and 419.66(c)(1), and to the pass-through payment for three categories
of devices.
4. Payment Changes for Drugs, Biologicals, and Radiopharmaceutical
Agents
In the proposed rule, we discussed proposed payment changes for
drugs, biologicals, radiopharmaceutical agents, and vaccines.
5. Estimate of Transitional Pass-Through Spending in CY 2006 for Drugs,
Biologicals, and Devices
In the proposed rule, we discussed 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.
[[Page 68523]]
6. Brachytherapy Payment Changes
In the proposed rule, we included a discussion of our proposal
concerning coding and payment for the sources of brachytherapy.
7. Coding and Payment for Drug Administration
In the proposed rule, we discussed our proposed coding and payment
changes for drug administration services.
8. Hospital Coding for Evaluation and Management (E/M) Services
In the proposed rule, we discussed our proposal for developing
coding guidelines for evaluation and management services.
9. Payment for Blood and Blood Products
In the proposed rule, we discussed our proposed payment changes for
blood and blood products.
10. Payment for Observation Services
In the proposed rule, we discussed our proposed criteria and coding
changes for observation services.
11. Procedures That Will Be Paid Only as Inpatient Services
In the proposed rule, we discussed the procedures that we proposed
to remove from the inpatient list and assign to APCs.
12. Indicator Assignments
In the proposed rule, we discussed proposed changes to the list of
status indicators assigned to APCs and presented our comment indicators
that we proposed to use in this final rule with comment period.
13. Nonrecurring Policy Changes
In the proposed rule, we discussed proposed changes in payments for
multiple diagnostic imaging procedures and proposed changes in payment
policy for interrupted procedures.
14. OPPS Policy and Payment Recommendations
In the proposed rule, we addressed recommendations made by MedPAC,
the APC Panel, and the GAO regarding the OPPS for CY 2006.
15. Physician Oversight in Critical Access Hospitals
In the proposed rule, we discussed physician oversight for services
provided by nonphysician practitioners such as physician assistants,
nurse practitioners, and clinical nurse specialists in CAHs.
H. Public Comments Received on the CY 2006 OPPS Proposed Rule
We received over 1,000 timely pieces of correspondence containing
multiple comments on the CY 2006 OPPS proposed rule. Summaries of the
public comments and our responses to those comments are set forth in
the various sections under the appropriate headings.
Comment: One commenter objected to the short time between the end
of the comment period and the effective date of the final rule. The
commenter stated that the brief time period gives inadequate time for
systems and software changes. The commenter asked that the proposed
rule be published July 1 and that the final rule be published no later
than October 1 of each year. The commenter indicated that hospitals
need the extra month to implement the OPPS because it is much more
complex for hospitals to implement than the IPPS.
Response: We understand the commenter's concern about the
difficulty of implementing the annual OPPS update in 60 days. We do our
best to issue the proposed rule and the final rule as promptly as
possible and to make all of the supporting documentation available on
the CMS Web site as soon as we can. However, factors such as the use of
the most recent claims data and cost report data on which we base the
proposed and final rates delay the issuance of the proposed rule and
the final rule. Hospital delays in submission of hospital bills are an
important factor in timing of the OPPS updates as well, because we want
to use as many claims as possible in setting the OPPS rates. Moreover,
we cannot issue the final rule until the HCPCS code files for the
forthcoming year are final because we assign a stataus indicator to
each HCPCS code in the OPPS OCE. The HCPCS files are not final until
they are published in October.
Comment: Commenters asked that CMS include an indirect medical
education adjustment in the OPPS because it is the only major Medicare
payment system that does not include a teaching adjustment. One
commenter asked that CMS conduct a study to determine the special roles
and costs related to medical education and the appropriateness of
including a teaching hospital adjustment.
Response: We have not developed an indirect medical education add-
on payment made under the OPPS because the statute does not provide for
this adjustment, and we are not convinced that it would be appropriate
in a budget-neutral payment system where such changes would result in
reduced payments to all other hospitals. Moreover, in the final rule,
we have developed payment weights that we believe resolve many of the
public concerns regarding appropriate payments for new technology
services and device-dependent procedures, which we believe are
furnished largely by teaching hospitals. In addition, the application
of the wage index adjustment to 60 percent of the APC payment package
(especially for APCs into which expensive devices are packaged) tends
to benefit teaching hospitals, which are predominantly located in hgh-
cost areas. These and other payment changes should help ensure
equitable payment for all hospitals within the constraints of the
statute.
I. Public Comments Received on the November 15, 2004 Final Rule With
Comment Period
We received approximately 55 timely pieces of correspondence on the
November 5, 2004 final rule with comment period, some of which
contained multiple comments on the APC assignment of HCPCS codes
identified with the NI comment indicator in Addendum B of that final
rule with comment period and on the surgical insertion and implantation
device criterion. Summaries of those public comments and our responses
to those comments are set forth in the various sections under the
appropriate headings.
II. Updates Affecting Payments for CY 2006
A. Recalibration of APC Relative Weights for CY 2006
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).
In the CY 2005 OPPS proposed rule (70 FR 42680), we proposed to use
the same basic methodology that we described in the April 7, 2000 final
rule to recalibrate the APC relative payment
[[Page 68524]]
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 proposed 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 137 million final action claims for hospital OPD
services furnished on or after January 1, 2004, and before January 1,
2005. Of the 137 million final action claims for services provided in
hospital outpatient settings, 109 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 109 million claims, we were able to use 52.7 million whole claims
to set the proposed OPPS APC relative weights for CY 2006 OPPS. From
the 52.7 million whole claims, we created 87.9 million single records,
of which 54.9 million were ``pseudo'' single claims (created from
multiple procedure claims using the process we discuss in this
section).
As we proposed, the final APC relative weights and payments for CY
2006 in Addenda A and B to this final rule with comment period were
calculated using claims from this period that had been processed before
June 30, 2005, and continue to be based on the median hospital costs
for services in the APC groups. 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 received numerous public comments concerning our proposed data
source and methodology for recalibrating the APC relative weights for
CY 2006. A summary of the comments and our responses are discussed
below.
Comment: Commenters stated that many APC rates fluctuate
dramatically, and the instability in the system makes it very hard for
hospitals to budget and plan services from year to year. Among the
services identified as issues of specific concern were clinic visits,
application of brachytherapy sources, drugs and biologicals, and
device-intensive APCs. Some commenters recommended that CMS limit
increases and decreases for all APCs to no more than a 5-percent shift
(increase or decrease) from one year to another. Commenters emphasized
that fluctuations in payment rates for device-dependent procedures from
year to year impact manufacturers' abilities to contract effectively
with hospitals to provide a stable purchasing environment and, thereby,
impede innovation and adversely impact beneficiaries.
Response: We understand the commenters' concerns about the need for
sufficient stability in the OPPS so that hospitals can plan and budget.
We have given this issue much consideration. We recognize that reliance
on single procedure claims may result in fewer claims for some services
than for others. For example, median costs for services such as office
visits, for which the volume of single bills is very high, would
generally be more stable than the median costs for services for which
we have very few single procedure claims. We will continue to explore
changes we could effectuate to enable us to use even more claims on the
premise that using more claims data will enhance stability.
However, we note that the statutory design of the OPPS and the
rapid evolution in the delivery of outpatient hospital services include
many elements that may be responsible for some of the fluctuation in
rates from year to year. For example, the ``2 times rule'' imposed by
the law requires the movement of some procedures from one APC to
another each year. Moreover, the OPPS is based on procedure coding for
which there are hundreds of changes each year. In addition, the entry
of new technology into a budget neutral payment system results in a
shift of funds away from previously existing services to provide
payments for new services. These systemic factors are valid reflections
of the changes in services in the outpatient department, and shifts in
payment legitimately mirror those changes.
Comment: Commenters stated that the entire OPPS is underfunded
because it pays only 87 percent of the costs of services to Medicare
beneficiaries. One commenter indicated that the underfunding of
services to Medicare patients is particularly severe for
disproportionate share hospitals and hospitals with level I trauma
centers and, therefore, will inhibit access to care for Medicare
beneficiaries and other individuals.
Response: Our early analyses indicated that the OPPS was, in its
inception, based on payment that was less than cost due to statutory
reductions in payment for hospital outpatient costs prior to the
enactment of the BBA, which authorized the current OPPS. Certain
fundamental statutory features of the OPPS dictate such a finding. For
example, the base amounts upon which the OPPS was established, the
rules concerning budget neutrality, and subsequent out-year adjustments
such as annual reductions in coinsurance and adjustments to outlier and
pass-through payment allocations are established in statute and, as
such, would require legislation to amend.
Comment: Commenters supported use of the most recent claims data
for recalibrating the APC relative weights but in many cases wanted CMS
to adjust the claims data for particular services of interest to them
in ways that will result in higher payment for those specified
services. Other commenters supported use of proprietary, confidential
external data in lieu of claims data to set the median costs on which
the rates are based for selected services because they believe that the
use of claims data results in median costs that are less than the costs
of the services being furnished. Some commenters asked CMS to establish
a representative sample of hospitals from which data would be collected
for use in place of claims data or to validate the data derived from
claims.
Response: We believe that, in a budget neutral relative payment
system such as the OPPS, it is important that the relative weights be
based on a uniform source of data processed in a standardized way. We
believe that Medicare claims data are the most uniform data source
available to us. Moreover, the weights derived from such a system are
the vehicles for distributing Medicare payments for outpatient hospital
services fairly among all hospitals that furnish outpatient hospital
services to Medicare beneficiaries. We are committed to using claims
data in a uniform manner, to the maximum extent possible, to develop
the relative weights from which payment rates are calculated. We do not
see a compelling need to use external data to set or adjust median
costs for device-dependent APCs for the CY 2006 OPPS. Therefore, for
the CY 2006 OPPS, we have not substituted external data for Medicare
claims data for the purpose of setting the median costs on which the
relative weights are based.
After carefully considering all comments received, we are
finalizing our data source and methodology for the recalibration of CY
2006 APC relative weights as proposed without modification.
b. Use of Single and Multiple Procedure Claims. For CY 2006, we
proposed 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
[[Page 68525]]
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 costs for
those APCs. 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 identified
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 proposed 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
proposed for CY 2006 OPPS resulted in our being able to use some part
of 90 percent of the total claims that are eligible for use in OPPS
rate-setting and modeling in developing this final rule with comment
period. This process enabled us to use, for CY 2006, 88 million single
bills for rate-setting: 55 million ``pseudo'' singles and 34 million
``natural'' single bills (bills that were submitted containing only one
separately payable major HCPCS code). (These numbers do not sum to 88
million because more than 800,000 single bills were removed when we
trimmed at the HCPCS level at +/-3 standard deviations from the
geometric mean.)
We proposed to bypass the 404 codes identified in Table 1 of the
proposed rule (70 FR 42682) 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 that list, 385 were used for bypass in CY 2005. For CY
2006, we proposed to continue the use of the codes on the CY 2005 OPPS
bypass list and expand it by adding those codes that, using data
presented to the APC Panel at its February 2005 meeting, met 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.
As we proposed, in this final rule with comment period, we used the
following empirical criteria that 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.
As stated in the proposed rule (70 FR 42681), 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 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 recommended 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 policy to pay these services separately. We
added these codes to the bypass list because changing them from
packaged to separately paid would result in a reduction of the number
of single bills on which we could base median costs
[[Page 68526]]
for other major separately paid procedures that 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.
As explained in the CY 2006 proposed rule (70 FR 42682), we
examined the packaging on the single procedure claims in the CY 2004
data for these codes. We found that none of these three 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 proposed to pay
separately for these codes and to add them to the bypass list for the
CY 2006 OPPS.
In the CY 2006 proposed rule, we specifically invited public
comments on the proposed ``pseudo'' single process, including the
bypass list and the criteria. A summary of the many comments we
received and our responses follow:
Comment: Some commenters supported use of multiple procedure claims
through application of the bypass list and date of service
stratification. Other commenters stated that these processes may result
in more claims but not necessarily better data for rate-setting. Many
commenters objected to the use of single procedure claims as the basis
for setting the relative weights because they believed that using
single procedure claims limits the claims data to the simplest and
least costly cases. They proposed CPT code or APC specific strategies
for using multiple procedure claims in ways that would apply only to
the services of interest to them that could not be generalized across
multiple procedure claims for all services. The commenters indicated
that the use of single procedure claims greatly limits the number of
claims that are used for setting median costs and weights, and that the
OPPS relative weights would be greatly improved if we could use all of
the claims data. They indicated that the use of single procedure claims
causes medians to be set based on incorrectly coded claims for the many
add-on codes that can only be billed properly when they are billed with
the base code to which they are attached. In addition, they indicated
that many services are so routinely furnished in combination with other
services that use of single procedure claims will never result in
appropriate median costs for these procedures.
Response: We share the commenters' desire to use as much claims
data as possible to set the relative weights for the OPPS services. We
continue to explore ways to use more data from multiple procedure
claims. Specifically, we are looking at the extent to which the many
add-on codes (codes that are reported for services furnished only as an
adjunct to another service) can be packaged to create more single
claims. We are also exploring strategies for using data from correctly
coded multiple procedure claims containing both base and add-on codes
to ascertain the incremental costs of the add-on services. We also
expect to explore other generally applicable strategies, such as
apportioning packaging based on submitted charges that would enable us
to use multiple procedure claims.
We are disinclined to focus on service-specific strategies for
using multiple procedure claims because those that have been suggested
to us are not generally applicable to multiple procedure claims across
all services, but rather are focused on increasing the median costs of
particular services to the exclusion of all other services. As we
indicated above, we believe that it is important in a relative weight
system that, to the maximum extent possible, the same claims and the
same processing rules apply to all services so that the resulting
relative weights are uniformly created and serve all hospitals fairly.
Comment: One commenter asked why only some of the office visit and
consultation services are included in the bypass list (for example, CPT
codes 99213 and 99214 are on the list) but CPT codes 99211, 99212 and
99215 are not. The commenter believed that the cited unlisted codes
should also be on the list. Other commenters did not believe that CPT
codes 99213 and 99214 met the criteria for inclusion as bypass codes
and believed that they should be removed from the list.
Response: We have included below data calculated from the APC Panel
data for use in setting the bypass list for the CY 2006 proposed rule
and this final rule with comment period. These data show that CPT codes
99213 and 99214 meet the criteria for inclusion as bypass codes, and
that CPT codes 99211, 99212 and 99215 exceed the 5-percent limit for
single bills containing packaging:
------------------------------------------------------------------------
Percent of
Median amount single bills
HCPCS Short descriptor of packaging for the code
on single containing
bills packaging
------------------------------------------------------------------------
99211................. Office/ $11.98 6.15
outpatient
visit, est.
99212................. Office/ 10.88 5.43
outpatient
visit, est.
99213................. Office/ 11.72 3.87
outpatient
visit, est.
99214................. Office/ 12.76 3.63
outpatient
visit, est.
00215................. Office/ 12.76 8.62
outpatient
visit, est.
------------------------------------------------------------------------
Comment: Commenters supported the use of the bypass list but were
concerned that the inclusion of services on the bypass list may
systematically result in lower costs for the procedures that are
included on the list than if they had not been included on the list.
Response: We established the bypass list criteria for the purpose
of limiting any potential adverse impact on the medians for the
services on the bypass list. We believe that the requirement that a
code cannot be placed on the bypass list if more than 5 percent of the
single bills for that code contain packaging or if the median packaging
for the code exceeds $50, is a strong deterrent to systematic reduction
of medians for services on the bypass list. We have received no
comments on the appropriateness or inappropriateness of the bypass
criteria, and thus, we have not changed them for the CY 2006 OPPS.
Comment: Commenters asked CMS to carefully consider the impact of
add-on codes on the creation of multiple
[[Page 68527]]
procedure claims and urged CMS to not disqualify a claim because of the
presence of an add-on code that is packaged. In the case of add-on
codes that are separately paid, one commenter urged CMS to apportion
the packaged charges between the base code and the add-on code so that
the data from the multiple procedure claim can be used. Some commenters
asked CMS to place all add-on codes, both packaged and separately paid,
on the bypass list to create more single procedure claims.
Response: The presence of an add-on code with a status indicator of
``N'' because it is a packaged service does not currently disqualify
the claim as a multiple procedure claim. The claim is considered to be
a single procedure claim and the cost of the packaged add-on code is
treated like any other packaged drug, device, or supply or other
packaged cost. However, the presence of an add-on code that is
separately paid but not on the bypass list does currently cause the
claim to be a multiple procedure claim that is not used because of the
difficulties in determining how to apportion the packaging on the claim
between the two separately paid procedure codes.
We disagree that all add-on codes could safely be added to the
bypass list. Many add-on codes use significant resources that are
reported as packaged charges in support of the add-on code. For
example, CPT code 33225 (Left ventricular lead add-on) requires more
than an hour of additional operating room time and also requires a
device with significant cost when the service is furnished in
conjunction with a base service. If we were to include CPT code 33225
on the bypass list, only the line-item charge for the CPT code would be
attributed to the procedure code. Neither the device cost (which is
packaged), nor the share of other costs attributable to the service
(for example, drugs, supplies, and extended operating room time) would
be attributed to CPT code 33225. They would both be packaged into the
base code. The single procedure claims for CPT code 33225 would not
reflect the costs of the device or extended operating room time. In
addition, the single procedure claims for the base code would reflect
packaging that is not properly associated with that procedure.
However, we recognize that the add-on codes present a significant
data problem because they can never be correctly billed unless they are
also billed on the same claim with a base code to which they add
services. We are undertaking a study of add-on codes to determine
whether there are add-on codes that are now separately paid that should
become packaged, and thus would provide more single procedure claims.
With respect to the add-on codes for which packaging is not
appropriate, we will be exploring methods that would enable us to
systematically calculate valid median costs for the add-on codes from
multiple procedure claims and thus create a more robust set of valid
claims for rate-setting. We anticipate working with the APC Panel
members on this issue.
Comment: Commenters asked CMS to assign a flag to claims that
became pseudo singles in the claims included in the public use files so
that it would be easier for commenters to model future proposed
policies.
Response: The public use files (the limited data set and the
beneficiary encrypted data set) contain claims as submitted to CMS.
Therefore, to flag the pseudo single claims in the public use file is
not possible because the pseudo single claims may be part, but not all,
of the submitted claim. Even if we did flag the claim, the user would
still have to replicate the process to create pseudo single claims. We
note that we have greatly increased the information we issued regarding
how we process the claims to acquire the median costs, and we
understand that outside replication of our medians has improved.
Comment: Commenters asked whether CMS disregards line item charges
for drugs, biologicals, and radiopharmaceutical agents and items with
status indicators ``K'' and ``G'' for purposes of creating pseudo
singles claims.
Response: The presence on a claim of a code and charge for a drug,
biological, or radiopharmaceutical agent, whether separately paid or
packaged, has no impact on determining whether the claim is a single
procedure claim.
After carefully considering all public comments received, we are
adopting as final the proposed ``pseudo'' single process and the bypass
codes listed in Table 1 without modification.
BILLING CODE 4120-01-P
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BILLING CODE 4120-01-C
2. Calculation of Median Costs for CY 2006
In this section of the preamble, we discuss the use of claims to
calculate the OPPS payment rates for CY 2006. The hospital outpatient
prospective payment page on the CMS Web site on which this final rule
with comment period is posted provides an accounting of claims used in
the development of the final rates: http://www.cms.hhs.gov/providers/hopps.
The accounting of claims used in the development of this final
rule with comment period is included on the Web site under supplemental
materials for the CY 2006 final rule with comment period. That
accounting provides additional detail regarding the number of claims
derived at each stage of the process. In addition, below 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.''
As we proposed, we used the following methodology to establish the
relative weights to be used in calculating the OPPS payment rates for
CY 2006 shown in Addendum A and in Addendum B to this final rule with
comment period. This methodology is as follows:
We used outpatient claims for the full CY 2004 to set the 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 109 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 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 we 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 Healthcare 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. For this final rule with
comment period, 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.
The overall hospital-specific CCR is the total of costs and charges
in those cost centers where we believe that a significant portion of
the costs and charges are for services paid under the OPPS. We have
included the list of the cost centers that we use in our overall CCR
calculation on our Web site along with our cost center to revenue code
crosswalk, which we discuss below. We do not include the costs and
charges generated by nursing schools or paramedical education programs
in our cost and charge totals.
We then flagged CAH claims, which are not paid under the OPPS, and
claims from hospitals with invalid CCRs. The latter included claims
from hospitals without a CCR; those from hospitals paid an all-
inclusive rate; those from hospitals with obviously erroneous CCRs
(greater than 90 or less than .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, as proposed, we trimmed 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 code indicated on the line
with the charge. Table 2 of the proposed rule (70 FR 42690) contained 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 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
[[Page 68538]]
another file. These claims were combined with the 76X claims identified
previously to calculate the 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, radiopharmaceutical agents, and blood and blood
products. The line-item costs were also used to calculate the per
administration cost of drugs, biologicals (other than blood and blood
products), and radiopharmaceutical agents.
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, 3, 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'' listed in Table 1 of the proposed rule and this final
rule with comment period 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 final
rule with comment period) and packaged revenue codes into the cost of
the single major procedure remaining on the claim. The list of packaged
revenue codes is shown below in Table 2. These are the same as those
published in Table 2 of the proposed rule (70 FR 42690).
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, 58.4 million claims were
left. Of these million claims, we were able to use some portion of 52.7
million whole claims (90.24 percent of the potentially usable claims)
to create the 88 million single and ``pseudo'' single claims for use in
the CY 2006 median payment rate-setting.
We also excluded (1) claims that had zero costs after summing all
costs on the claim and (2) 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 deleted
claims containing token charges because 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 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 resources. Therefore, we deleted 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 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-
[[Page 68539]]
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.
We received a number of public comments concerning our proposed
data processes for calculating the CY 2006 OPPS relative weights and
median costs. A summary of the comments and our responses follow:
Comment: Commenters stated that the proposed rule did not provide
adequate information for hospitals to evaluate the impact of each of
the proposed policy changes independently or in combination. They
requested that CMS provide a public use file that shows the impact of
each individual proposed change in methodology so that providers can
determine how the changes would affect their own operations and provide
a basis for comments.
Response: We currently provide provider-specific tables that we
understand are very accurate in estimating the payments individual
hospitals will receive. While we wish to make available to the public
as much hospital-specific information as possible, there are limits to
the resources available to us to provide hospital-specific information.
Generally, we provide a broad range of information to the public. We
make available our claims data in the form of both a limited data set
and a beneficiary encrypted data set for use by the public, including
hospitals. In addition, in both the OPPS proposed and final rules each
year, we give a detailed description of how we process the paid claims
to derive the median costs and how we create relative weights from the
median costs. Many different organizations with a broad range of
divergent interests currently use this information provided to the
public to generate extraordinarily detailed reports and data of
interest to them. As this is public information, we would expect that
hospital associations and hospitals could do the same, either directly
or using alternative sources to determine the impact of various policy
options.
Comment: One commenter strongly opposed the requirement that all
OPPS encounters furnished on the same day must be billed on a single
claim. Some commenters believed that this increases the number of
claims that cannot be used for ratesetting by creating multiple
procedure claims and creates a needless burden on hospitals to ensure
that all encounters on the same date of service are billed on the same
claim.
Response: We agree and we have revised our policy governing how
services on the same date of service must be billed. See Change Request
4047, Transmittal 711, dated October 14, 2005 for a complete discussion
of our current policy. Under this change in policy, there are instances
where nonrepetitive OPPS services that are furnished on the same date
of service may be billed on different claims as long as all charges
that pertain to each service are also reported on the same claim as the
HCPCS code that describes that service. We emphasize that it is vitally
important to us that all of the charges that pertain to a separately
paid service be included on the same claim with the service being
billed so that the claim will accurately reflect the full cost of the
service. If, for example, charges for a packaged drug, recovery room
time, and sterile supplies that were used in providing a surgical
service are not included on the claim with the HCPCS code and line-item
charge for the use of the operating room for the surgical procedure,
those charges for drugs, recovery room, and supplies will not be
packaged with the charge for the OR time for the surgical procedure and
that claim will incorrectly and inadvertently lower the median cost for
that surgical procedure. This is especially the case if the service is
a low volume service. Also, this revised billing policy cannot apply to
services for which we use claim-specific OCE logic to determine
payments, such as drug administration and observation services, because
the OCE claim-by-claim logic cannot function properly if all services
provided by a hospital that are related to the services subject to the
OCE logic are not reported on the same claim.
Comment: One commenter supported deletion of claims with token or
nominal charges (for example, a very small charge such as $1) but was
concerned about exclusion of claims containing multiple surgical or
cardiac catheterization services because such exclusions may
significantly reduce the number of claims used for rate-setting. The
commenter noted that CMS has long permitted hospitals to show a token
charge on the line-item with separately paid procedures when they were
performed at the same session as a surgical procedure for which a
charge is shown as operating room time. Another commenter wanted claims
that contain a single payable APC line to be included even if there are
token charges on other nonpayable lines on the claim.
Response: The submission of claims for multiple separately paid
procedures with the same date of service on which there is a charge for
operating room time for one of the HCPCS codes and token charges on the
lines for the other separately paid HCPCS codes reflects a difficulty
with using multiple procedure claims. (For example, a claim contains
three separately paid surgical services, with a charge of $2,000 for
one and charges of $1 for each of the others, plus a single charge each
for drugs, sterile supplies, and recovery room time.) We note if we
were to use such claims and allocate packaging to each separately paid
procedure (on some basis yet to be determined) and then divide the
claim into multiple claims, we would be using claims records that would
contain nothing but packaged costs and a token charge for some of those
services. Similarly, if we were to focus solely on the procedure with
the line charge of $2,000 and attribute all the packaging to it, we
would be overstating the packaging for that service because some of it
rightfully belongs with the other two separately paid procedures for
which there was a token charge. We acknowledge the commenters' concern
and we will continue to pursue an
[[Page 68540]]
appropriate way to allocate the costs on these types of claims.
After carefully reviewing all public comments received, we are
finalizing the process for calculating median costs and the list of
packaged services shown in Table 2 for OPPS services furnished on or
after January 1, 2006, as proposed without modification. Table 2
contains the list of packaged services by revenue code that we used in
developing the APC relative weights listed in Addenda A and B of this
final rule with comment period.
We note that comments and responses regarding aspects of median
cost and relative weight calculations specific to particular services
or particular categories of services are also found in specifically
identified sections of this preamble.
BILLING CODE 4120-01-C
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BILLING CODE 4120-01-P
3. Calculation of Scaled OPPS Payment Weights
Using the median APC costs discussed previously, we calculated the
final relative payment weights for each APC for CY 2006 shown in
Addenda A and B to this final rule with comment period. 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 $60.19 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 final relative weights. Based on this comparison, we
adjusted the relative weights for purposes of budget neutrality. The
unscaled relative payment weights were adjusted by 1.012508103 for
budget neutrality. The final relative payment weights are listed in
Addenda A and B to this final rule with comment period. The final
relative payment weights incorporate the recalibration adjustments
discussed in sections II.A.1. and 2. of this preamble.
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 cost of
those specified covered outpatient drugs (as discussed in section V. of
this preamble) is included in the budget neutrality calculations for CY
2006 OPPS.
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 for the CY 2006 OPPS.
(We provide a discussion of brachytherapy payment issues at section
VII. of this final rule with comment period.)
Comment: One commenter indicated that CMS should convene a panel to
look at additional data submission requirements that the panel believes
would greatly enhance both the reliability of the data and its
subsequent use for ratesetting. Specifically, the commenter urged CMS
to consider whether to require hospitals to identify the APCs that
apply to multiple procedure claims or develop a system that groups
multiple procedure claims in a fashion that is analogous to the
inpatient prospective payment system.
Response: We fail to understand how hospital reporting of the APCs
that apply to services on claims would resolve the issue of how to
distribute packaged costs, such as drugs and recovery room time, among
multiple procedures billed on the same claim. Therefore, we do not
support imposing this reporting burden on hospitals. With respect to
grouping procedures into combination APCs for purposes of dealing
effectively with services that commonly appear in specific combinations
together on claims, we proposed creation of combination APCs for the CY
2004 OPPS to deal with very frequent combinations of services. While we
chose not to implement this approach for the CY 2004 OPPS, largely in
response to public comments, we have not ruled out such an approach in
the future as a way to effectively calculate median costs and set
payment rates for services for which the norm is provision in
combinations with other services.
4. Changes to Packaged Services
a. Background. 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.'' As stated in the proposed
rule, the Packaging Subcommittee reviewed every code that was packaged
in the CY 2004 OPPS (70 FR 42691). 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. Another criterion used to determine whether a code should become
unpackaged was how likely it was for the costs of the packaged code to
be appropriately mapped to the separately payable codes with which it
was performed. The Packaging Subcommittee also examined median costs
from hospital claims for packaged services.
The Packaging Subcommittee identified areas for change for some
packaged CPT codes that they believed could frequently be provided to
patients as the sole service on a given date and that required
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 recommended:
(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 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).
[[Page 68543]]
(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 are for procedures to
measure blood oxygen levels).
(8) That CMS provide education and consistent guidelines to
providers and fiscal intermediaries on correct billing for packaged
codes in general, and in particular for CPT codes 36540, 36600, 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 Panel.
In addition, during its August 2005 meeting, the APC Panel accepted
the report of the Packaging Subcommittee and made the following
recommendations:
(1) No change to the CY 2005 status indicator of 76937 (N-
packaged), ultrasound guidance for vascular access, but requested that
CMS collect available hospital claims data on that code for further
consideration by the Packaging Subcommittee at the next available
meeting.
(2) No change to the CY 2005 status indicator of CPT code 38792 (N-
packaged), sentinel node identification, but requested that CMS collect
available hospital claims data on that code for further consideration
by the Packaging Subcommittee by the next scheduled meeting.
(3) No change to the CY 2005 status indicator of CPT code 42550 (N-
packaged), injection for salivary x-ray.
(4) That CMS collect additional data on CPT code 36500, venous
catheterization for selective blood organ sampling, and the
corresponding radiological supervision and interpretation code, 75893,
including a list of other codes with which these codes are most
frequently billed, for consideration by the Packaging Subcommittee.
(5) No change to the CY 2005 status indicator of CPT code 0069T (N-
packaged), acoustic heart sound services.
(6) That CMS collect additional data on CPT 94762, overnight pulse
oximetry, including a list of other codes with which this code is most
frequently billed, for consideration by the Packaging Subcommittee.
b. Responses to the APC Panel Recommendations
For CY 2006, we proposed 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 assign a
modifier to the codes. We noted in our proposed rule that CPT code
36540 was also bundled under the Medicare Physician Fee Schedule
(MPFS), and our data demonstrated that the service was generally billed
with other separately payable services (70 FR 42691). We also had
relatively few single claims for CPT code 36600, compared to the
procedure's overall frequency. Both of these codes had relatively low
hospital resource utilization. As these procedures were almost always
provided with other separately payable services, hospitals' payments
for those other services included the costs of CPT codes 36540 and
36600. With respect to the APC Panel's recommendation that the OPPS
make payment for one of these services if the code had a modifier
appended signifying that it was the only service provided on a day,
there is currently no appropriate CPT modifier that could be appended
to signal this circumstance. A new HCPCS modifier would not be
appropriate because the packaged codes recommended by the APC Panel for
separate payment when billed alone are CPT codes.
We received a few public comments concerning this proposal.
Comment: Commenters stated that CPT 36540 should not be assigned
status indicator ``N'' because drawing blood for laboratory work from a
venous access device requires that a registered nurse assess the
patient and then use a sterile kit to perform the blood draw. They
objected to having to report an E/M visit code in order to receive
payment for the service when it is the only service provided. The
commenters requested that CMS assign the proposed status indicator
``Q'' for CPT code 36540 so that the OPPS could make payment when it is
the only service provided. Similarly, at least one commenter asked that
CMS assign the ``Q'' status indicator to CPT code 36600.
Response: We continue to believe that the services described by CPT
codes 36540 and 36600 are almost always provided in conjunction with
other separately payable services in the hospital outpatient department
setting. Our data do not support making these services separately
payable. We proposed the new ``Q'' status indicator for services that
may be separately payable or packaged depending on special
circumstances for CY 2006 only for observation services. Codes assigned
this status indicator will require the application of OCE logic to
determine the codes' payment status and identify separate payment if
appropriate, and then application of the same logic in our data
processing to develop median costs for those services for future OPPS
updates. We seek to gain some experience with such logic in the OCE and
our data processing for observation services prior to considering any
expansion of the use of status indicator ``Q.'' Use of the ``Q''
modifier for procedures that are sometimes packaged would require
ongoing maintenance of a list of codes for which this status indicator
may be used and their APC assignments if separately paid, as well as
additional claims and data processing activities.
After carefully reviewing all comments received, for CY 2006 we are
adopting as final without modification our proposal to retain CPT codes
36540 and 36600 as packaged services and not adopt the APC Panel's
recommendation to assign a modifier for use when the services are
provided with no other separately payable services on the same day.
For CY 2006, we proposed 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 $39.00. 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 proposed to pay separately for this code
every time it is billed. We believed that it was more appropriate to
make payment for each procedure, rather than increase hospitals'
administrative burden by requiring specific coding changes to indicate
that there were no other separately payable procedures on the claim.
Based on our review of the data, the cost for this procedure was not
insignificant, and the volume of single and multiple claims was modest.
When we reviewed related codes, including CPT code 51702 (Insertion of
temporary
[[Page 68544]]
indwelling bladder catheter, simple) and CPT code 51703 (Insertion of
temporary indwelling bladder catheter, complicated), we noted that
these codes also had substantial median costs and a moderate volume of
single claims. Therefore, for CY 2006, we proposed to pay separately
for CPT codes 51702 and 51703, mapping them to APC 0340 with a median
cost of $39.00 and APC 0164 (Level I Urinary and Anal Procedures) with
a median cost of $72.00, respectively. We proposed that CPT codes
51701, 51702, and 51703 be placed on the bypass list, as discussed in
section II.A.1.b. of this final rule with comment period.
The comments we received supported our proposal. Accordingly, we
are finalizing our proposal to pay separately for CPT codes 51701 and
51702, and to assign them to APC 0340 with status indicator ``X,'' and
a median cost of $36.00 for CY 2006. We are also finalizing our
proposal to pay separately for CPT code 51703, and to assign it to APC
0164 with status indicator ``T,'' and a median cost of $69.00 for CY
2006.
For CY 2006, we proposed to accept the APC Panel recommendation
that CPT code 76937 (Ultrasound guidance for vascular access) remain
packaged. We were concerned that there might be unnecessary overuse of
this procedure if it were separately payable. In addition, we believed
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.
We received several public comments in response to our proposal.
Comment: A few commenters requested that some radiologic guidance
codes, such as CPT code 76937 for ultrasound guidance for vascular
access and CPT code 75998 for fluoroscopic guidance for central venous
access device placement, become separately payable instead of packaged.
The commenters stated that each guidance code could be reported with
several separately payable procedure codes, thereby skewing the median
costs for the procedures and not providing appropriate payment for the
procedures when radiologic guidance was used. In addition, one
commenter expressed concern that the codes have been packaged due to
concern over unnecessary utilization. The commenter stated that an
audit is a more appropriate way to prevent unnecessary utilization. In
addition, the commenters cited a finding published in a June 2001
report by the Agency for Healthcare Research and Quality, that use of
ultrasound guidance reduces relative risk for complications during a
central venous catheter insertion by 78 percent, as a reason that
separate payment should be made for CPT code 76937. The commenters also
stated that assignment of packaged status to these codes conflicts with
CMS' policy as stated in its CY 2003 OPPS final rule, to pay separately
for all radiology guidance codes.
Response: OPPS hospital claims data reveal that out of the total
instances of CPT code 76937 appearing on claims used for setting
payment rates for CY 2006, CPT code 76937 was billed with four
separately payable codes for insertion of central venous access devices
84 percent of the time. This indicates, as might be expected, that the
costs for CPT code 76937 are typically packaged into four CPT codes,
36556, 36558, 36561, and 36569, the most commonly billed codes under
the OPPS for vascular access device insertion. The data for CPT code
75998 reveal similar patterns of utilization and packaging. Of the
total instances of CPT code 75998 appearing on claims used for setting
payment rates for CY 2006, code 75998 was billed with the same four
separately payable codes for insertion of central venous access devices
70 percent of the time. This indicates that the costs for fluoroscopic
guidance for central venous access device placement are typically
packaged into the same CPT codes as the costs for ultrasound guidance
for vascular access. Of single claims used for setting payment rates
for CY 2006 for those four CPT codes describing the insertion of
vascular access devices, ultrasound guidance was reported from 16 to 34
percent of the time, and fluoroscopic guidance was billed from 29 to 52
percent of the time. For the same four CPT codes, one or more forms of
guidance (fluoroscopic and/or ultrasound) were reported on 41 to 64
percent of the single claims utilized for rate-setting. Thus, overall
for these vascular access device insertion services, guidance was used
in at least 41 percent of the single claim cases, a very significant
proportion of the time. If anything, this percentage may underestimate
the utilization of guidance for the insertion of vascular access
devices, as we have been told that hospitals may not always code
separately for packaged services for which no separate payment is made.
Hospital claims data from CY 2004 yield a median cost of $61.00 for
ultrasound guidance and $73.00 for fluoroscopic guidance for vascular
access. The costs for these guidance procedures are relatively low
compared with the CY 2006 payment rates for the separately payable
services they most frequently accompany, which range from almost $500
to about $1,600. We note that, in general, our payment rates for
vascular access device services for CY 2006 are significantly greater
than our CY 2005 payment rates for the same services because more
specific CY 2004 data available for CPT codes that were new in CY 2004
permitted us to reconfigure the APCs containing vascular access device
procedures to improve clinical and resource coherence. In addition, our
hospital claims data demonstrate that in CY 2004 guidance services were
used frequently for the insertion of vascular access devices, and we
have no evidence that patients lacked appropriate access to guidance
services necessary for the safe insertion of vascular access devices in
the hospital outpatient setting. We believe the increased CY 2006
payment rates for insertion of vascular access devices should result in
preservation of appropriate access to medically reasonable and
necessary ultrasound and fluoroscopic guidance procedures used to
facilitate the insertion of the devices.
If we were to unpackage CPT codes 76937 and 75998, single bills
available to develop median costs for vascular access device insertion
services would be significantly reduced. In addition, separate payment
for an ancillary guidance service always performed in conjunction with
other separately payable services could lead to overutilization of the
ancillary service, for which payment is more appropriately bundled into
the prospectively established payment for the procedure to insert the
vascular access device. Our statement regarding paying separately for
radiology guidance services in the CY 2003 final rule with comment
period was made in the context of our explanation regarding our
decision to unpackage certain radiology guidance procedures that had
first been packaged for CY 2002, and does not necessarily apply to all
radiology guidance services. As for all HCPCS codes, we will continue
to evaluate each service, including radiology guidance services, for
its most appropriate OPPS payment status, including packaged versus
separately payable designation, on a case-by-case basis according to
the clinical and resource characteristics of the procedure and the
other services with which it would likely be billed.
[[Page 68545]]
We will share the CY 2004 and early CY 2005 hospital claims data
concerning these vascular access guidance services with the APC Panel
Packaging Subcommittee, as recommended by the APC Panel, for their
review prior to the next biannual APC Panel meeting.
After carefully considering the public comments received, we are
adopting as final without modification our proposal to accept the APC
Panel's recommendation that CPT code 76937 remains a packaged service
for CY 2006. In addition, we are finalizing our proposal to continue to
package CPT code 75998 for CY 2006.
We refer the reader to section VIII. of this preamble on drug
administration regarding the APC Panel's recommendation concerning CPT
codes 90471 and 90472.
For CY 2006, we proposed to accept the APC Panel recommendation to
gather data and review CPT code 94762 to determine how often this code
was billed without any other separately payable codes on the same date
of service and whether it was performed more frequently alone in rural
settings than other settings. During the August 2005 APC Panel meeting,
we presented data to the APC Panel regarding CPT code 94762. CY 2004
OPPS hospital claims data indicated at that time that CPT code 94762
was billed only 1,145 times without any separately payable codes on the
claim, which was only 1.5 percent of all units of code 94762 billed.
Fifty-two percent of the 1,145 single occurrences of CPT code 94762
were provided by rural hospitals. Fifty-two percent was particularly
high considering that, when reviewing both single and multiple
procedure claims, the data indicated that CPT code 94762 was provided
by rural hospitals only 12 percent of the time. The data revealed that
rural hospitals were more likely than urban hospitals to bill CPT code
94762 without any separately payable codes on the claim. For purposes
of this analysis, a rural hospital was defined as any hospital that is
considered rural for payment purposes. In general, this included
geographically rural providers as well as providers that were
reclassified to rural areas for wage index classification.
We recognize that the data used in the analysis are somewhat
limited. Because CPT 94762 is a packaged code and does not receive
separate payment, it is possible that an unknown number of hospitals
chose not to submit claims to CMS when CPT code 94762 was provided
without other separately payable services on their claims.
Comment: Several comments requested that CMS change the status
indicator for CPT code 94762 from ``N'' to ``X'' and that the service
be assigned to APC 0369, (Level III Pulmonary Tests). They stated that
because noninvasive ear or pulse oximetry for oxygen saturation, by
continuous overnight monitoring, is a prerequisite for proving the
medical necessity for home oxygen therapy, this is often the only
service provided to beneficiaries during their hospital outpatient
visits. The commenters stated that no E/M service is necessary and that
it should be possible to receive payment for CPT code 94762 when it is
the only service provided.
Response: We continue to believe that the packaged status of CPT
code 94762 is appropriate. As discussed during the August 2005 APC
Panel meeting, our data do not support separate payment for this
service because 98.5 percent of the time, it is provided with
separately payable services, and is rarely the only service provided in
hospital settings on a single date of service to a Medicare
beneficiary.
After carefully considering the public comments received, for CY
2006 we are accepting the APC Panel's recommendations to retain as a
packaged service CPT code 94762. We will share the CY 2004 and early CY
2005 hospital claims data concerning CPT code 94762 with the APC Panel
Packaging Subcommittee as recommended by the APC Panel, for its review
during the next biannual APC Panel meeting.
For CY 2006, we proposed 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 state
our belief that CPT code 77790 was 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
bundled with the payment for the brachytherapy service. The small
number of single claims for this code in our data verified that this
code was rarely billed alone without other payable services on the
claim, and those few single claims might be miscoded claims. Our data
review of CPT codes 94760 and 94761 revealed that these codes had low
resource utilization, and were most frequently provided with other
services. Similar to CPT code 77790, there were many fewer single
claims for CPT codes 94760 and 94761 than multiple procedure claims
that included CPT codes 94760 and 94761. CPT codes 94760 and 94761
describe services that were 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.
We did not receive any public comments concerning our proposal.
Therefore, for CY 2006 we are finalizing, without modification, our
proposal to accept the APC Panel's recommendations to retain as
packaged services CPT codes 77790, 94760, and 94761.
For CY 2006, we proposed to accept the APC Panel recommendation to
gather data and review CPT codes 42550 (injection for salivary x-ray),
and 38792 (sentinel node identification) with the Packaging
Subcommittee. In the proposed rule, we stated that this would include
analyzing single and multiple procedure claims volume and resource
utilization data, and reviewing those studies with the Packaging
Subcommittee. During the August 2005 APC Panel meeting, the Panel
recommended that we continue to package CPT codes 42550 and 38792 for
CY 2006. We believed that CPT code 42550 was appropriately packaged, as
were other injection codes that were integral to the provision of some
separately payable procedures. In addition, we agreed with the APC
Panel that CPT code 38792 was appropriately packaged because we
believed that it would almost always be provided with other separately
payable procedures on the same date of service, such as nuclear
medicine services or surgical procedures.
We received a few public comments regarding our proposal to retain
as packaged CPT code 38792.
Comment: The commenters stated that CPT 38792 is sometimes the only
service provided in the hospital outpatient department, and that
separate payment under the OPPS should be allowed. They stated that
there are instances in which the injection for the X-ray is provided in
the hospital outpatient department, and then the beneficiary goes to a
different setting outside the hospital for the surgery. The commenters
requested that CMS assign the proposed ``Q'' status indicator to this
procedure code to make separate payment possible under the OPPS.
Response: We believe that the most appropriate course of action
with regard to CPT code 38792 is to retain its packaged status and to
collect
[[Page 68546]]
additional data and, as recommended by the APC Panel, to then present
those data to the Packaging Subcommittee during our next meeting with
them. Based on our CY 2004 claims data, we had only four single claims
for CPT code 38792. We continue to believe that payment for the
injection service is most appropriately packaged with other separately
payable services provided on the same date of service, most likely
imaging or surgical procedures.
After carefully reviewing and considering the public comments
received for CY 2006, we are accepting the APC Panel's recommendations
to retain as packaged services CPT codes 38792 and 42550. Payment for
those injection services is most appropriately bundled with the
payments for other separately payable services provided on the same
day.
We will share the CY 2004 and early CY 2005 hospital claims data
concerning CPT 38792 with the APC Panel Packaging Subcommittee as
recommended by the APC Panel, for its review during the next biannual
APC Panel meeting.
As we proposed, we referred CPT code 97602 (Nonselective wound
care) for MPFS evaluation of its bundled status as CPT code 97602
relates to services provided under the OPPS.
We received several public comments concerning our proposed
treatment of CPT code 97602 for CY 2006, with assignment of status
indicator ``A.''. Those comments and others related to wound care
services are addressed in section III.D.5.j. of this preamble.
During the August 2005 APC Panel meeting, the Panel recommended
that CMS collect additional data on CPT code 36500 (Venous
catheterization for selective blood organ sampling) and the
corresponding radiological supervision and interpretation code, 75893.
We received several clinical scenarios from a provider, indicating that
CPT codes 36500 and 75893, both packaged services, were frequently
provided on a claim without any separately payable codes. In those
cases, the provider did not receive any payment. We believed it was
unlikely that these two procedures would be reported without any other
separately payable codes on the claim. Our early review of several
clinical scenarios revealed that other separately payable codes would
likely be provided on the same claim.
We received one comment in response to our proposal to retain
packaged status for CPT codes 36500 and 75893.
Comment: One commenter requested that CMS allow separate payment
for CPT codes 36500 and 75893 when these services are the only services
on the claim. The commenter stated that there are many times that these
are the only procedures performed during a hospital outpatient
encounter.
Response: Our data do not support separate payment for these
procedures at this time. After considering the comment and the APC
Panel's recommendation, we will collect and review additional data to
determine which codes are most frequently billed on claims with CPT
codes 36500 and 75893. We will share the CY 2004 and early CY 2005
hospital claims data for these venous catheterization and radiological
supervision services as recommended by the APC Panel, for its review
prior to the next biannual APC Panel meeting.
During the August 2005 APC Panel meeting, the Panel recommended
that CMS maintain the packaged status of CPT 0069T (Acoustic heart
sound recording and computer analysis only). This code is indicated as
an add-on code to an electrocardiography service, according to the
American Medical Association's CY 2005 CPT book. Therefore, we believed
this code was appropriately packaged because it was integrally related
to the provision of electrocardiography, and should never be performed
alone.
We received several comments regarding CPT 0069T in response to the
code's new interim designation in the CY 2005 final rule with comment
period and to our proposal for CY 2006.
Comment: Several commenters requested that CMS change the status
indicator for CPT code 0069T (Acoustic heart sound recording and
computer analysis only). The commenters requested that CMS assign the
procedure to APC 0099 with an ``S'' status indicator rather than ``N,''
as was the CY 2005 and proposed CY 2006 status indicator for code
0069T. The commenters indicated that the test's status as a packaged
procedure results in inequitable payment to hospitals. They stated that
the cost of an EKG with the acoustic heart sound recording is $55,
whereas the cost of an EKG without such recording is only $31. They
added that because CMS has packaged the procedure, the hospital is
underpaid by $24 for each test it performs.
Response: It is our understanding that the acoustic heart sound
recording and analysis is intended for a specific, targeted group of
patients to enhance the provider's ability to diagnose heart failure.
The technology always is performed in conjunction with an EKG and as
such is ideal for packaging. It is up to hospitals to increase their
charges to reflect the additional costs for those EKGs that include the
acoustic heart sound recording. If the hospital uses the test according
to the manufacturer's guidelines, the costs will be distributed over
the large number of EKGs that are performed in the hospital outpatient
department and, over time, the additional costs will be recognized in
the OPPS rates as increased payments for other services provided on the
same day, likely EKGs. We are accepting the Panel's recommendation that
we maintain the packaged status of CPT code 0069T for CY 2006. We will
review claims data as they become available for the CY 2007 OPPS
update.
We also received several comments that requested status indicator
changes for other CPT codes, not previously brought before the
Packaging Subcommittee.
Comment: Commenters suggested that the following packaged
procedures should be made separately payable: CPT code 96523
(Irrigation of implanted venous access device for drug delivery systems
(new code for CY 2006)); CPT code 76001 (Fluoroscopy, physician time
more than one hour); CPT code 76003 (Fluoroscopic guidance for needle
placement); CPT code 76005 (Fluoroscopic guidance and location of
needle or catheter tip); CPT code 74328 (Endoscopic catheterization of
the biliary ductal system, radiological supervision and
interpretation); CPT code 74329 (Endoscopic catheterization of the
pancreatic ductal system, radiological supervision and interpretation);
CPT code 74330 (Combined endoscopic catheterization of the biliary and
pancreatic ductal systems, radiological supervision and
interpretation); HCPCS code P9612 (Catheterization for collection of
specimen); and HCPCS code G0269 (Placement of occlusive device into
either a venous or arterial access site, post surgical or
interventional procedure).
Response: We believe that the commenters' suggestions bear closer
examination. We will not make any changes to the packaged status of
these services at this time. Rather, we will collect data related to
the costs and utilization of these services for presentation to the
Packaging Subcommittee of the APC Panel. We note that the status
indicator of CPT code 96523, a new CPT code for CY 2006, is subject to
comment in this final rule with comment period. We will discuss with
the Packaging Subcommittee, on an ongoing basis, packaged procedures
for which status indicator changes have been suggested by the public.
The ongoing process allows members some additional time to
[[Page 68547]]
consider the issues we bring to them prior to the twice yearly meetings
where the subcommittee makes its recommendations to the full APC Panel.
Additional issues and new data concerning the packaging status of
codes will be shared with the APC Panel Packaging Subcommittee 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. Payment for Partial Hospitalization
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. PHP APC Update for CY 2006
To calculate the final CY 2006 PHP per diem payment, we initially
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 used 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 from year to year while the median per diem
cost for hospital-based PHPs has remained relatively constant ($200-
$225). We believe that CMHCs 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. Since 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 with comment period 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.
As discussed in the proposed rule (70 FR 42693), 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
compared to CY 2003. The average charge per day for CMHCs in CY 2003
was $1,184 and in CY 2004, the CMHC average charge per day dropped to
$765. 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.
[[Page 68548]]
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 believed 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.
As stated in the proposed rule (70 FR 42693), we considered three
alternatives to our update methodology for the PHP APC for CY 2006 that
would mitigate this drastic reduction in payment for PHP. One
alternative was 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 have used $209, the
median per diem cost for hospital-based PHPs during CY 2004 to
establish the PHP APC for CY 2006. However, we believed 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.
The second alternative we considered was 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. 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 have affected 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 will provide an incentive for CMHCs
to stabilize their charges so that we can use their data in future
updates of the PHP APC. However, we believe that the trimming methods
described above will 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, as stated in the proposed rule (70 FR 42693) we continue
to be concerned about the volatility of the CMHC data. The analyses we
conducted for the proposed rule seem to indicate that eliminating
aberrant CMHC data results in a median per diem cost more in line with
hospital data. We stated in the proposed rule that we would continue to
analyze the CMHC data in developing payment rates, and cautioned that
we may use only hospital data in the future if the data continue to be
unstable.
In the proposed rule, we stated that we considered a third
alternative that would lessen the PHP payment reduction for CY 2006,
yet provide an adequate payment amount to promote access to the partial
hospitalization benefit for Medicare beneficiaries (70 FR 42694). Using
this approach, for CY 2006, we proposed 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. We scaled that amount relative
to the cost of a mid-level office visit to establish the PHP APC for CY
2006. We believed 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 believed 15 percent was 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 proposed that the reduction in payments for
PHP be a transitional measure, and proposed to 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.
We received 58 public comments in response to this proposal. A
summary of the comments is provided below along with our responses.
Comment: In general, the commenters expressed concern that a
reduction in the PHP rate of 15 percent would lead to the closure of
many PHPs and that limited access to this crucial service would result
in more costly inpatient hospital care as the only alternative. CMHCs
commented that their costs are higher than hospitals', with most in the
$300 to $400 range. Another commenter indicated that a per diem rate of
$300 to $350 was more appropriate than our proposed amount.
A few commenters also suggested alternatives such as including
prior years' CMHC data trended forward based on medical inflation,
using a rolling-average or maintaining the CY 2005 payment rate for PHP
services furnished in CY 2006.
Response: For the final rule, we analyzed 12 months of more current
data for hospital and CMHC PHP claims for services furnished between
January 1, 2004 and December 31, 2004. This claims data is more current
in that it includes claims paid through June 30, 2005. We also used the
most currently available cost-to-charge ratios to estimate costs. Using
this updated data, we recreated the analysis performed for this year's
proposed rule to determine if the significant factors we used in
determining the proposed PHP rate had changed. The median per diem cost
for CMHCs increased slightly to $154, while the median per diem cost
for hospital-based PHPs decreased slightly to $201. The CY 2004 average
charge per day for CMHCs was $760 similar to the figure noted in the
proposed rule ($765) but still significantly lower than what is noted
for CY 2003 ($1,184). We continue to believe that a combination of
reduced charges and slightly lower CCRs for CMHCs resulted in a
significant decline in the CMHC median per diem cost between CY 2003
and CY 2004.
Following the methodology used for the CY 2005 OPPS update, the
combined hospital-based and CMHC median per diem cost would be $161, a
decrease of 44 percent compared to the CY 2005 combined median per diem
amount. While this figure is somewhat higher than the $149 combined
median in the proposed rule, we believe that this amount is still too
low to cover the cost for all PHPs.
As we did in the proposed rule, we again considered three
alternatives to our update methodology for the PHP
[[Page 68549]]
APC for CY 2006 that would mitigate the payment differences for PHP
services. The first alternative was to base the PHP APC on hospital-
based PHP data alone. Using the most recent years available data, the
median per diem cost of hospital-based PHPs for CY 2004 is $201,
somewhat less than the $209 median per diem cost of hospital-based PHP
using the proposed rule CY 2004 data. We continue to believe that using
$201 would be too low for all PHPs in CY 2006. However, we do believe
the decrease from $209 to $201 from the proposed rule to this final
rule with comment continues the trend in lower per diem costs for
hospital-based PHPs.
The second alternative we considered was to apply the same trimming
methodology noted in the proposed rule 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. Again, using the most recent available data, we compared CMHC
per diem costs in CY 2003 to CMHC per diem cost in CY 2004 and
determined the percentage change. Initially, we trimmed CMHC 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
$165, slightly more than noted in the proposed rule. Again, this
approach still produced a per diem cost we believe is too low. We then
trimmed CMHC claims where the difference in CMHC per diem costs from
2003 to 2004 were 25 percent or more. This trimming variant produced a
CMHC median per diem cost of $172 for CY 2004.
We continue to believe that trimming certain aberrant CMHC data
will provide an incentive for CMHCs to stabilize their charges so that
we can use their data in future updates of the PHP APC. However, the
two trimming methods described above produce median per diem costs that
we believe are too low for the CY 2006 PHP APC rate.
The CY 2004 claims data coincides with the effective date of the
separate CMHC outlier threshold policy which became effective January
1, 2004. We believe that this policy may have, in part, contributed to
the rapid decreases in CMHC's per diem charges in CY 2004. If so, we
may see charges stabilize in the CY 2005 claims data which would enable
us to use the CMHC data to compute the CY 2007 rate.
We proposed a 15 percent reduction to the combined hospital-based
and CMHC median per diem cost for CY 2006. We have conducted further
analysis of more complete CY 2004 claims data combined with more
recently available cost-to-charge ratios. The newer data continue to
produce a combined hospital-based and CMHC median per diem cost that is
an unacceptable decrease from CY 2005 PHP APC rate. We continue to
believe that 15 percent is an appropriate reduction because it
recognizes decreases in median per diem costs in the hospital data and
the CMHC data, and also reduces the risk of adverse impact on access to
these services that might result from a large single-year rate
reduction.
To apply this methodology, we 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, the
resulting APC final rate for PHP of $246.04 for CY 2006, of which
$49.21 is the beneficiary's coinsurance.
Comment: A few commenters stated that CMHC facility costs increased
in virtually every area including salaries, benefits, supplies,
insurance, dietary support, transportation, communications and
administrative support and that they experienced overall increases in
expenses of more than 5 percent in most areas. These commenters
requested that CMS increase the per diem rate paid for PHP services
consistent with the inflation rate for the medical industry. Another
commenter suggested we use inpatient costs per day as the basis for the
PHP median per diem cost. This commenter suggested that CMS develop an
adjustment factor relative to the inpatient psychiatric facility
prospective payment system per diem base rate to form the basis for the
PHP per diem rate.
Response: The statute does not provide for the update strategies
suggested by these commenters and is specific as to the update
methdology.
Comment: A few commenters indicated that the methodology used to
compute the PHP APC distorts per diem costs because the claims include
non-paid days.
Response: If a provider has charges on a bill for which they do not
receive payment, this will be reflected in that provider's cost-to-
charge ratio. This lower cost-to-charge ratio will be applied to the
larger charges and will result in the appropriate cost per diem.
Comment: A few commenters stated that they are unable to collect
coinsurance from their patients, that Medicaid cuts have made it more
difficult to stay viable, and that the proposed rate reduction would
cause PHP programs to close.
Response: The Medicare bad debt policy and Medicaid payment
policies are beyond the scope of the July 25, 2005 OPPS proposed rule.
We note the bad debt policy can be located in the Medicare Provider
Reimbursement Manual, Pub. 15, Chapter 3 or through the following link:
http://www.cms.hhs.gov/manuals/pub151/PUB_15_1.asp.
Comment: With respect to the methodology used to establish the PHP
APC amount, commenters expressed concern that data from settled cost
reports fails to include costs reversed on appeal and that there are
inherent problems in using claims data from a different time period
like available cost-to-charge ratios on settled cost reports.
These commenters also stated that this can only artificially lower
the actual median costs. The commenters claims that when cost reports
are settled, generally 2 years or more after the actual year of
services, they have operated on actual revenues of 80 percent of the
per diem.
Response: We use the best available data in computing the APCs.
With respect to PHP services, we specifically issued a Program
Memorandum on January 17, 2003 directing FIs to update the cost-to-
charge ratios on an on-going basis whenever a more recent full year
cost report is available. In this way, we hoped to minimize the time
lag between the cost-to-charge ratios and claims data.
Comment: One commenter related that administrative costs for CMHCs
continue to be a major impediment to operating PHPs for Medicare
beneficiaries. Medicare does not cover transportation to and from
programs and does not cover meals. Almost all programs offer
transportation because in most cases Medicare beneficiaries with
serious mental illnesses would not be able to access these programs
without the transportation.
Response: The services that are covered as part of a PHP are
specified in section 1861(ff) of the Act. Meals and transportation are
specifically excluded under section 1861(ff)(2)(I) of the Act.
Comment: Several commenters simply summed the payment rates for
three Group Therapy Sessions (APC 0325) and one Extended Individual
Therapy Session (APC 0323) and requested that amount as the minimum for
a day of PHP. These same commenters then questioned why the per diem
amount is considerably less than the combined cost of these services.
Response: We do not believe this is an appropriate comparison. It
is important to note that the APC services cited by
[[Page 68550]]
the commenter (APC 0325 and APC 0323) are not PHP services, but rather
single outpatient therapeutic sessions. PHP is a complete program of
services with efficiencies and economies of scale provided in contrast
to individual psychotherapy services. We also believe that the
commenters used only the median cost from single bills, for example,
where group psychotherapy was the only service furnished. As stated
earlier, we used data from PHP programs (both hospitals and CMHCs) to
determine the median cost of a day of PHP. PHP is a complete program of
services with efficiencies and economies of scale provided in contrast
to individual psychotherapy services.
The PHP APC (0033) reflects the program of services provided in
that it consists of the cost of all services provided each day and does
not reflect a sole service. Although we require that each PHP day
include a psychotherapy service, we do not specify the specific mix of
other services provided and have focused our analysis on the cost per
day rather than the cost of each service furnished within the day.
Comment: One commenter requested that the same provisions given to
rural hospital outpatient departments also be given to rural CMHCs.
Response: We believe the commenter may be referring to the
statutory hold harmless provisions. Section 1833(t)(7)(D) of the Act
authorizes such payments, on a permanent basis, for children's
hospitals and cancer hospitals and, through CY 2005, for rural
hospitals having 100 or fewer beds and sole community hospitals in
rural areas. Section 1866(t)(7)(D) of the Act does not authorize hold
harmless payments to CMHC providers.
Comment: We received several comments from CMHCs stating that their
costs are higher as hospitals can share and spread their costs to other
departments. These commenters also indicated that the CMHC patient
acuity level is more intense than the hospital patients as hospital
outpatient departments need only provide 1 or 2 therapies, yet still
receive the full per diem.
Response: By definition, a PHP bill must have at least 3 partial
hospitalization HCPCS codes for each day of service, one of which must
be a psychotherapy HCPCS code (other than brief psychotherapy). This
requirement is applied to all partial hospitalization bills, whether
provided in an outpatient hospital department or in a CMHC. Therefore,
hospital outpatient departments must provide the same level of program
intensity and must provide for the same level of patient acuity as
CMHCs in order to receive payment.
Comment: A few commenters requested that CMS revise the CMHC cost
report form (CMS-2088) to include a field which allows the CMHC to
report its Medicare PHP days. They also recommended that we revise
settlement worksheet D on the CMS-2088 to include new fields that
display the Medicare PHP cost per day and separate PHP reimbursement
between outlier and non-outlier reimbursement (since the current cost
report form commingles both types of reimbursement). Finally, the
commenters recommended that we revise the CMHC Provider Statistical &
Reimbursement Report Type: 76P to include a field which reports actual
paid Medicare PHP days.
Response: We appreciate the commenters suggestions for improving
the Medicare cost report for CMHCs. We plan to explore these and other
modifications to improve CMHC cost reporting so that we may use CMHC
data in future ratesetting.
Comment: A few commenters stated that hospitals that offer partial
hospitalization services should not be penalized for the instability in
data reporting that stems from CMHCs.
Response: We believe hospitals-based PHPs have actually benefited
from our combining hospital and CMHC data to compute the PHP APC rate.
The median calculated from hospital outpatient department PHPs has
consistently been far less then the median amount that is computed for
CMHCs.
Comment: One commenter who represents CMHCs expressed frustration
over several unsuccessful attempts at becoming a member of the APC
panel.
Response: The qualifications and selection of the APC Panel members
is outside the scope of this regulation. We refer the commenter to
http://www.cms.hhs.gov/faca/apc/default.asp for information on the APC
panel.
3. 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,
we used CY 2004 claims data to calculate the 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 contrast, for 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.
In the proposed rule, CMHCs were projected to receive 0.6 percent
of the estimated total OPPS payments in CY 2006. As noted in section
II.H. of this preamble, for CY 2006, we proposed to set the target for
hospital outpatient outlier payments at 1.0 percent of total OPPS
payments. We also proposed allocate a portion of that 1.0 percent, 0.6
percent (or 0.006 percent of total OPPS payments), to CMHCs for PHP
services. As discussed in section II.G. below, we proposed to set 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 did not set a dollar threshold for CMHC outliers. We proposed 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
[[Page 68551]]
outlier threshold, we used hospital charge inflation factor to inflate
charges to CY 2006.
We received no comments on our proposal. As discussed in section
II.H, using more recent data for this final rule, we set the target for
hospital outpatient outlier payments at 1.0 percent of total OPPS
payments. We also allocate a portion of that 1.0 percent, 0.6 percent
(or 0.006 percent of total OPPS payments), to CMHCs for PHP services.
As we proposed, we set 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 did not set a dollar threshold for
CMHC outliers. For CY 2006, we set the outlier threshold for CMHCs at
3.40 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. Conversion Factor Update for CY 2006
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 final rule on August 12, 2005, is 3.7 percent (70
FR 47392), rather than the 3.2 percent forecast published in the IPPS
proposed rule on May 4, 2005 (70 FR 23384) and referenced in the CY
2006 OPPS proposed rule. 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 3.7 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 budget neutrality factor of
1.001485209 for wage index changes by comparing total payments from our
simulation model using the FY 2006 IPPS final wage index values to
those payments using the current (FY 2005) IPPS wage index values. In
addition, to accommodate the rural adjustment discussed in section
II.G. of this preamble, we calculated a budget neutrality factor of
0.99614506 by comparing payments with the rural adjustment to those
without. For CY 2006, we estimate that allowed pass-through spending
will equal approximately $45.5 million, which represents 0.17 percent
of total OPPS projected spending for CY 2006. The conversion factor is
also adjusted by the difference between the 2.0 percent pass-through
set-aside and the 0.17 percent estimate of pass-through spending.
Finally, decreasing payments for outliers to 1.0 percent of total
payments, as proposed, returned 1.0 percent to the conversion factor.
The market basket increase update factor of 3.7 percent for CY
2006, the required wage index budget neutrality adjustment of
approximately 1.001485209, the return of 1.0 percent in total payments
from a reduced outlier target, the return of 1.83 percent of the pass-
through set-aside, and the adjustment for the rural payment adjustment
of 0.99614506 result in a conversion factor for CY 2006 of $59.511.
We received several public comments on the proposed conversion
factor update for CY 2006.
Comment: Several commenters requested CMS to revise the market
basket update included in the final OPPS rule to include a 3.7 percent
market basket update, consistent with the IPPS final rule.
Response: We have used a 3.7 percent market basket increase update
factor in our conversion factor calculation for the CY 2006 OPPS
update.
Comment: One commenter suggested that CMS increase total payments
to hospitals by 3.2 percent and not the 1.9 percent total payment
increase indicated in the regulatory impact analysis section of the
proposed rule.
Response: The 1.9 percent reported in column 6 of Table 33 in the
regulatory analysis section of the proposed rule is not the 3.2 percent
that appears in column 5 because it models all payments to hospitals.
The 1.9 percent reflects the loss of payment for drugs outside of OPPS
authorized by Pub. L. 108-173, that expires in CY 2006. The statute
requires CMS to take into account, for purposes of establishing a
budget neutral CY 2006 update, the additional costs associated with
payments for specified covered outpatient drugs. The regulatory impact
analysis accompanying this final rule with comment period demonstrates
a similar loss. The market basket increase update factor of 3.7 percent
is offset by the drug payments in CY 2006 that were made outside the
system in CY 2005, to result in an overall increase of 2.2 percent.
Accordingly, we are finalizing the conversion factor update for CY
2006 of $59.511.
D. Wage Index Changes for CY 2006
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 proposed 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 the CY 2006 OPPS proposed rule, in accordance with our
established policy, we proposed to use the FY 2006 final version of
these wage indices with any corrections posted on the CMS Web site, to
determine the wage adjustments for the OPPS payment rate 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,
[[Page 68552]]
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 applying to the OPPS for CY 2006. We refer the reader to the FY
2006 IPPS final rule (70 FR 47363 through 47387, August 12, 2005) for a
detailed discussion of the changes to the wage indices. In this final
rule with comment period, we are not reprinting the FY 2006 IPPS wage
indices referenced in the discussion below, with the exception of the
out-migration wage adjustment table (Addendum L of this final rule with
comment period). We refer readers to the CMS Web site for the OPPS at
http://www.cms.hhs.gog/providers/hopps. At this Web site, the reader
will find a link to the FY 2006 IPPS wage indices tables and any
corrections made to them.
1. The 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 final
rule, we again stated that hospitals located in MSAs will be urban and
hospitals that are located in Micropolitan Areas or Outside CBSAs will
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 1-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
final rule, we discussed the cessation of the 1-year transition and
announced that hospitals will 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, TEFRA hospitals will receive 100
percent of their wage index based upon the new CBSA configurations
beginning in CY 2006.
2. We are applying the 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 final 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 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
adopting all of the IPPS reclassifications 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. We are continuing to apply 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
final rule (70 FR 47383 and 47384, August 12, 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 final rule, we finalized our policy that
reclassified hospitals not receive the out-migration adjustment unless
they waive their reclassified 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 to this final rule with comment
period lists all hospitals that will receive an out-migration
adjustment to their wage index in 2006 including TEFRA hospitals that
will receive an out-migration adjustment under this OPPS final rule
with comment period. (See also Table 4J of the Addendum to the FY 2006
IPPS final rule).
We used the final FY 2006 IPPS indices to adjust the payment rates
and coinsurance amounts that are included in this OPPS final rule with
comment period 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 final 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.
We received two public comments on the application of the FY 2006
IPPS wage indices under the OPPS.
Comment: One commenter supported our proposal to extend the IPPS
wage indices to OPPS because this simplifies payment for hospitals.
One commenter suggested that OPPS use different labor share
percentages for hospitals with a wage index below 1.0
[[Page 68553]]
and hospitals with a wage index above 1.0. The commenter specifically
cited the requirement in Pub. L. 108-173 that IPPS use a larger labor
share percentage for hospitals with wage indexes over 1.0 and a
relatively smaller labor share percentage for hospitals with wage
indexes less than 1.0. This commenter specifically requested that CMS
use a labor share of 50 percent for hospitals with wage indexes less
than 1.0.
Response: Section 403 of Pub. L. 108-173 requires that IPPS
hospitals be paid using a labor-related share of 62 percent unless this
labor-related share would result in lower payments than would otherwise
be made. Unlike IPPS, OPPS has no mandate to reduce the labor-related
share. The OPPS labor-related share was determined through regression
analyses conducted for the initial OPPS proposed rule (63 FR 47581,
September 8, 1998). Those analyses identified 60 percent as the
appropriate labor share for outpatient services. We confirmed that this
labor-related share is still appropriate during our regression analysis
for the payment adjustment for rural hospitals in this final rule. In
these regression equations, the coefficient of the hospital wage index
is the estimated percentage change in unit costs attributable to a 1
unit percent increase in the wage index, which is an estimate of the
share of outpatient unit costs attributable to labor. Both Table 5 and
Table 6 in section II.G. of this preamble indicate a coefficient of 63
percent for the wage index. In light of both analyses, we believe that
the current 60 percent labor-related share remains appropriate for OPPS
payment purposes.
After carefully considering the public comments received, we are
finalizing our wage index adjustment policy for CY 2006 OPPS as
proposed without modification.
E. Statewide Average Default Cost-to-Charge Ratios (CCRs)
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). As we proposed, in this final rule with comment period, we have
updated the default ratios using the most recent cost report data for
CY 2006.
We calculated the statewide default CCRs using the same CCRs that
we use to adjust charges to costs on claims data. Table 3 of the
proposed rule (70 FR 42696) listed 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.
For the proposed rule, 80.79 percent of the submitted cost reports
represented data for CY 2003. We have since updated the cost report
data we use to calculate cost to charge ratios with additional
submitted cost reports for CY 2004. For the final rule, 51.66 percent,
the majority of the submitted reports utilized in the default ratio
calculation, 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 CY 2003, 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 appeared 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.
We did not receive any public comments concerning the proposed
statewide average default CCRs. Therefore, we are finalizing them as
shown in Table 3 below for OPPS services furnished on or after January
1, 2006.
BILLING CODE 4120-01-C
[[Page 68554]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.010
[[Page 68555]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.011
BILLING CODE 4120-01-P
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 SCHs located in
rural areas for services
[[Page 68556]]
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 SCHs 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.)
We received four public comments concerning this hold harmless
policy.
Comment: The commenters expressed concern about the impact that the
expiration of the transitional corridor hold harmless payments would
have on small rural hospitals because these are vulnerable facilities
that provide important access to care in their communities.
One commenter recommended that the provision be expanded to
permanently extend the hold harmless payments to small rural hospitals
and rural SCHs, as is currently the case for cancer hospitals and
children's hospitals. Two commenters referenced efforts by a large
hospital association to work with Congress on legislation to provide
for this expansion.
Response: We appreciate the comments that were submitted and we
have carefully reviewed each of them. As the commenters acknowledge,
section 1833(t)(7)(D) of the Act, as amended by section 411 of Pub. L.
108-173, provides that OPPS transitional corridor payments will expire
for rural hospitals having 100 or fewer beds and SCHs located in rural
areas on December 31, 2005. Therefore, we are providing for the
termination of these payments in this final rule with comment period.
However, as noted in section II.G. of this final rule with comment
period, we are providing a 7.1 percent adjustment for rural sole
community hospitals in accordance with section 411 of Pub. L. 108-173.
G. Adjustment for Rural Hospitals
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.
As described in our CY 2006 OPPS proposed rule, we used regression
analysis to study the differences in outpatient cost per unit between
rural and urban hospitals because we believed that a simple comparison
of unit costs would not capture the myriad of factors that contribute
to observed costs, including labor supply, complexity, and volume of
services. For this final rule with comment period, we reran these
regression analyses that we conducted in the proposed rule and
conducted additional analyses in response to issues raised in public
comments.
For this final rule with comment period, our regression analysis
included all 4,088 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 a more
complete set of CY 2004 Medicare claims than was used in the analysis
for the proposed rule 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,
services receiving pass-through payments, and any service paid under a
separate payment system 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.
We calculated the total unit outpatient cost for each hospital by
dividing total outpatient cost by the total number of APC units
discounted for the joint performance of multiple surgical procedures.
(See section II.G.1. below for a definition of discounted units.) As in
the analysis for the proposed rule, 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. We used the explanatory regression
models to assess which class of rural hospitals, if any, is
significantly more costly than urban hospitals. In a ``payment model''
approach, the only independent variables included in the cost
regression are those variables considered for payment adjustments. We
used the payment model to determine the amount of the adjustment for
any class of hospitals identified as significantly more costly in the
explanatory model. The regression 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 unit 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). In regression
analysis, dummy variables capture the difference in means of the
dependent variable in the class of hospitals of interest and all other
hospitals, holding all other variables in the equation constant.
1. Factors Contributing to Unit Cost Differences Between Rural
Hospitals and Urban Hospitals and Associated Explanatory Variables
For this final rule with comment period, we retained the same set
of explanatory variables as used in the regression analysis for the
proposed rule because we believe that these variables capture the most
important factors contributing to differences in unit costs between
rural and urban hospitals.
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. We used the OPPS hospital wage index for CY 2006 as our
measure of relative differences in labor input costs.
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. We used the total
number of discounted units as our indicator of volume. Discounted units
[[Page 68557]]
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. 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).
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. 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 as our measure of complexity. The service-mix index
reflects the average APC weight of each facility's outpatient services.
From our analysis, we also believe that the number of beds captures
variation in unit costs attributable to the additional complexity of
services performed by a hospital that is not explained by their service
mix index.
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 discounted 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 of
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, noted
above, or scale economies are more important.
In addition to the above factors, we included additional
categorical variables to indicate the types of specialty hospitals that
participate in OPPS, specifically cancer, children's, long-term care,
rehabilitation, and psychiatric hospitals because we do not believe
that the costs, volume, and service-mix associated with these hospitals
looks like the costs, volume, and service mix of a typical OPPS
provider.
Finally, we included several categorical variables for
rural/urban location and type of rural hospital to capture variation
unexplained by the other independent variables in the model. Urban
hospitals are the reference group for all of the different types of
hospitals examined included in the regressions equations below. Table 4
provides descriptive statistics for the dependent variables and key
independent variables by urban and rural status. Without controlling
for the other influences on per unit cost, rural hospitals have a 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 Rural and Urban Location
----------------------------------------------------------------------------------------------------------------
Rural Urban
---------------------------------------------------
Variable Standard Standard
Means Deviation Means Deviation
----------------------------------------------------------------------------------------------------------------
Unit Outpatient Cost........................................ $157.57 ($64.94) $188.76 ($93.53)
Standardized Unit Outpatient Cost........................... $75.51 ($55.70) $73.54 ($40.98)
Wage Index.................................................. 0.8807 (0.1012) 1.0212 (0.1479)
Service-Mix Index........................................... 2.3636 (0.9357) 2.7544 (1.6037)
Outpatient Volume........................................... 21,021 (21,770) 38,469 (46,925)
Beds........................................................ 78 (56) 196 (170)
Number of Hospitals......................................... 1,206 ........... 2,882
----------------------------------------------------------------------------------------------------------------
2. Results
For this final rule with comment period, we began our analysis by
rerunning the regression models that we had examined for the proposed
rule. As a group, all rural hospitals continue to demonstrate weak
evidence of slightly higher unit costs than urban hospitals, after
controlling for labor input prices, service-mix complexity, volume,
facility size, and type of hospital. In the explanatory model,
regressing unit costs on all of the independent variables discussed
above, the coefficient for the rural categorical variable was 0.024
(p=0.0613). 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 suggests that rural hospitals are approximately
2.4 percent more costly than urban hospitals after accounting for the
impact of other explanatory variables. This is the same coefficient
observed in the regression analyses for the proposed rule. The results
of this regression appear in Table 5. This regression demonstrated
reasonably good explanatory power with an adjusted R2 of 0.54
(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
[[Page 68558]]
facility size variable (beds), suggesting that facility size is more
reflective of complexity than any economies of scale. The payment
regression that accompanies this explanatory model indicates an
adjustment for all rural hospitals of 4.3 percent.
BILLING CODE 4120-01-P
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BILLING CODE 4120-01-C
As we did for our proposed rule, we divided rural hospitals into
categories that reflected their eligibility for the expiring hold
harmless provision under section 1833(t)(7)(D) of the Act in order to
determine whether the small difference in costs was uniform across
classes of rural hospitals or whether all of the variation was
attributable to a specific type of rural hospitals. Specifically, we
divided rural hospitals into rural SCHs, rural hospitals with 100 or
fewer beds that are not rural SCHs, and other rural hospitals. The
first two categories of rural hospitals are currently eligible for
payments under the expiring hold harmless provision.
As indicated in the proposed rule, 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. The rural SCH variable has an explanatory regression
coefficient of 0.06044 and an observed probability of 0.0003. 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 6.2
percent would be less than 0.1 percent. This is sufficient evidence to
accept that rural SCHs are more costly than urban hospitals, holding
all other variables constant.
Notably, we observe no significant difference between all small
rural hospitals with 100 or fewer beds and urban hospitals or between
other rural hospitals and urban hospitals. In the explanatory
regression presented in Table 6, the dummy variable for small rural
hospitals has an observed coefficient of 0.01203 and an associated
probability of 0.4748. If the unit costs of small rural hospitals are
the same as those of urban hospitals, the probability of observing a
value as extreme or more extreme than 1.2 percent would be less than 50
percent. With such a high probability, there is insufficient evidence
to conclude that rural hospitals with 100 or fewer beds are more costly
than urban hospitals, holding all other variables constant. The results
are almost identical when
[[Page 68559]]
volume and facility size are not included in the equation. Finally, the
dummy variable for other rural hospitals has an observed coefficient of
-0.01646 and an associated probability of 0.4545. If the unit costs of
other rural hospitals are the same as those of urban hospitals, the
probability of observing a value as extreme or more extreme than -1.7
percent would be less than 50 percent. These results are also present
when facility size and volume are not included in the equation. As with
small rural hospitals, this is insufficient evidence to conclude that
other rural hospitals are more costly than urban hospitals. Further,
for this group of rural hospitals, the coefficient is negative,
indicating lower cost per unit.
[GRAPHIC] [TIFF OMITTED] TR10NO05.013
Based on the above analysis, we continue to believe that a payment
adjustment for rural SCHs is warranted. The accompanying payment
regression, also appearing in Table 6, indicates a cost impact of 7.1
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 implementing a 7.1 percent payment increase for rural SCHs for
CY 2006. This adjustment will apply to all services and procedures paid
under the OPPS, excluding drugs, biologicals, and services paid under
the pass-through payment policy. As stated in the proposed rule, this
adjustment is budget neutral, and will be applied before calculating
outliers and coinsurance. We will not reestablish the adjustment amount
on an annual basis, but we may review the adjustment in the future, and
if appropriate, may revise the adjustment. Additional descriptive
statistics are available on the CMS Web site.
We received 19 public comments concerning these results.
Comment: Several commenters supported our proposed payment
increased for rural SCHs of 6.6 percent.
Response: We appreciate the commenters' support. As we discussed
above, based on our most recent analysis, we are implementing an
adjustment of 7.1 percent in this final rule with comment period. We
believe that an adjustment at this level remains consistent with the
views expressed by the commenters.
Comment: Several commenters expressed concern that the regression
analysis, as presented, does not separately set out the regression
results for rural hospitals with 100 or fewer beds that are not rural
SCHs. They indicate that, while CMS stated that this class of hospitals
did not demonstrate significance in the explanatory regression
analyses, it did not definitively display these results. The
[[Page 68560]]
commenters highlighted the importance of showing these results because
these are the facilities that will be losing their hold harmless
protection in CY 2006. One of the commenters cited MedPAC's 2005 Report
to Congress, which noted that previous MedPAC research indicated higher
costs for low-volume hospitals which are predominantly rural. The
commenters urged CMS to specifically report the regression results with
small rural hospitals with 100 or fewer beds identified separately.
Response: We agree with the commenters that we should identify
small rural hospitals with 100 or fewer beds separately in the
analysis. The results in Table 6 demonstrate that small rural hospitals
with 100 or fewer beds do not appear to have unit costs different from
those of urban hospitals after controlling for other contributors to
unit cost, including volume.
Comment: Several commenters requested clarification on the
definition of rural in order to assess which hospitals would be
eligible for the rural adjustment. The commenters asked: Would a SCH
located in a rural area that has been reclassified for wage index
purposes into an urban area be eligible for the SCH adjustment? Would a
SCH located in an urban area that has been reclassified for wage index
purposes into a rural area be eligible for the SCH adjustment?
Response: SCHs will be considered rural for the rural adjustment,
and for purposes of the OPPS rural adjustment only, under section
1833(t)(13)(B) of the Act if a hospital is geographically located in a
rural area or has been reclassified to a rural area for wage index
purposes. Therefore, a SCH located in a rural area that has been
reclassified for wage index purposes into an urban area will be
eligible for the adjustment, regardless of whether the SCH has been
reclassified to an urban area for wage index purposes. In addition, a
SCH located in an urban area that has been reclassified for wage index
purposes into a rural area also will be eligible for the adjustment.
New Sec. 419.43(g)(1)(ii) of the regulations, which we are finalizing
in this final rule with comment period, will provide that an SCH is
eligible for the adjustment if the hospital is ``located in a rural
area as defined in Sec. 412.64(b) of this chapter or is treated as
being located in a rural area under Sec. 412.103.'' To clarify the
text in response to the comments received, we are referencing Sec.
412.103 in the final regulation text instead of the reference to
section 1886(d)(8)(E) of the Act. This definition of a ``SCH located in
a rural area'' only will apply for the purposes of the rural adjustment
in this rule.
Comment: One commenter asked if rural SCHs that are participating
in the Rural Community Hospital Demonstration Program would be eligible
for the rural adjustment.
Response: Rural SCHs participating in the Rural Community Hospital
Demonstration Program are eligible to receive this rural adjustment.
The Rural Community Hospital Demonstration Program, authorized under
section 410A of Pub. L 108-173, assesses whether rural hospitals will
benefit from cost-based reimbursement and is limited to payment for
inpatient services. Although SCHs participating in the demonstration
program are not eligible to receive traditional SCH payments made under
the IPPS, these hospitals retain their SCH status.
Comment: Several commenters requested clarification of whether CMS
intends to make this adjustment available beyond CY 2006, and whether
it intends to reestablish the adjustment amount on an annual basis.
Response: We will not reestablish the adjustment amount on an
annual basis, but we may review the adjustment in the future and, if
appropriate, revise the adjustment.
Comment: A few commenters requested that CMS extend the rural
adjustment to CMHCs or make some other special allowance or provision
for their rural location.
Response: Section 1833(t)(13)(A) of the Act limits the scope of
this analysis and any adjustment to comparing rural and urban hospitals
costs.
Comment: Several commenters requested that CMS extend the proposed
rural adjustment to all SCHs, not just rural hospitals, under its
equitable adjustment authority in section 1833(t)(2)(E) of the Act. The
commenters described the necessary access to services that urban SCHs
provide and highlighted that both urban and rural SCHs have been
recognized for special protections by Congress in other payment systems
because they are the sole source of inpatient hospital services
reasonably available to Medicare beneficiaries.
One commenter used the public use file that CMS provided on its Web
site and conducted detailed analyses to assess the appropriateness of
an adjustment for urban SCHs. The commenter compared urban SCHs, rural
SCHs, other urban hospitals, and other rural hospitals on the number of
beds, their service mix, and wage index. The commenter also conducted
regression analysis. The first model the commenter examined included a
variable for rural location and a variable for SCH status in addition
to the other variables used in CMS' explanatory model. The commenter
reported that the SCH variable is significant, suggesting that SCHs are
more costly than other non-SCHs controlling for rural or urban status.
The commenter concluded that the results indicated SCHs are
significantly more costly than hospitals that are not SCHs and that
geographic location does not influence this finding.
The same commenter also examined an explanatory model that
resembled CMS' explanatory model. The commenter indicated that this
model included separate variables for urban SCHs, rural SCHs, and all
other rural hospitals in order to isolate the unit cost differences
between urban SCHs and other hospitals. The commenter reported that, in
this model, the unit costs of urban SCHs were not significantly
different from urban, non-SCH unit costs. With regard to this last
finding, the commenter suggested that the lack of significance is less
important than the comparability in the magnitude of the coefficient
for rural and urban SCHs, and that both types of hospitals have
coefficients at 6 percent. Finally, the commenter examined the
significance of the rural indicator in an explanatory regression model
conducted only with SCH hospitals. Within this population, the
commenter reported that all explanatory variables are statistically
significant, except an indicator for rural status, and suggested that
this finding further supports extending the adjustment to urban SCHs.
The commenter concluded by requesting that CMS repeat its regression to
confirm that SCH status, and not geographic location, is indicative of
higher costs, and if it finds this to be true, to appropriately adjust
for higher costs.
Response: We do not believe it is sufficient to confirm that all
SCHs are significantly more costly than non-SCHs, as the commenter
demonstrated in its first regression model because the statutory
authority for this adjustment is to be based upon the comparison
between urban and rural hospitals. The regression model that includes a
variable for SCH status and a variable for rural location only confirms
that all SCHs have higher costs than hospitals that are not SCHs and
that, having controlled for SCH status, rural and urban hospitals are
not different. Rural SCHs comprise 90 percent of all SCH, and are the
basis for the observed significance on the SCH variable.
Notwithstanding the mandate for this rural adjustment, we believe that
urban SCHs would have to demonstrate strong
[[Page 68561]]
empirical evidence that they are significantly more costly than other
urban hospitals. We do not find the strong empirical evidence
supporting an adjustment for urban SCHs, as we do for rural SCHs.
In many respects, urban SCHs look like urban hospitals on some of
the key variables presented in Table 4. Urban SCHs have a mean cost per
unit of $183.89, and urban hospitals have a mean cost per unit of
$188.76. Urban SCHs have a mean standardized unit cost of $74.01, and
all urban hospitals have a mean standardized cost of $73.54. Finally,
urban SCHs have a mean volume of 36,714, and urban hospitals have a
mean volume of 38,469. Similar to the commenter, we also ran an
explanatory regression analysis that included urban SCHs as a separate
class of hospitals in addition to rural SCHs, small rural hospitals,
and other rural hospitals. In these results, the coefficient associated
with urban SCHs was 0.05960 and the associated probability was 0.1624.
If the unit costs of urban SCHs are the same as those of urban
hospitals, the probability of observing a value as extreme or more
extreme than 6.1 percent would be less than 20 percent. We acknowledge
the commenter's statement that the size of the coefficient on the urban
SCH dummy variable is comparable to that on the dummy variable for
rural SCHs. However, we do not believe that the size of the coefficient
is sufficient evidence. The lack of significance associated with such a
large coefficient is attributable to the much higher standard error
accompanying urban SCHs compared to rural SCHs. Higher standard error
indicates that there is large variability in unit costs for urban SCHs
after controlling for all other variables in the equation. Some urban
SCHs may have unit costs as high as rural SCHs, but clearly many do
not. We believe that this observation accounts for the lack of
significance on the rural variable in the commenter's regression
analyses, which was limited to the population of SCHs.
Comment: One commenter requested that CMS examine whether the
outpatient costs of Medicare-Dependent Small Rural Hospitals (MDHs), a
subgroup of rural hospitals, are higher than urban hospitals'
outpatient costs, and provide an adjustment to payments if appropriate.
Response: We did not find any evidence that rural MDHs are more
costly than urban hospitals. We ran an explanatory regression analysis
that included rural MDHs as a separate class of small rural hospitals
from other small rural hospitals because 90 percent of rural MDHs were
also small rural hospitals. We also included all of the other variables
in Table 6 above, including rural SCHs and other rural hospitals. In
these results, the coefficient associated with rural MDHs was -0.01955,
with an associated probability of 0.4438. If the unit costs of MDHs are
the same as those of urban hospitals, the probability of observing a
value as extreme or more extreme than 2 percent would be less than 50
percent.
Comment: One commenter argued that CMS excluded variables from the
regression model that control for ``financial pressure'' and ``market
structure.'' The commenter argued that higher costs can be the result
of inefficient operations as much as they could also be the result of
higher input costs created by rural location, and that measures of
financial pressure or market structure would capture any variation in
unit cost attributable to a lack of local competition. The commenter
suggested that SCHs may be inefficient because they already have
special payment status under the IPPS and the OPPS. Finally, the
commenter suggested that, because beneficiaries' access to care is the
central objective of any payment policy, CMS should consider a low-
volume adjustment that better captures higher costs that the hospital
cannot control. At the same time, the commenter acknowledged that
section 1833(t)(13)(A) of the Act specifically requires an analysis of
urban and rural costs.
Response: While it is not inappropriate to include additional
variables in the explanatory regression analysis, we first note that
section 1833(t)(13)(A) of the Act specifically calls a determination of
whether costs faced by rural hospitals are higher than those faced by
urban hospitals. For this reason, we believe that the model in Table 6
ably controls for scale efficiencies in a comparison of urban and rural
costs. Our adjusted R2 of 54 percent also demonstrates a relatively
good fit. We acknowledge that some of the SCHs eligible for the
adjustment may also be more costly because of inefficiencies due to
limited competition or because they currently receive special payment
status under the IPPS and the OPPS. However, we also agree with the
commenter that beneficiary access is an important goal. We believe that
the current model is sufficiently robust to identify hospitals with
significantly higher costs such that payment under the OPPS alone might
impact beneficiary access. The SCH status of these hospitals suggests
that they are important to beneficiary access. Rural SCHs receive their
designation because they are the only, or one of a few, sources of care
for beneficiaries. For example, these hospitals may be the only
immediately available source of emergency services for Medicare
beneficiaries.
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
finalizing our policy by including a payment adjustment for rural SCHs
of 7.1 percent and finalizing the regulation text at Sec. 419.43(g) as
noted above.
H. Hospital Outpatient Outlier Payments
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 in order to
better target outliers to those high cost and complex procedures where
a very costly service could present a hospital with significant
financial loss. If 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 a
discussion on CMHC outliers, see section II.B.3. of this final rule
with comment period.
As explained in our CY 2005 final rule with comment period (69 FR
65844), we set our projected target for aggregate outlier payments at
2.0 percent of aggregate total payments under the OPPS. Our outlier
thresholds were set so that estimated CY 2005 aggregate outlier
payments would equal 2.0 percent of aggregate total payments under the
OPPS.
For CY 2006, we proposed to set our projected target for aggregate
outlier payments at 1.0 percent of aggregate total payments under the
OPPS. A portion of that 1.0 percent, an amount equal to 0.6 percent of
outlier payments, would be allocated to CMHCs for partial
hospitalization program service outliers. In support of this decision,
we cited MedPAC's March 2004 Report to Congress, in which MedPAC
recommended that Congress pursue the statutory change needed to
eliminate the outlier policy under the OPPS. We specifically
highlighted several of the reasons given by MedPAC for the elimination
of the outlier policy because they are equally applicable to any
[[Page 68562]]
reduction in the size of the percentage of OPPS payments dedicated to
outlier payments. One of MedPAC's arguments included the very narrow
definition of many APCs with limited packaging frequently resulting in
multiple service payments for any given claim. In addition, we noted
that outlier policies are susceptible to ``gaming'' through charge
inflation and that the OPPS is the only ambulatory payment system with
an outlier policy. Finally, we cited MedPAC's observation that the
distribution of outlier payments benefits some hospital groups more
than others.
In order to ensure that estimated CY 2006 aggregate outlier
payments would equal 1.0 percent of estimated aggregate total payments
under the OPPS, we proposed 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. Ultimately, we chose to modify the fixed dollar threshold to
target 1.0 percent of estimated aggregate total payment under the OPPS
and not to modify the current 1.75 multiple in order to further our
policy of targeting outlier payments to complex and expensive
procedures with sufficient variability to pose a financial risk for
hospitals. We note that modifying the multiple threshold would have
done less to target outlier payments to complex and expensive
procedures.
We calculated the fixed-dollar threshold for the proposed rule
using the same methodology as we did in CY 2005. The claims that we use
to model each OPPS lag by 2 years. For this final rule with comment
period, we used CY 2004 claims to model the CY 2006 payment system. In
order to estimate CY 2006 outlier payments for the proposed rule, we
inflated the charges on the CY 2004 claims using the same inflation
factor of 1.0865 that we used to estimate the IPPS fixed-dollar outlier
threshold for the IPPS FY 2006 proposed rule. For 2 years, the
inflation factor is 1.1804. The methodology for determining this charge
inflation factor was discussed at length in the IPPS proposed rule (70
FR 47493, August 12, 2005). As we stated in our final rule for 2005, we
believe that the use of this charge inflation factor is appropriate for
OPPS because, with the exception of the routine service cost centers,
hospitals use the same cost centers to capture costs and charges across
inpatient and outpatient services (69 FR 65845, November 15, 2004). As
also noted in the IPPS final rule, we believe that a charge inflation
factor is more appropriate than an adjustment to costs because this
methodology closely captures how actual outlier payments are made and
calculated (70 FR 47495, August 12, 2005). We then applied the overall
cost-to-charge ratio (CCR) that we calculate from each Hospital's Cost
Report (CMS-2552-96) as part of our process for estimating median APC
costs. The calculation of this overall CCR is discussed in greater
detail in section II.A. of this preamble. We estimated outlier payments
using these costs for several different fixed-dollar thresholds,
holding the 1.75 multiple constant until the aggregated outlier
payments equaled 1.0 percent of aggregated total payments under the
OPPS. In addition, for CY 2006, we proposed an outlier threshold for
CMHCs of 3.45 times the APC payment rate.
For this final rule with comment period, we recalculated the fixed-
dollar threshold in light of updated claims data, a revised charge
inflation estimate, and more timely CCRs. As in the proposed rule, we
did not change the multiple threshold of 1.75 times the APC payment
rate, but concentrated on adjusting the fixed-dollar threshold. We
again used the same inflation factor that we used to estimate the IPPS
fixed-dollar threshold. Because the charge inflation factor for the
IPPS was revised to 14.94 percent for 2 years in the IPPS FY 2006 final
rule (70 FR 47493, August 12, 2005), we inflated charges on all CY 2004
OPPS claims by 1.1494.
We then applied the hospital specific overall CCR which we
calculated for purposes of our APC cost estimation. We simulated
aggregated outlier payments using these costs for several different
fixed dollar thresholds holding the 1.75 multiple constant until the
total outlier payments equaled 1.0 percent of aggregated total OPPS
payments. We estimate that a threshold of $1,250 combined with the
multiple threshold of 1.75 times the APC payment rate will allocate 1.0
percent of aggregated total OPPS payments to outlier payments. We used
a lower charge inflation factor of 14.94 percent to increase charges to
reflect 2006 dollars. The proposed fixed dollar threshold declined to
$1,250 from $1,575 in the proposed rule primarily because we used the
lower charge inflation factor of 1.1494.
The following is an example of an outlier calculation for CY 2006
under our final 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 CCR 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 ($1,250 +
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 $4,250 ($1,250 + $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.
For CMHCs, in CY 2005, 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. For this final rule with
comment period, updated data reduces the multiple outlier threshold for
CMHCs to 3.4. The outlier threshold for a CMHC is met when the cost of
furnishing a service or procedure by a CMHC exceeds 3.4 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 3.4 times the APC payment rate.
We received 25 public comments concerning our proposed outlier
policy.
Comment: One commenter supported CMS' decision to reduce the
percentage of total payments set aside for outlier payments from 2.0
percent to 1.0 percent.
Response: We appreciate the commenter's support. Although the
fixed-dollar threshold has changed due to more accurate data than in
the proposed rule, we do not believe that this change would impact the
views expressed by the commenter.
Comment: Several commenters expressed concern that, in light of an
increase in the threshold from $1,175 to $1,575, CMS may have set the
threshold for outlier payments too high. They requested clarification
as to how CMS determined that a $400 increase in the fixed-dollar
threshold was appropriate and how the $1,575 fixed-dollar threshold was
calculated. The commenters specifically noted that in the IPPS final
rule CMS reduced the charge inflation factor used to set the fixed-
dollar threshold from 18.04
[[Page 68563]]
percent to 14.94 percent, and suggested that CMS make a similar
adjustment to the OPPS methodology.
Response: As discussed above, for the proposed rule, we used a
charge inflation factor of 1.1804 to inflate the charges on CY 2004
claims to CY 2006 dollars. We then applied the overall CCR that we
calculate as part of our APC median estimation process to those
inflated charges to estimate costs. We compared these estimated costs
to 1.75 times the proposed APC payment amount and to the APC payment
amount plus a number of fixed-dollar thresholds until we identified a
threshold that produced total outlier payments equal to 1.0 percent of
total aggregated OPPS payments. This methodology increased the fixed-
dollar threshold by $400.
We repeated the same estimation process for this final rule, using
a complete set of CY 2004 claims, the updated charge inflation estimate
of 14.94 percent from the IPPS final rule, as requested by commenters,
and each hospital's overall CCR, as calculated for our APC median
setting process. The final fixed dollar threshold for OPPS 2006 is
$1,250 plus the APC payment rate, and the final multiple threshold is
1.75 times the APC payment rate.
Comment: Commenters expressed concern that CMS has never reported
the actual amount of outlier payments for the OPPS made in past years.
They noted that CMS routinely reports prior year outlier payments for
the IPPS. The commenters also expressed concern that CMS may not spend
the percentage of total aggregated OPPS payment set aside each year for
outlier payments. One commenter hypothesized that outlier payments had
been underspent in previous years, and that the proposed reduction in
outlier payments was designed to realign the policy with actual
payment. The commenters urged CMS to publish data on actual outlier
payments made in CY 2004 and prior years in the final rule. They also
recommended that actual outlier payments for CY 2005 OPPS be reported
as soon as CMS is able to obtain accurate data and that CMS continue to
report these data in the future.
Response: As we have stated in prior rules (see for example 69 FR
65847, November 15, 2004), we have not provided aggregate outlier
payments for past years because we do not use those estimates to set
the outlier thresholds and because we make outpatient claims available.
However, we understand that providers might wish to know this
information, especially in light of recent changes in the OPPS outlier
policy. In the final set of CY 2004 OPPS claims, aggregated outlier
payments were 2.5 percent of aggregated total OPPS payments. In the
final set of CY 2003 OPPS claims, aggregated outlier payments were 3.1
percent of aggregated total OPPS payments. For both years, the
estimated outlier payments were set at 2 percent of total aggregated
OPPS payments. At this time, we cannot make accurate estimates about
aggregated total outlier payments for CY 2005, but we intend to provide
this information in our proposed rule for CY 2007. We intend to
continue reporting the percentage of total payments made in outlier
payments for the most recent and complete set of claims in future
rules. We note above our reasons for proposing to reduce the projected
target percent of total aggregated OPPS payments attributable to
outlier payments.
Comment: Several commenters suggested that CMS did not provide
sufficient analytic support to justify a reduction in outlier payments
from 2.0 percent to 1.0 percent, relying only on MedPAC's
recommendations. The commenters urged CMS not to change its outlier
policy or to delay implementation until greater technical analyses
could be conducted. One commenter suggested that, without CMS'
technical analyses, stakeholders cannot conduct their own analyses. The
commenters frequently questioned our reference to the March 2004 MedPAC
Report to Congress and stated that outlier payments are not evenly
distributed among hospitals as justification for reducing the
percentage of total payments dedicated to outlier payments. They noted
that differences in outlier payments would be expected for hospitals
serving different populations. Several commenters cited the continued
instability in rates as a reason for continuing at 2.0 percent. One
commenter specifically hypothesizes that instability in payment rates
may be attributable to a lack of stability in unit costs, suggesting a
continued need for outlier payments. Another commenter acknowledged
that the variability in costs for APCs was clearly less than that for
DRGs, but that the current policy of setting aside two percent of total
payments, already accounted for this difference.
Response: Our decision to reduce the projected target amount of
total payments set aside for outlier payments is based on the technical
analyses that MedPAC conducted in its March 2004 Report to Congress
demonstrating that the CY 2004 OPPS outlier policy was ineffective at
addressing complex cases of financial risk and on the arguments that
MedPAC made against outlier payments. As noted above, MedPAC argued
that the fairly narrow definition of the APC groups makes outlier
payments less necessary for the OPPS, that the limited packaging in
OPPS frequently resulting in multiple service payments for any given
claim, and that the susceptibility to ``gaming'' through charge
inflation continues. MedPAC's 2004 Report to Congress also suggested
that our outlier policy could be redistributing outlier payments among
hospitals based on cost structures or charging patterns rather than
differences in case-mix. We agree with the commenters that an unequal
distribution of outlier payments according to differences in case mix
is appropriate, the concern is that different case mix does not account
for outlier payment distributions.
We do not believe that the moderate fluctuation in APC payment
rates that continues to be present in the OPPS is an adequate argument
against reducing the percentage of aggregated total OPPS payments set
aside for outlier payments for several reasons: changes in payment
rates appropriately reflect changes in costs, the variability of costs
is less for complex and expensive procedures, and outlier payments in
OPPS target services not cases. As discussed in section II.A. of this
preamble, we believe that the moderate changes in the payment rates
remaining after the system has been operating for several years is, in
large part, a function of the small APC group size and service basis.
The small group size of the APCs makes changes in service costs more
transparent than if groups were larger. Aggregation generally reduces
variation. Changes in payment rates from year to year appropriately
reflect true changes in the cost of a specific service. Changes in cost
and charging patterns captured in a provider's cost report will lead to
changes in the median cost of services from year to year. In addition,
we are required to adjust the APCs each year to ensure that groups are
comparable with ``respect to the use of resources.'' The ``2 times''
rule requires that the highest median cost for an item or service
within the group not be greater than two times the lowest median cost.
The ``2 times'' rule specifically limits the amount of variability of
unit costs in any group, forcing the APC payment rates to reflect
changes in costs. It embeds some fluctuation into APC payment rates,
but also reduces the need for an expansive outlier policy.
The observed variability in unit costs is greater for low cost and
simple procedures and smaller for complex, expensive procedures. In its
2004 Report to Congress, MedPAC found that
[[Page 68564]]
the highest variability in estimated costs was associated with the
lowest cost items. This observation continues to be true in the CY 2004
claims. On average, HCPCS codes with low median costs demonstrate
greater variability, as measured by the coefficient of variation, than
HCPCS codes with high median costs. The coefficient of variation is the
percent of the standard deviation accounted for by the mean and enables
a relative comparison of variation across groups. This trend also is
evident in the APC coefficient of variation. The bottom 50 percent of
APCs arrayed by median costs have an average coefficient of variation
of 82 percent, whereas the top 50 percent of APCs, arrayed by median
cost, have an average coefficient of variation of 63 percent.
Finally, OPPS outlier payments are targeted to services, rather
than cases. Unlike the IPPS, outlier payments are not for extremely
costly patients but extremely costly services. In many cases, an
extremely costly case in the outpatient setting may not warrant an
outlier payment because no specific service was excessively costly. The
small number of services included in any APC group means that the
provider will receive payment for most services billed on a claim.
Reducing total outlier payments to 1.0 percent of total OPPS payments
effectively raises the payment for all other services because the
foregone 1.0 percent of total spending is returned to the conversion
factor. We acknowledge the comment stating that the comparative
difference in cost variability between the IPPS and the OPPS is already
accounted for in the difference between the 5 to 6 percent estimated
outlier target under IPPS and the 2 percent projected outlier estimate
under OPPS. However, we believe that setting total outlier payments at
1.0 percent of total aggregated OPPS payments sets aside an appropriate
amount of dollars for unexpected and costly services.
Comment: One commenter indicated concern that CMS proposed an
additional change to the outlier payments before having one year of
experience with the fixed-dollar threshold introduced in CY 2005.
Response: We do not believe that these two policies are related.
The amount of total aggregated OPPS payments set aside for outlier
payments is an entirely different policy from the manner in which those
payments are distributed to hospitals. We did not institute the fixed-
dollar threshold to reduce outlier payments, but rather to target
payments to expensive and costly cases. The fixed-dollar threshold will
continue to have this effect within a smaller amount of outlier
payments.
Comment: Several commenters suggested that CMS did not sufficiently
demonstrate the impact on hospitals of reducing the percentage of
estimated total payments dedicated to outlier payments 2.0 percent to
1.0 percent and requested this analysis. The commenters expressed
concern that hospitals providing sophisticated and expensive
technologies to very sick patients would be placed at greater risk of
financial loss. Most of the commenters suggested that the reduction in
the outlier percentage be delayed until CMS can fully evaluate the
impact, while other commenters simply urged for a return to the 2-
percent target amount.
Response: For the proposed rule, we did not include a specific
analysis of the redistributive impact of outliers because the fixed-
dollar threshold policy did not change, only the aggregate amount of
dollars paid. We did include outlier payments in our impact tables, and
we made the amount of outlier payment estimated for each hospital
available on our Web site. However, we appreciate commenters' desire to
more fully view the impact of the outlier policy. For this final rule
with comment period, we have provided a separate table in our
regulatory impact analysis, section XIX of this preamble, showing the
differences in total aggregated OPPS payment for CY 2006 attributable
to the change in the outlier policy. We estimate that no class of
hospital will experience more than a 1 percent change in total payments
due to outlier payments and many classes of hospitals receive greater
payments.
Comment: Several commenters suggested that CMS pay outlier claims
at the same rate at which inpatient outlier claims are paid, that is,
80 percent of cost. Various rationales were provided, including
consistency with the IPPS, ensuring that hospitals can recoup the
variable costs of providing expensive care, and improving the adequacy
of payments.
Response: We believe that the payment percentage of 50 percent is
appropriate for the OPPS because, in general, a costly OPPS service
poses less of a financial risk for hospitals than a costly case under
the IPPS. If we did increase the payment percentage to 80 percent, we
would have to compensate elsewhere to maintain the 1.0 percent set
aside for outlier payments, probably by raising the fixed-dollar
threshold. Changing the payment percentage to 80 percent would merely
concentrate a more generous outlier payment on a much smaller number of
extremely costly services each year.
Comment: One commenter recommended a new methodology for estimating
the fixed-dollar outlier threshold for both the OPPS and the IPPS. The
commenter suggested that, in addition to inflating charges from CY 2004
to CY 2006, CMS also should adjust CCRs to reflect proportionally
slower inflation in costs. The commenter believed that this would
result in deflating overall CCRs. The commenter specifically
recommended that CMS update the CCRs for the OPPS to the latest
available hospital-specific data.
Response: We agree with the commenter that the CCRs that we use to
set the outlier thresholds should be as recent as possible. We also
believe that these CCRs should reflect, as closely as possible, the
actual CCRs that the fiscal intermediary will use to determine outlier
payments in CY 2006. As we did for the IPPS final rule (70 FR 47493,
August 12, 2005), we used the overall CCRs from the most recent
provider-specific file, in this case, the July 2005 OPSF, to estimate
costs from inflated charges on CY 2004 claims. The OPSF contains CCRs
from each provider's most recent tentatively settled cost report.
Because of the time it takes to complete cost reports and upload them
in the fiscal intermediaries' standard systems, for at least part of CY
2006, the CCRs on the OPSF are the same ones that the fiscal
intermediaries will use to determine outlier payments. However, unlike
the IPPS, the overall CCRs on the OPSF are higher than those that we
use to estimate APC medians. The median overall CCR that we calculate
from each hospital's cost report as a default CCR in estimating costs
from charges in order to set relative weights is 0.305, whereas the
median overall CCR on the OPSF is 0.32. Were we to use the CCRs from
the OSPF, the fixed dollar threshold would increase, from $1,250 to
$1,800.
We will consider using the CCRs found in the OSPF for the CY 2007
OPPS outlier calculations, similar to our calculations under IPPS.
However, in view of the newness of a fixed-dollar threshold for OPPS
outlier payments and our concern that using the OSPF CCRs for this
final rule would result in an $1,800 fixed dollar threshold that is
considerably higher than the proposed threshold, we have decided to use
the CCRs that we calculated for the APC median setting process for our
outlier calculations as we have in past years. These CCRs are timely,
as the majority of them are created from cost reports with fiscal years
beginning in 2004 and 2003.
Comment: One commenter requested that CMS reverse its decision to
reduce
[[Continued on page 68565]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 68565-68614]] Medicare Program; Changes to the Hospital Outpatient Prospective
Payment System and Calendar Year 2006 Payment Rates
[[Continued from page 68564]]
[[Page 68565]]
the percentage of total payments attributable to outlier payments to 1
percent and return outlier payments to the target level of 3 percent
established under the Balanced Budget Act (BBA) of 1997.
Response: For all of the reasons stated above, we do not believe
that outlier payments should be increased to 3 percent of total
payments. We further note that the BBA, as revised by the Balanced
Budget Refinement Act (BBRA) of 1999, set an upper limit of ``no more
than'' 3.0 percent for outlier policies, giving the Secretary the
discretion to set a lower estimated target percent.
Comment: One commenter expressed concern that decreasing the
outlier pool and increasing the fixed dollar threshold may encourage
greater packaging in order to increase procedure charges.
Response: We do not believe that greater packaging is an issue for
the OPPS outlier policy. Should providers choose to package more
services into the charges for payable procedures and not report
packaged services, over time, those higher costs would lead to higher
payment rates for payable procedures. This would, in turn, increase the
fixed dollar outlier threshold. Further, rolling the charges for
packaged services into the charges for payable procedures is expected
under OPPS.
Comment: One commenter requested that CMS describe the services
that qualify for outlier payments.
Response: The actual services that qualify for outlier payments
under the fixed dollar threshold policy introduced in CY 2005 will
likely be quite similar to those receiving payments under 2005 OPPS. As
noted above, at this time, we do not have a complete set of CY 2005
claims. However, in our analysis replicating the analysis done by
MedPAC in its March 2004 Report to Congress, we estimate that costly
services such as APC 0246 (Cataract Procedures with IOL Insert), APC
0080 (Diagnostic Cardiac Catheterization), and APC 0131 (Level II
Laparoscopy) would receive a large percentage of outlier payments under
the fixed-dollar threshold policy.
Accordingly, after considering the public comments received, for CY
2006, we are finalizing the OPPS outlier policy of two thresholds for
hospitals of a multiple threshold of 1.75 times the APC payment amount
and a fixed dollar threshold of $1,250 plus the APC payment amount and
one threshold for CMHCs of 3.4 times the APC payment amount.
I. Calculation of the National Unadjusted Medicare Payment
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 final rule with comment period and the relative weight determined
under section II.A. of this final rule with comment period. Therefore,
the national unadjusted payment rate for APCs contained in Addendum A
to this final rule with comment period and for HCPCS codes to which
payment under the OPPS has been assigned in Addendum B to this final
rule with comment period (Addendum B is provided as a convenience for
readers) was calculated by multiplying the final CY 2006 scaled weight
for the APC by the final CY 2006 conversion factor.
However, to determine the payment that will 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 are 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. The
wage index values include the occupational mix adjustment described in
section II.D. of this final rule with comment period that was developed
for the FY 2006 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 L contains the qualifying counties and the final wage
index increase developed for the FY 2006 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 SCH, 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 Sec. 412.103 of the Act,
multiply the wage index adjusted payment rate by 1.071 to calculate the
total payment.
We received no public comments concerning our proposal for
calculating the national unadjusted Medicare payment rate. Therefore;
we are adopting as final, for OPPS services furnished on or after
January 1, 2006, our proposed methodology for calculating the national
unadjusted Medicare payment amount.
J. Beneficiary Copayments for CY 2006
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.
[[Page 68566]]
2. Copayment for CY 2006
For CY 2006, we proposed 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). We used the same methodology to determine the final unadjusted
copayment amounts for services payable under the OPPS that will be
effective January 1, 2006. These copayment amounts are shown in
Addendum A and Addendum B of this final rule with comment period.
3. Calculation of the 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, $7.00 is 29 percent of $23.79.
Step 2. Calculate the wage adjusted payment rate for the APC, for
the provider in question, as indicated in section II.I. of this
preamble.
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.
We received two public comments concerning our proposed methodology
for calculating the beneficiary unadjusted copayment amount.
Comment: One commenter recommended that CMS maintain the
coinsurance amount above 40 percent of the APC payment amount as the
proposed payment rate for CY 2006 is lower than the CY 2005 payment
rate when adjusted for inflation.
Response: We appreciate the commenter's recommendation but note
that the statute does not provide for this. 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, that specified percentage is 40 percent of the APC payment
rate.
Comment: One commenter objected to beneficiaries being liable for
more than 20 percent of the Medicare payment rate for services paid
under the OPPS. The commenter acknowledged that the law limits the
copayment for a single service to the amount of the inpatient
deductible, but objected to there being no limit to the amount of
coinsurance that a beneficiary can incur per year or even for a single
outpatient encounter. The commenter acknowledged that the amount of
beneficiary copayment liability is set in statute but urged CMS to work
with Congress to restore beneficiary coinsurance of hospital outpatient
services to the level it views as appropriate.
Response: As the commenter indicated, the level of beneficiary
coinsurance is set based on specific statutory criteria.
Comment: One commenter recommended that CMS work with Congress to
restore the beneficiary coinsurance for hospital outpatient services to
the appropriate level. By ``appropriate,'' we assume the commenter
means that coinsurance for all OPPS services should be 20 percent,
which is the coinsurance rate for other services paid under Medicare
Part B.
Response: We appreciate the commenter's recommendation and will
take it into consideration. However, until the statute at section
1833(t)(8)(C)(ii) of the Act is revised, the Secretary must adhere to
the current requirements of the law, which caps the beneficiary
coinsurance payment at 40 percent of the APC payment rate. In addition,
the law requires that the coinsurance amount be no less than 20 percent
of the APC rate.
Accordingly, we are adopting as final, for OPPS services furnished
on or after January 1, 2006, our proposed methodology for calculating
the beneficiary unadjusted copayment amount.
III. Ambulatory Payment Classification (APC) Group Policies
A. Introduction
1. Treatment of New HCPCS Codes Discussed in the CY 2006 OPPS
Proposed Rule
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. (Table 14 of the CY 2006
OPPS proposed rule.) We have designated the payment status of those
codes and added them to the April update of the CY 2005 OPPS
(Transmittal 514). In the proposed rule, we also solicited public
comments on the proposed APC assignments of these services.
Table 7.--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, 1 g.
Q9942................................ Injection, Immune Globulin,
Intravenous, Lyophilized, 10 mg.
Q9943................................ Injection, Immune Globulin,
Intravenous, Non-Lyophilized, 1
g.
Q9944................................ Injection, Immune Globulin,
Intravenous, Non-Lyophilized, 10
mg.
------------------------------------------------------------------------
Further, consistent with our annual APC updating policy, we
proposed to assign the new HCPCS codes for CY 2006 to the appropriate
APCs and incorporate them into our final rule with comment period for
CY 2006.
We did not receive any public comments on the new procedural C
codes, their status indicators, or their APC assignments for the two
new OPPS procedures (C9723 and C9724) implemented in April 2005.
Therefore, we are adopting as final our proposal to assign these HCPCS
codes C9723 and
[[Page 68567]]
C9724 for CY 2006 to the appropriate APCs, as shown in Addendum B of
this final rule with comment period, without modification.
We received a number of public comments related to drugs described
by new HCPCS codes implemented in April 2005 in the OPPS; specifically,
HCPCS codes C9127, C9128, C9223, C9440, Q4079, Q9941, Q9942, Q9943, and
Q9944. See section V. of this preamble (Payment Changes for Drugs,
Biologicals, and Radiopharmaceutical Agents) for a discussion of these
comments, including comment summaries, our responses and a description
of our final OPPS payment policies. In addition, our final payment
policy for CY 2006 is included in Addendum B of this final rule with
comment period.
2. Treatment of New CY 2006 HCPCS Codes
In the proposed rule, we proposed that we would assign new HCPCS
codes for CY 2006 to appropriate APCs and/or status indicators and that
we would implement them in our final rule. However, we received some
comments regarding individual new HCPCS codes that commenters expect to
be implemented for the first time in the CY 2006 OPPS. We do not
specifically respond to those comments in this final rule. We could not
discuss APC and/or status indicator assignments for new CY 2006 HCPCS
codes in the proposed rule because the new CY 2006 HCPCS codes were not
available when we issued the proposed rule. Rather, as has been our
practice in the past, we implement new HCPCS codes in the OPPS final
rule, at which time we invite public comment about our treatment of the
new codes. We subsequently respond to those comments in the final rule
for the following year's OPPS update.
New 2006 HCPCS codes are designated in Addendum B with Comment
Indicator ``NI.'' The status indicator and/or APC assignments for all
HCPCS codes flagged with Comment Indicator ``NI'', which are new 2006
HCPCS codes, are subject to public comment.
3. Treatment of New Mid-Year Category III CPT Codes
Twice each year, the AMA issues Category III CPT codes, which the
AMA defines as temporary codes for emerging technology, services, and
procedures. The AMA established these codes to allow collection of data
specific to the service described by the code which otherwise could
only be reported using a Category I CPT unlisted code. The AMA releases
Category III CPT codes in January, for implementation beginning the
following July, and in July, for implementation beginning the following
January. In the past, CMS has treated new Category III CPT codes
implemented in July of the previous year or January of the OPPS update
year in the same manner that new Category I CPT codes and new Level II
HCPCS codes implemented in January of the OPPS update year are treated;
that is, we provide APC and/or status indicator assignments in the
final rule updating the OPPS for the following calendar year. New
Category I and Category III CPT codes, as well as new Level II HCPCS
codes, are flagged with Comment Indicator ``NI'' in Addendum B of the
final rule to indicate that we are assigning them an interim payment
status which is subject to public comment following publication of the
final rule that implements the annual OPPS update.
We are concerned that not recognizing for 6 months (from July to
January) the Category III codes that the AMA releases each January for
implementation in July may hinder timely collection of data pertinent
to the services described by the codes. Moreover, delay in recognizing
these codes could inhibit access to the services they describe because
of provider reluctance to furnish a service that defaults to the OPPS
payment assigned to unlisted codes. Also, we have on occasion found
redundancy between Category III CPT codes and some of the C-codes,
which are only payable under the OPPS and created by us in response to
applications for New Technology services. Therefore, beginning in CY
2006, we are modifying this process and recognizing Category III CPT
codes that are released by the AMA in January to be effective beginning
July of the same calendar year in which they are issued, rather than
deferring recognition of those codes to the following calendar year
update of the OPPS. Adopting this approach means that new Category III
CPT codes will be recognized under the OPPS biannually rather than
annually.
Some of the new Category III CPT codes may describe services that
our medical advisors determine to be similar in clinical
characteristics and resource use to HCPCS codes in an existing APC. In
these instances, we may assign the Category III CPT code to the
appropriate clinical APC. Other Category III CPT codes may describe
services that our medical advisors determine are not compatible with an
existing clinical APC, yet are appropriately provided in the hospital
outpatient setting. In these cases, we may assign the Category III CPT
code to what we estimate is an appropriately priced New Technology APC.
In other cases, we may assign a Category III CPT code one of several
non-separately payable status indicators, including N, C, B, or E,
which we feel is appropriate for the specific code. We expect that we
will already have received applications for New Technology status for
some of the services described by new Category III CPT codes, which may
assist us in determining appropriate APC assignments. If the AMA
establishes a Category III CPT code for a service for which an
application has been submitted to CMS for New Technology status, CMS
may not have to issue a temporary Level II HCPCS code to describe the
service, as has often been the case in the past when Category III CPT
codes were only recognized by the OPPS on an annual basis.
Therefore, beginning in July 2006, CMS will implement in the
regular quarterly update of the OPPS the Category III CPT codes that
the AMA releases in January 2006 for implementation in July 2006. CMS
will implement in the January 2007 update of the OPPS the Category III
CPT codes that the AMA releases in July 2006, and so forth.
B. Variations Within APCs
1. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient 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, partial hospitalization
services, and medical visits. We also have developed separate APC
groups for certain medical devices, drugs, biologicals,
radiopharmaceuticals, and brachytherapy devices.
We have packaged into each procedure or service within an APC group
the cost associated with those items or services that are directly
related
[[Page 68568]]
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 final rule with comment period.
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 hospital median
cost of the services included in that APC relative to the hospital
median 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.
2. Application of the 2 Times Rule
In accordance with section 1833(t)(2) of the Act and Sec. 419.31
of the regulations, we annually review the items and services within an
APC group to determine, with respect to comparability of the use of
resources, if the median 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 APCs.
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 violated 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 APCs to different APCs to resolve the 2 times rule violations.
Of the 65 HCPCS code reassignments recommended by the APC Panel, we
concurred with 58 of the recommended reassignments. Therefore, we
proposed to reassign the HCPCS codes as indicated in Table 7 of the
proposed rule (70 FR 42703).
The seven HCPCS code movements that the APC Panel recommended, but
upon further review we proposed not to accept, are discussed below. We
include in our discussion the assignments we also proposed and the
final assignments for CY 2006.
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. At the time of the
proposed rule, our analysis of those two APCs based on partial year 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 partial CY 2004 hospital claims data and to remove these APCs from
the list of exceptions. The APC Panel recommended maintaining CPT codes
45303 (Proctosigmoidoscopy, rigid; with dilation) and 45305
(Proctosigmoidoscopy, rigid; with biopsy, single or multiple) in APC
0146 because the median cost for these codes appeared too high, and
they believed that the CY 2004 claims were aberrant. In addition, the
APC Panel recommended that CMS move CPT code 45309
(Proctosigmoidoscopy, rigid; with removal of single tumor, polyp, or
other lesion by snare technique) from APC 0147 and assign it to a new
proposed APC 0428. Based on the results of our review of several years
of claims data and our study of hospital resource homogeneity, we
disagreed that those claims data were aberrant. We proposed 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.
We received no public comments concerning our proposed APC
assignments for CPT codes 45303, 45305 and 45309 and are making final
our proposal, without modification.
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 (Cytopathology, concentration
technique, smears and interpretation) and 88112 (Cytopathology,
selective cellular enhancement technique with interpretation, except
vaginal or cervical) from APC 0343 to a proposed new APC 0433. The APC
Panel also recommended moving CPT codes 88319 (Determinitive
histochemistry or cytochemistry to identify enzyme constituents) and
88321 (Consultation and report on referred slides prepared elsewhere)
from APC 0342 to a proposed new APC 0433. Based on the results of our
review of several years of hospital claims data and our study of
hospital resource homogeneity, we proposed a different way to resolve
the 2 times rule violation. We proposed to place CPT codes 88319 and
88112 in APC 0343 and to place CPT codes 88108 and 88321 in new APC
0433.
We received no public comments concerning our proposal.
We will finalize, without modification our proposal to assign CPT
codes 88112 and 88319 to APC 0343 and to assign CPT codes 88108 and
88321 to new APC 0433.
c. Other Comments on the Proposed List of APC Assignments to
Address 2 Times Violations. We received a few comments concerning our
proposed reassignments for several of the other
[[Page 68569]]
HCPCS codes (for example, CPT codes 57155, 75790, and 88187) indicated
in Table 7 of the proposed rule (70 FR 42703) and the responses are
included in clinically relevant sections, elsewhere in this preamble.
After carefully reviewing our final data and all comments received
concerning our proposed assignments of the 58 HCPCS codes, we are
finalizing those assignments as proposed.
3. Exceptions to the 2 Times Rule
As discussed earlier, we may make exceptions to the 2 times limit
on the variation of costs within each APC group in unusual cases such
as low-volume items and services. At the time of the proposed rule,
taking into account the APC changes that we proposed 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
costs of procedures classified in the APCs, we reviewed all the APCs to
determine which APCs would not satisfy the 2 times rule criteria. 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 published in the proposed rule (70 FR 42705) listed the
APCs that we proposed to exempt from the 2 times rule based on the
criteria cited above. For cases in which a recommendation by the APC
Panel appeared to result in or allow a violation of the 2 times rule,
we generally accepted the APC Panel's recommendation because those
recommendations were based on explicit consideration of resource use,
clinical homogeneity, hospital specialization, and the quality of the
data used to determine the APC payment rates that we proposed for CY
2006. The median costs for hospital outpatient services for these and
all other APCs can be found on the CMS Web site: http//http://www.cms.hhs.gov.
We received a number of comments about some of the procedures
assigned to APCs that we proposed to make exempt from the 2 times rule
for CY 2006. Those discussions are elsewhere in the preamble, in
sections related to the types of procedures that were the subject of
the comments.
For the proposed rule the listed exceptions to the 2 times rule
were based on data from January 1, 2004 through September 30, 2004. For
this final rule with comment period, we used data from January 1, 2004
through December 31, 2004. Thus, after responding to all of the
comments on the proposed rule and making changes to APCs based on those
comments, we analyzed the full CY 2004 data to identify APCs with 2
times rule violations.
Based on those final data, we found that there were 41 APCs with 2
times violations. We were able to remedy two violations of the 2 times
rule that appeared in the final data for APC 0363 (Level I
Otorhinolaryngologic Function Tests) and APC 0010, (Level I Destruction
of Lesion). We moved CPT code 92588 (Evoked otoacoustic emissions;
comprehensive or diagnostic evaluation) from APC 0363 to APC 0660
(Level II Otorhinolaryngologic Function Tests) to address a 2-times
violation in APC 0363. We applied the criteria as described earlier to
finalize the APCs that are exceptions to the 2 times rule for CY 2006.
Listed below in Table 8 is the final revised list of APCs that are
exceptions to the 2 times rule for CY 2006.
BILLING CODE 4120-01-P
[[Page 68570]]
[GRAPHIC] [TIFF OMITTED] TR10NO05.014
[[Page 68571]]
BILLING CODE 4120-01-C
C. New Technology APCs
1. Introduction
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.
Every year we receive many requests for higher payment amounts for
specific procedures under the OPPS because they require the use of
expensive equipment. We are taking this opportunity to respond in
general to the issue of hospitals' capital expenditures as they relate
to the OPPS and Medicare.
Under the OPPS, our goal is to make payments that are appropriate
for the services that are necessary for treatment of Medicare
beneficiaries. The OPPS and most other Medicare payment systems are
budget neutral and so, although we do not pay full hospital costs for
procedures, we believe that our payment rates generally reflect the
costs that are associated with providing care to Medicare beneficiaries
in cost-efficient settings. Further, we believe that our rates are
adequate to assure access to services for most beneficiaries.
For many emerging technologies there is a transitional period
during which utilization may be low, often because providers are first
learning about the techniques and their clinical utility. Quite often,
the requests for higher payment amounts are for new procedures in that
transitional phase. The requests, and their accompanying estimates for
expected Medicare beneficiary or total patient utilization, often
reflect very low rates of patient use, resulting in high per use costs
for which requestors believe Medicare should make full payment.
Medicare does not, and we believe should not, assume responsibility for
more than its share of the costs of procedures based on Medicare
beneficiary projected utilization and does not set its payment rates
based on initial projections of low utilization for services that
require expensive capital equipment. For the OPPS, we rely on hospitals
to make their business decisions regarding acquisition of high cost
capital equipment taking into consideration their knowledge about their
entire patient base (Medicare beneficiaries included) and an
understanding of Medicare's and other payors' payment policies.
As stated earlier, in a budget neutral environment we do not make
payments that fully cover hospitals' costs, including those for the
purchase and maintenance of capital equipment. We rely on providers to
make their decisions regarding the acquisition of high cost equipment
with the understanding that the Medicare program must be careful to
establish its initial payment rates for new services that lack hospital
claims data based on realistic utilization projections for all such
services delivered in cost efficient hospital outpatient settings. As
the OPPS acquires claims data regarding hospital costs associated with
new procedures, we will regularly examine the claims data and any
available new information regarding the clinical aspects of new
procedures to confirm that our OPPS payments remain appropriate for
procedures as they transition into mainstream medical practice.
2. 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, we
recognized that 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) spanned too broad of a cost interval to
accurately represent the lower costs of an ever-increasing number of
procedures that are appropriate for New Technology APC assignment.
Therefore, we proposed 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 also proposed 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
published in the proposed rule (70 FR 42706) contained a listing of the
10 additional New Technology APCs that we proposed for CY 2006.
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 proposed 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 published in
our proposed rule (70 FR 42707) summarized these proposed New
Technology APC reassignments.
We received no public comments in response to our proposed
refinement of the New Technology APC cost bands. Therefore, for CY
2006, we are finalizing our proposal to discontinue New Technology APCs
1501 and 1538, and reassign the procedures currently assigned to them
to New Technology APCs 1491 through 1500. Table 9 lists the final New
Technology APCs 1491 through 1500 for CY 2006.
[[Page 68572]]
Table 9.--New Technology APCs for CY 2006
------------------------------------------------------------------------
Final CY
Status 2006
APC Descriptor Indicator payment
rate
------------------------------------------------------------------------
1491.............. New Technology--Level IA S $5
($0-$10).
1492.............. New Technology--Level IB S 15
($10-$20).
1493.............. New Technology--Level IC S 25
($20-$30).
1494.............. New Technology--Level ID S 35
($30-$40).
1495.............. New Technology--Level IE S 45
($40-$50).
1496.............. New Technology--Level IA T 5
($0-$10).
1497.............. New Technology--Level IB T 15
($10-$20).
1498.............. New Technology--Level IC T 25
($20-$30).
1499.............. New Technology--Level ID T 35
($30-$40).
1500.............. New Technology--Level IE T 45
($40-$50).
------------------------------------------------------------------------
3. 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 CY 1996 data to set payment rates) and on our
continuing experience with the assignment of services to New Technology
APCs.
In the course of reviewing applications for New Technology APC
assignments under the OPPS, we have encountered many situations in
which there is extremely limited clinical experience with new
technology services regarding their use and efficacy in the typical
Medicare population. In some cases, there has been 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. In the CY 2006 proposed rule, we
indicated that we believed that our current New Technology APC
assignment process helps to assure such access, and that an enhancement
to the New Technology APC application process might 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 APC application and review process
for the OPPS. Therefore, in addition to our current information
requirements at the time of application, we proposed 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. In making this
proposal, we specifically indicated that we would not change our
current criteria for assignment of a service to a New Technology APC.
Rather, the intent of the proposed new requirement was to encourage
timely review of a new service or procedure by the wider medical
community as CMS is reviewing it for possible new coding and assignment
to a New Technology APC under the OPPS. The AMA's CPT Editorial Panel
has only one CPT code application that is used by applicants requesting
consideration for either Category I or III codes. We indicated that 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
would 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. In the proposed rule,
we indicated our belief that consideration by the CPT Editorial Panel
might facilitate appropriate dissemination of the new technology
services across delivery settings and bring to light other needed
coding changes or clarifications. We further proposed 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
reminded the public that we do not consider an application complete
until all informational requirements are provided. In addition, we
reminded 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.
We received a large number of public comments concerning our
proposal.
Comment: Many commenters suggested that the AMA CPT Editorial Panel
may not be the most appropriate forum for a federally mandated
decision. Some of these commenters pointed out that meetings of the
panel and the considerations on which it bases decisions are not open
to the public. Other commenters questioned whether there is an inherent
conflict in the proposal, as CMS and the AMA are distinctly separate
organizations with different objectives and constituencies, so that it
may not be in the interest of Medicare beneficiaries to tie CMS policy
to proceedings of the AMA. Other commenters suggested that even the
requirement that the AMA acknowledge receipt of the coding application
suggests that the AMA has potential ``veto'' power over CMS authority
and
[[Page 68573]]
may thus constitute an unlawful delegation of federal decision making.
Response: We wish to clarify that it was not our proposal to rely
upon the decisions of the CPT Editorial Panel. Nor did we propose to
adopt the objectives or policies of the AMA or the CPT Editorial Panel.
Rather, we proposed only to require initiation of the process for
obtaining a CPT code in order to foster the common objective of
appropriately recognizing new technology services and properly coding
those services. Under our proposal, we would continue to make
determinations about the need for new HCPCS codes and about appropriate
assignments to New Technology APCs to establish payment rates
completely independently of the CPT Editorial Panel. We also proposed
only that the applicant show us a letter of acknowledgement or receipt
from the AMA, not that the AMA would send us such a letter or withhold
such a letter as a way to exercise veto power.
Comment: One commenter stated that while it is possible for
manufacturers to file CPT applications to the AMA, the AMA has usually
discouraged this practice and specialty societies have been slow to
support CPT applications not vetted through them. Another commenter
indicated that manufacturers are often not in receipt of letters from
the AMA indicating receipt of a CPT coding application, and hence may
not be able to provide these letters with their application for New
Technology APC assignment. Other commenters claimed that if a
manufacturer waits to gather clinical and utilization information
sufficient to support a Category I code, the application may no longer
meet CMS's definition of ``truly new'' and may be ineligible for a New
Technology APC assignment.
Response: Our proposal did not specifically require that
manufacturers submit applications to the CPT Editorial Panel. In fact,
we specifically proposed only that such an application ``be
submitted,'' and did not stipulate the identity of the applicant. In
addition, we were not proposing to require that manufacturers provide
us with copies of letters they had received directly from the AMA. We
understand, however, that manufacturers ordinarily work in concert with
the actual applicants for new CPT codes, and expect that it is
reasonable for a manufacturer to be able to obtain such a letter. We
also specifically required only the initiation of the application
process, not the receipt of a positive (or negative) decision by the
CPT Editorial Panel, in order to prevent the process from delaying our
decision beyond the point at which a New Technology APC assignment is
appropriate. Our proposal was meant only to encourage the appropriate
dissemination of information, data collection, and review by the wider
medical community concerning new technologies. Finally, it is worth
emphasizing that while our objective is to consider for assignment to
New Technology APCs services that represent technologies that are
``truly new,'' for designation under the OPPS we specifically rely on
our criteria which require that a service or procedure not be described
by any existing HCPCS code or combination of codes, that it cannot be
adequately represented in the claims data being used for the most
current annual OPPS update, and that there is no appropriate clinical
APC for its assignment. We do not believe that our proposal to require
initiation of the CPT application process would result in delays beyond
the point at which these criteria could still be met.
Comment: One commenter stated that there are only three submission
deadlines per year for CPT applications, which do not comport to the
quarterly schedule for filing New Technology applications to CMS.
Response: The filing dates for New Technology applications are
informational dates published on our website as reference points for
application receipt related to the earliest date for adding a new code
for an approved service to a New Technology APC, that is, the beginning
of the following quarter. The actual dates for adding new services, if
approved, are often later than the next quarter, depending on specific
issues related to comprehensive evaluation of a specific application,
which often involves requests for additional information.
Comment: One commenter recommended as an alternative that CMS
create codes for qualifying services and assign them to a New
Technology APC and stipulate that those applicants must apply to the
CPT Editorial Panel for a new code within one year.
Response: We do not believe that it would be advisable to accept
this recommendation. First, we do not have a policy of making
contingent approvals for payment. All requirements for Medicare payment
must be met at the time a code and payment rate are established. In
addition, this recommendation would require establishing a mechanism to
monitor compliance with the condition of approval. Finally, the
necessity of withdrawing some HCPCS codes from coding and payment
because of non-compliance has great potential for causing confusion
among providers.
Comment: One commenter stated that our concern about limited
experience with new technologies in the Medicare population is more
appropriately related to coverage of new procedures, rather than to
coding issues. Assignment of a service to a New Technology APC is meant
to create a mechanism for gathering utilization data, and does not
guarantee coverage and payment of a technology. Coverage for new
technologies remains the discretion of Medicare contractors, unless CMS
makes a national coverage determination. This commenter claimed that
the proposal to require a CPT coding application implies that CMS would
be effectively removing the Medicare contractors from the coverage
decision-making process.
Response: We do not believe that our proposal would have the effect
of removing Medicare contractors from the process of making coverage
decisions, or otherwise usurp the role of the coverage decision-making
process. Rather, the proposal would serve merely to promote evaluation
of new services by the wider medical community, so that the results of
this evaluation could serve to assist in broader distribution of new
clinical information, establishment of appropriate standard coding, and
wider dissemination of promising technologies. Even when the CPT
Editorial Panel establishes a new code, Medicare contractors have
discretion to make local coverage decisions, and CMS retains the right
to make national coverage determinations with regard to the procedure
or service.
Comment: Some commenters indicated that there are unique payment
concerns related to applying for a Category III CPT code, asserting
that many Medicare contractors view Category III CPT codes as an
indication that a technology is experimental or investigational. One
commenter provided as an example a proposed and final policy of one CMS
contractor not to cover any technologies described by Category III CPT
codes, ``since these codes have been created to track new, unproven
therapies and tests.'' Another commenter claimed that assignment of a
Category III CPT code often results in non-coverage decisions by both
local carriers and fiscal intermediaries.
Response: The example provided by commenters about the implications
of Category III CPT codes for coverage decisions by Medicare
contractors appears to be relevant outside the context of the OPPS,
mainly within the physician payment context. We have been unable to
identify any fiscal
[[Page 68574]]
intermediary that has adopted any such broad noncoverage policy
regarding Category III CPT codes.
Comment: One group of commenters urged us not to adopt the proposed
requirement that a CPT application submission to the AMA's CPT
Editorial Panel be required before we accept a New Technology APC
application for review. These commenters asserted that a CPT coding
application, in and of itself, will not provide us with input from the
greater medical community, unless we wait until the CPT Editorial Panel
has made a coding decision and that decision has been made public.
Because of the timing of the CPT code review process, it is not
reasonable for CMS to wait until the CPT Editorial Panel has made a
public coding decision, which can take 6-12 months for an internal
decision, and 6-24 months before publishing a coding decision for a
Category I code. These commenters also believed that this requirement
would delay access to new services, asserting that applying for a CPT
code is a lengthy process and involves months of gathering information
on the technology and its use, working with relevant specialty
societies to obtain support for a new code and to develop a clinical
vignette, and consulting within the CPT Editorial Panel. In order to
obtain a Category I code, the new technology must have widespread usage
across the country and in multiple locations, and its efficacy must be
documented in U.S. peer-reviewed journal articles. Other commenters
stated that a number of issues regarding the CPT coding process make
our proposal impractical, in addition to the lack of a guaranteed
timely review by the CPT Editorial Panel. The AMA does not have
``official'' evidence and utilization thresholds for coding
applications. However, commenters indicated that physician specialty
societies often require certain thresholds of utilization or clinical
evidence be met before a Category I CPT application for a new service
is submitted, and there is considerable variation in such thresholds
among the specialty societies. If a manufacturer submits an application
without society support or before there is widespread utilization, the
application is more likely to be denied or assigned a Category III CPT
code, even if that was not requested. Some commenters indicated that
there are payment concerns in applying for a Category III CPT code,
asserting that most private payers view Category III CPT codes as
indication that a technology is experimental or investigational, and
therefore refuse to cover procedures or services described by Category
III CPT codes. These commenters asserted that because of the risk of
non-coverage of Category III CPT codes, manufacturers may forego
applying for New Technology APC assignments, or will be hesitant to
apply for both a New Technology APC assignment and CPT code
simultaneously. Without unique service codes, it will be more difficult
for CMS to track new services and eventually to assign them to
clinically appropriate APCs. The result will be fewer New Technology
APC applications, and less beneficiary access to new technologies. A
few commenters asserted that little would be gained by the mere filing
of a CPT application without a coding determination from the CPT
Editorial Panel, because the information in both applications is
similar. One commenter suggested that if there is information from the
CPT application that CMS requires to evaluate the New Technology APC
application, we should add such questions to our application.
In lieu of using the CPT coding process to encourage review by the
wider medical community, a few commenters recommend that CMS appoint a
standing advisory committee of clinical representatives, or another
independent group of medical experts from specialties and hospitals, to
review New Technology APC applications and provide input to CMS. Other
commenters also suggested that we convene an independent group of
medical experts to assist in the review of applications as necessary.
A number of other commenters, principally from hospitals and
hospital associations, supported our proposal to require a CPT
application prior to our consideration of a New Technology APC
application because they favored less ambiguity in the coding
framework. Some of these commenters said that there is a proliferation
of C-codes and G-codes, which are burdensome to hospitals as such codes
are often not recognized by other payers, and our proposal will
minimize the need for expedited issuance of C-codes or G-codes. They
asserted that hospitals would benefit by reduced duplication of codes
for services recognized by Medicare and other payers. Other commenters
claimed that the correct process for coding new services is to start by
way of the CPT Editorial Panel review process rather than the New
Technology APC application process. Other commenters also supported the
requirement on the grounds that the CPT review process is rigorous,
including input by physician specialty societies, which indicates the
level of acceptance of a new technology in the medical community,
relevant to the OPPS because physicians perform new technology
procedures in the hospital setting. One commenter indicated that there
may be specific occasions when it is necessary to submit applications
to the CPT Editorial Panel and CMS simultaneously. Another commenter
requested that we recognize potential delays resulting from this
additional step and expedite our review of New Technology APC
applications. Finally, one commenter indicated appreciation of the
reasons for the proposal, but asked that this new requirement remain as
stated, that an application needs to be submitted to the AMA CPT
Editorial Panel, but that it did not necessarily need to be reviewed
and processed by the CPT Editorial Panel prior to CMS's consideration
of the New Technology APC application.
Response: In light of the strong division among the commenters on
the merits of our proposal to require that a CPT coding request be
submitted prior to submission of a New Technology APC application, we
have decided not to adopt this proposal at this time. Many of the
comments reflect confusion about the specifics of the proposal.
Therefore, we are concerned that, because the commenters did not
understand some specifics of this proposal during their review of the
CY 2006 proposed rule, we may similarly not be in a position to
understand all the implications of the concerns noted by the
commenters. In particular, we did not intend to tie our decision-making
regarding applications for New Technology APC assignment to the CPT
Editorial Panel process, but wished to promote review of the coding,
clinical use, and efficacy of new technology services by the wider
medical community to facilitate the swift spread of promising new
technologies into medical practice.
While we are deferring our proposal, we continue to believe that
timely review of potential new services by the wider medical community
is valuable, given our experience that many services that have
requested OPPS coding and assignment to a New Technology APC have
demonstrated limited clinical efficacy. We also continue to believe
that new technology services deserve timely standard and comprehensive
coding established through the CPT Editorial Panel review process to
permit appropriate payment and data collection regarding their
utilization patterns and clinical outcomes. We also do not agree with
many of the criticisms directed against the proposal. For example, as
stated previously, we do not agree that
[[Page 68575]]
our proposal to have applicants file a CPT coding request before
submission of a New Technology APC application would make the CPT
coding process a Federal decisionmaking forum. This is because we would
not require a decision to be made by the CPT Editorial Panel. However,
in light of the numerous and considered comments opposed to the
proposal, we are not proceeding with it at this time.
At the same time, we remain committed to the general goal of
promoting review of the coding, clinical use, and efficacy of new
technology services by the wider medical community. We continue to
believe that such broad and early review of new technology procedures
would enhance our ability to make appropriate initial and subsequent
decisions on assignments of new services to New Technology APCs and
would facilitate the more rapid dissemination of promising new
technologies to all service settings and appropriate patient
populations. Therefore, we will continue to study how to best achieve
these goals of timely review of new technologies by the general medical
community to validate their clinical worth and distinctiveness in
comparison with existing services and to promote more rapid
dissemination of effective new procedures throughout standard medical
practice. In doing so, we will continue to consider whether the
proposal we advanced would serve that goal. We would specifically
welcome further input on this proposal or alternatives to it. We may
reintroduce this proposal or advance alternative approaches at a later
date.
As a preliminary matter, we are not inclined to accept one
alternative recommended by some commenters. Specifically, we are not
inclined to establish a standing advisory committee to provide input on
New Technology applications to the OPPS, as some have suggested. A
standing committee involving outside experts would add additional
review time that would impede upon our application process, as well as
prevent us from evaluating New Technology applications for addition to
the OPPS on a quarterly basis, as appropriate. We prefer to maintain
the flexibility that our current process provides. In addition, the
specific medical expertise required to evaluate new technologies would
likely vary widely from application to application. This factor would
render consultation with a standing advisory committee with fairly
stable membership more difficult to maintain.
4. New Technology Services
a. Ablation of Bone Tumors
Comment: One commenter requested that we reassign CPT code 20982
(Ablation, bone tumor(s) (eg, osteoid osteoma, metastasis)
radiofrequency, percutaneous, including computed tomographic guidance)
from New Technology Level XX, APC 1557 to New Technology Level XXII,
APC 1559. The commenter stated that the procedure has been in New
Technology APC 1557 for 2 years, and that the payment rate for that APC
is not adequate to cover the hospitals' costs. The commenter asserted
that assignment to that APC was based on inadequate information. The
commenter used physician practice expense data to estimate costs to
perform the ablation procedure, and stated that the costs far surpass
the OPPS payment amount, largely due to the high cost of the necessary
radiofrequency probe. Further, the commenter added that its analysis
found that 2 of the 16 single claims CMS used to calculate the median
cost for CPT code 20982 for the proposed rule were inaccurate because
no charge for the ablation device, as indicated by the absence of a
separate supply charge, was included. The commenter believed that those
two claims had a significant effect on the median cost for CPT code
20982, because of the small number of claims for the procedure. The
commenters' analysis further showed that the median cost for these
procedures was $2,156 based on 14 claims that included a supply charge.
Response: As we have stated in this preamble, we are committed to
relying on our claims data for making APC assignments as much as
possible. While we appreciate the external data provided by the
commenter regarding the costs of supplies associated with the practice
expense inputs for the Medicare Physician Fee Schedule, that payment
system utilizes a different methodology for establishing payment for
services that is not directly applicable to payment rates under the
OPPS. In the case of CPT code 20982, we believe that our hospital
claims data are adequate to support our proposal to maintain the
service in New Technology APC 1557 for CY 2006. CPT code 20982 was a
new code for CY 2004 so we have 1 year of hospital data for this
procedure. For CPT code 20982, we have 17 single claims from CY 2004
with a procedure-specific median cost of $1,578. As we do not require
that hospitals bill a separate supply charge for the probe that is used
for this service because there is no specific device C-code available,
we have no reason to believe that claims for CPT code 20982 without a
separate supply charge do not contain charges for all costs associated
with the procedure. The catheter charges may be wrapped into the charge
for the procedure itself. The code-specific median indicates that even
the current New Technology APC payment at $1,850 may be too high, but
given the information provided by the commenter and the relatively low
number of CY 2004 claims available for calculating the median cost for
CPT code 20982, we are finalizing our proposal for CY 2006 and are
retaining CPT code 20982 for at least 1 more year in New Technology APC
1557.
b. Breast Brachytherapy
Comment: In response to the November 15, 2004 final rule with
comment period (69 FR 65682), one commenter applauded our assignment of
CPT codes 19296 (Placement of radiotherapy afterloading balloon
catheter into the breast for interstitial radioelement application) and
19298 (Placement of radiotherapy afterloading balloon catheters,
multiple tube and button type, into the breast for interstitial
radioelement application) to New Technology APC 1524 (Level XIV $3000-
$3500), and CPT code 19297 (Placement of radiotherapy afterloading
balloon catheter into the breast for interstitial radioelement
application; concurrent with partial mastectomy) to New Technology APC
1523 (Level XXIII $2500-$3000) for CY 2005. The commenter stated that
these payment amounts adequately cover the costs of the applicator
devices involved in the procedures.
Response: We agree with the commenter's acknowledgement that the
payment amounts that we assigned to CPT codes 19296, 19297, and 19298
for CY 2005 adequately cover the resource costs associated with these
procedures. Therefore, for CY 2006, we are maintaining CPT codes 19296
and 19298 in New Technology APC 1524 and CPT code 19297 in New
Technology APC 1523.
c. Enteryx Procedure
A new CPT code, 0133T (Upper gastrointestinal endoscopy, including
esophagus, stomach, and either the duodenum and/or jejunum as
appropriate, with injection of implant material into and along the
muscle of the lower esophageal sphincter (e.g., for treatment of
gastroesophageal reflux disease)), was created for implementation
January 1, 2006 to describe the procedure currently coded under the
OPPS as HCPCS code C9704 (Injection or insertion of inert substance
[[Page 68576]]
for submucosal/intramuscular injections(s) into the upper
gastrointestinal tract, under fluoroscopic guidance). For CY 2005,
C9704 was assigned to New Technology APC 1556, with a payment rate of
$1,750. As discussed below, we determined an appropriate APC assignment
for this procedure for CY 2006. However, in the period between
publication of the proposed rule and the end of the comment period, the
product manufacturer recalled this product and the Food and Drug
Administration has warned physicians about the danger of its use.
In our analyses to determine the most appropriate APC assignment
for the new CPT code, we found that the most accurate payment will be
made by retaining the procedure's current APC assignment. We did not
automatically assign CPT code 0133T to APC 1556 because that CPT code
explicitly includes the endoscopy that is integral to the service,
whereas the current C-code does not. For that reason we calculated the
claims-based median cost for the procedure by using single claims for
HCPCS code C9704, on the premise that if the procedure required
endoscopy and the endoscopy was not separately billed then the
endoscopy charges were reflected in the charges for HCPCS code C9704 as
well as claims for HCPCS code C9704 that had a charge for an endoscopy
included to assure us that we were capturing the charges for the entire
procedure from as many claims as possible. Thus, to determine an
appropriate APC placement for CPT code 0133T we analyzed all single
claims for HCPCS code C9704, as well as claims that had HCPCS code
C9704 combined with either CPT code 43234 (Upper gastrointestinal
endoscopy, simple primary examination (e.g., with small diameter
flexible endoscope)), or CPT code 43235 (Upper gastrointestinal
endoscopy including esophagus, stomach, and either the duodenum and/or
jejunum as appropriate; diagnostic, with or without collection of
specimen(s) by brushing or washing).
The median cost from these claims which would crosswalk to the new
CPT code is $1,660. Therefore, we believe that it is still appropriate
to retain the procedure, coded for CY 2006 as CPT code 0133T, in New
Technology APC 1556 rather than assigning it to a different New
Technology APC or a clinical APC at this time. We will be deleting
HCPCS code C9704. As with all procedures assigned to New Technology
APCs, we will reevaluate it for next year to determine whether
assignment to a clinical APC is more appropriate.
d. Extracorporeal Shock Wave Treatment
Comment: Several commenters to both the November 15, 2004 final
rule with comment period and to our July 25, 2005 proposed rule opposed
our placement of new HCPCS codes for high energy Extracorporeal Shock
Wave Therapy (ESWT) services into New Technology APC 1547. In response
to a New Technology application for ESWT, we created new codes for high
energy ESWT for chronic lateral epicondylitis (C9720-tennis elbow) and
for chronic plantar fasciitis (C9721) effective January 1, 2005, and
placed them into New Technology APC 1547, with a payment rate of $850
for CY 2005. A number of commenters requested that these ESWT services
be placed in New Technology APC 1559, which has a payment rate of
$2,250. A manufacturer of ESWT equipment, who commented, cited our
regulations (42 CFR Sec. 419.31) in stating that APC groups ``must
be'' comparable in terms of clinical use and resources required. This
commenter, as well as another manufacturer, claimed that New Technology
APC 1547 does not cover the costs of the ESWT procedures for chronic
lateral epicondylitis and for chronic plantar fasciitis. The commenters
provided their estimated costs of the procedure at about $2,300 per
service for both clinical indications. One commenter also indicated
that it understood that the AMA's CPT Editorial Panel intended to issue
new codes for the two high energy ESWT services beginning in CY 2006.
It stated that when these new CPT codes become effective, providers and
payers will be faced with two different sets of codes for high energy
ESWT, the CPT codes and the HCPCS C-codes, and this will cause
difficulties with provider billing and reimbursement.
Commenting parties expressed their belief that our placement of
ESWT did not cover the costs of ESWT for plantar fasciitis, claiming
that the ESWT equipment costs between $250,000 and $400,000 for each
unit, varying by manufacturer, and summarizing other additional costs,
such as those for an annual maintenance contract, a specialized
technician, and anesthesia, along with a specialized transport vehicle
for the ESWT equipment. Commenters asserted that high energy ESWT is
comparable to the resource costs of services in Level II Foot
Musculoskeletal Procedures, APC 0056 with a CY 2005 payment rate of
$2,380.72, except that ESWT includes the capital costs for the
equipment, transport vehicle, and technician mentioned earlier. The
commenters also stated that high energy ESWT has a similar technology
and cost structure, including technological devices, maintenance
contracts, and specialized technical personnel, to extracorporeal shock
wave lithotripsy, for the fragmentation of kidney stones. These
commenters proposed that high energy ESWT be placed in APC 1559. One
hospital indicated that its average cost for ESWT is $2,100. Another
commenter who compared high energy ESWT with lithotripsy stated that if
we wished to compare ESWT with the costs of other procedures, then we
should use lithotripsy, which also employs high energy extracorporeal
shock waves, but for the treatment of kidney stones. The commenter
claimed that many of the other costs associated with the two procedures
were similar as well, with the exception of an imaging component used
with lithotripsy. The commenter noted that lithotripsy's APC
assignment, APC 0169, has a payment rate close to that of New
Technology APC 1559. Another commenter, commenting only on HCPCS code
C9721, recommended that high energy ESWT for treatment of chronic
plantar fasciitis be placed in either clinical APC 0055 (Level I Foot
Musculoskeletal Procedures) or APC 0056 (Level II Foot Musculoskeletal
Procedures), claiming that it fits most closely clinically to
procedures in APC 0055, and that high energy ESWT is more homogeneous
to either APC 0055 or 0056 clinically and economically than to its
assigned New Technology APC. The commenter also stated that any new CPT
code beginning in CY 2006 for high energy ESWT for chronic plantar
fasciitis should replace HCPCS code C9721 and should be placed in APC
0055 or 0056.
Response: When we determine that a new service is eligible for
placement into a New Technology APC, we then perform our own cost
analysis and cost estimate, in addition to taking the projected costs
submitted in a New Technology APC application into consideration. As we
stated in our November 30, 2001 final rule (66 FR 59900) concerning
placement of new services into APCs, ``* * * we will not limit our
determination of the cost of the procedure to information submitted by
the applicant. Our staff will obtain information on cost from other
appropriate sources before making a determination of the cost of the
procedure to hospitals.'' We compared the necessary hospital resources
such as procedure room time, personnel, anesthesia and other resources
of the ESWT procedure to various other procedures for which we have
historical
[[Page 68577]]
hospital claims data. Additionally, we took into consideration
projected costs submitted in the New Technology APC application,
including the capital costs and equipment utilization assumptions,
concluding that HCPCS codes C9720 and C9721 should be assigned to New
Technology APC 1547. New Technology APCs, by their very definition, do
not contain services that are clinically homogeneous, but instead,
based solely on hospital resource considerations, the services have
estimated costs that place them into the same New Technology payment
band. In contrast, services assigned to the same clinical APC are
homogeneous with respect to both their clinical characteristics and
hospital resource utilization.
There are new CPT codes for CY 2006 that describe high energy ESWT
services, and hospitals providing these services in CY 2006 will use
the CPT codes to report them instead of the two predecessor C codes. In
particular, CPT code 0102T (Extracorporeal shock wave, high energy,
performed by a physician, requiring anesthesia other than local,
involving lateral humeral epicondyle) will replace HCPCS code C9720. In
addition, CPT code 28890 (Extracorporeal shock wave, high energy,
performed by a physician, requiring anesthesia other than local,
including ultrasound guidance, involving the plantar fascia) will
replace HCPCS code C9721. We have closely reviewed the hospital cost
information provided by the commenters, along with our CY 2004 hospital
claims data for other outpatient hospital services. We are not
confident yet, in the absence of hospital claims data for the
predecessor C codes or the new CPT codes, that we can appropriately
place CPT codes 0102T and 28890 in clinical APCs where they would share
clinical and resource homogeneity with other services. Therefore, for
CY 2006 we are assigning CPT codes 0102T and 28890 to New Technology
APC 1547 with a payment rate of $850. We believe that the payment rate
is appropriate based on all cost and utilization information available
to us regarding high energy ESWT and other services provided in a
hospital outpatient setting.
Comment: One commenter, the applicant for assignment of high energy
ESWT to a New Technology APC, claimed that our assignment of ESWT to a
New Technology APC violates the Administrative Procedure Act (APA). The
commenter asserted that the OPPS proposed rule published August 16,
2004 (69 FR 50448) failed to mention ESWT or its placement in an APC.
Moreover, the commenter claimed that our lack of discussion of our
methodology made proper comments difficult if not impossible. The
commenting party claimed that finalizing a rule without explanation is
unlawful. The commenter furthermore claimed that the placement of ESWT
in APC 1547 was arbitrary, capricious, and in excess of statutory
authority in violation of the Administrative Procedure Act. The
commenter claimed that it appeared that CMS ignored the applicant's
data that it submitted regarding resource use, instead comparing the
resource costs for ESWT with entirely different procedures, resulting
in inaccurate conclusions regarding the costs of ESWT services.
Moreover, the commenter claimed that we have improperly classified ESWT
into the same APC as endoscopic epidural lysis, which it claims
violated the statutory requirement to group procedures based on both
costs and clinical and resource comparability.
Response: We disagree that our assignment of ESWT to New Technology
APC 1547 was arbitrary, capricious, and in violation of the APA or the
Medicare statute. As stated in our response above, we perform our own
cost analysis and estimate the cost of any eligible new service, while
taking the projected hospital costs submitted in the New Technology APC
application into consideration. As we have indicated above, our
November 30, 2001 final rule concerning placement of new services into
APCs states that we do not limit our determination of the cost of the
procedure to information submitted by the applicant. We obtain
information on costs from other appropriate sources before making a
determination of the cost of the procedure to hospitals. In the case of
the ESWT procedures, our clinical review team of physicians compared
the resources such as procedure room time, anesthesia, and other
resources of the ESWT procedure to the resources of various other
outpatient hospital procedures for which we have historical hospital
claims data. We believe that our claims data on other procedures in
terms of hospital resource use yield relevant cost information for use
in developing cost estimates for new procedures without a claims
history. As explained above, we took the New Technology APC applicant's
costs into account as we reviewed its projected hospital costs
thoroughly and, in particular, utilized information regarding expected
service frequency, capital equipment, and other costs in our total cost
estimate for the procedures. As discussed earlier, assignment to a New
Technology APC does not imply clinical homogeneity with other services
assigned to the same New Technology APC. We also note that we could not
have included these two C-codes in the proposed rule for CY 2005, since
we had not yet completed our evaluation of the New Technology APC
application and rendered a decision until well after that proposed rule
was published. As we have announced numerous times elsewhere, we will
add New Technology service codes and assign their payment rates in our
quarterly updates, where applicable and available, to facilitate timely
integration of new codes into the OPPS. The timing of the ESWT
procedures decision made the addition of the codes and payment rates
coincident with our CY 2005 final rule publication. In order to have
provided a discussion of the codes in a proposed rule, implementation
of the codes would have been delayed a full year.
e. GreenLight Laser
During the August 2005 APC Panel meeting, the Panel recommended
accepting CMS' proposed creation of APC 0429 for CY 2006 and the
inclusion of HCPCS C9713, which describes use of the GreenLight Laser
System, in this APC. We received several public comments concerning the
reassignment of HCPCS codes C9713, 52647, 52648, 50080, and 50081 to
APC 0429.
Comment: Several commenters requested that CMS maintain HCPCS code
C9713 in its New Technology APC for one more year, which would give
hospitals more time to learn how to correctly code for this service.
The commenters stated that our proposed reassignment of the procedure
to a clinical APC was premature because the decision was based on only
9 months of claims data. They suggested that many hospitals may not
even have known about the new HCPCS code C9713 because it was not
implemented until April 5, 2004, and, therefore, CMS received even
fewer correctly coded claims than the true number of outpatient
hospital services actually described by HCPCS code C9713 that were
performed on Medicare beneficiaries during the 9 month period.
The commenters pointed out that there is evidence that hospitals
have not been using the HCPCS code properly and reminded us that some
members of the APC Panel stated that their hospitals were not coding
these procedures correctly.
The commenters stated that the short period of time for collection
of claims data and the low median cost calculated for HCPCS code C9713
based on those claims support their conjecture that the claims are not
correct, and that the
[[Page 68578]]
procedure should remain in its CY 2005 New Technology APC for at least
one more year to allow for collection of more accurate claims data.
Response: For CY 2006, CPT revised the descriptors of two procedure
codes for prostate laser procedures described by CPT codes 52647 and
52648. The revised CPT code descriptors are as follows: 52647 (Laser
coagulation of prostate, including control of postoperative bleeding,
complete (vasotomy, meatotomy, cystourethroscopy, urethral calibration
and /or dilation, and internal urethrotomy are included if performed);
and 52648 (Laser vaporization of prostate, including control of
postoperative bleeding, complete (vasectomy, meatotomy,
cystourethroscopy, urethral calibration and/or dilation internal
urethrotomy and transurethral resection of prostate are included if
performed). These descriptors for the CPT codes will be implemented on
January 1, 2006. Our policy in the OPPS is to maintain only one HCPCS
code that describes a specific procedure, and to the extent possible
adopt CPT coding for services provided under the OPPS. In this case we
determined, based on our review of the new descriptors, that procedures
reported using HCPCS code C9713 in CY 2005 could be appropriately
billed with CPT codes for CY 2006.
We also concluded that the resource use and clinical aspects of the
laser vaporization procedure reported with HCPCS code C9713 and of the
prostate procedures reported using CPT codes 52647 and 52648 prior to
revision were so similar that it was appropriate to move, as proposed,
the CY 2004 hospital claims data for HCPCS code C9713 to APC 0429 to
contribute to the APC's median cost calculation for CY 2006. In
addition, there was no reason to postpone adoption of the revised CPT
codes for use in the OPPS. Although we had less than a full year of
hospital claims data available for HCPCS code C9713, we had well over
1,600 single claims upon which to calculate median costs for the
procedure, and those claims data confirmed the resource similarity of
this service to the services coded by CPT codes 52647 and 52648. The
medians for these three procedures only range from $2,475 to $2,602 and
the clinical indications for the procedures are also similar. For CY
2006 we are adopting the newly available revised CPT codes for
reporting the procedure previously described by HCPCS code C9713 and
deleting HCPCS code C9713, effective January 1, 2006.
Creation of a new Level V APC 0042 for Cystourethroscopy and Other
Genitourinary Procedures, the level to which we assigned the CY 2004
data for the prostate laser procedures described by HCPCS code C9713
and CPT codes 52647 and 52648, along with cost data for two other
procedures also reassigned to that APC, resulted in tighter median cost
distributions within all levels of the APCs for cystouresthroscopy and
other genitourinary procedures. We are confident in the median costs
for all of these prostate procedures because we have over 1,000 single
claims for each of those procedures.
Although HCPCS code C9713 was placed in a New Technology APC for
only one year, assignment to an appropriate clinical APC is always our
goal for procedures that spend time assigned to New Technology APCs. In
this case, the creation of a Category I CPT code that describes the
procedure reported by HCPCS code C9713 during CY 2004 and CY 2005 in
the OPPS occurred more quickly than is often the case. We believe that
the procedure's assignment with similar procedures to a new clinical
APC is appropriate and will result in accurate payment. Also, we expect
that adoption of a revised CPT code for reporting the noncontact laser
vaporization of the prostate procedure will reduce hospitals'
administrative burden as they will be able report CPT codes for
prostate services provided in CY 2006, rather than C-codes specific to
the OPPS.
After carefully considering all comments we received, we are
finalizing, without modification, our proposal to assign CPT codes
52647, 52648, 50080, and 50081 to new APC 0429, Level V
Cystourethroscopy and Other Genitourinary Procedures. The CY 2004
hospital claims data for HCPCS code C9713 have been assigned to APC
0429 for purposes of establishing the final CY 2006 payment rate for
that APC.
f. Magnetoencephalography (MEG)
We proposed to reassign MEG procedures to clinical APC 0043, using
CY 2004 claims data to establish median costs on which payments would
be based.
We received a number of public comments concerning the reassignment
of CPT codes 95965, 95966, 95967.
Comment: A number of commenters addressed our proposal to assign
magnetoencephalography (MEG) procedures to APC 0430. There are three
MEG procedures affected by our proposal: CPT code 95965, MEG recording
and analysis for spontaneous brain magnetic activity; CPT code 95966,
MEG for evoked magnetic fields, single modality; and CPT code 95967,
MEG for evoked magnetic fields, each additional modality to be listed
separately in addition to CPT code 95965 for primary procedure. Each of
those procedures is currently assigned to a separate New Technology
APC, and the commenters believed that they should remain in those APCs
for CY 2006. The commenters believed that assignment to APC 0430 was
inappropriate because the proposed payment level of $674 was inadequate
to cover the costs of the procedures and because the procedures should
not be assigned to only one level as their required hospital resources
differ significantly.
The commenters stated that the median costs based on CMS' hospital
claims data are erroneous because hospitals are not providing accurate
charges for the procedures. Further, they stated that our data did not
represent the true costs of the procedures because MEG procedures are
performed on very few Medicare patients.
In addition to the written comments we received on our proposed
rule, hospital and manufacturer representatives made presentations to
the APC Panel during its August 2005 meeting. At that time, the Panel
recommended that CMS retain the MEG procedures in their current New
Technology APCs and that we collect more external data and provide a
detailed review of the data for the Panel's consideration at its next
meeting.
Response: The MEG procedures have been assigned to New Technology
APCs for 4 years. In CY 2002, all three services were assigned a
payment rate of $150 in a single New Technology APC. As these CPT codes
were new for CY 2002 and, therefore, first open to comment in the CY
2002 final rule, we received several comments regarding the costs of
the services. For CY 2003, all three services were assigned to higher
paying New Technology APCs, with a rate of $2,250 for CPT code 95965,
$1,375 for CPT code 95966, and $875 for CPT code 95967. For CY 2004 and
CY 2005, the procedures were again assigned to higher paying New
Technology APCs, with CPT code 95965 moving to a rate of $5,250; CPT
code 95966 to a rate of $1,450; and CPT code 95967 to a rate of $950.
For CY 2006, we proposed to assign these procedures to one new
clinical APC because assignment to New Technology APCs is generally
temporary while we are gathering hospitals claims data, and we now have
3 years of data upon which to base clinical APC assignments. Over the
entire 3-year period, the median costs
[[Page 68579]]
for all 3 services, especially CPT code 95965, have generally been far
less than the OPPS payment rates. In fact, the CY 2005 median cost
(based on CY 2003 claims data) for CPT code 95965 was only 16 percent
of the payment rate, and for CY 2006 the median cost (based on CY 2004
claims) was only 12 percent of the rate.
These procedures are rarely performed on Medicare beneficiaries
and, therefore, we have a small number of claims now and have no
expectation that the volume will increase. Patients targeted for MEG
investigation procedures are typically between 17 and 32 years old.
Furthermore, industry expectations are that the technology's growth
will be in installations outside of hospitals. Nevertheless, almost all
services with ongoing expectations of low volume for Medicare
beneficiaries, including obstetrical services, reside in clinical APCs,
not New Technology APCs. From CY 2003 claims data we were able to use
20 of the 21 claims submitted for CPT code 95965, 7 of the 7 claims
submitted for CPT code 95966, and 4 of the 6 submitted for CPT code
95967 to calculate median costs of the procedures. For CY 2006 based on
CY 2004 hospital claims data, we were able to use 10 of the 10 claims
submitted for CPT code 95965 and 3 of the 4 submitted for CPT code
95966, while we had no claims for CPT code 95967.
In contrast to the comments, we are committed to relying
increasingly on those data, especially in a case like this where the
few hospitals that offer this technology have been billing these
procedures for at least four years and the technology is no longer new.
However, we also are sensitive to the potential access effects of
relying on a low volume of claims to establish payment rates, as well
as to the APC Panel's recommendation regarding these procedures as
noted by the commenters. Therefore, for CY 2006 we considered charge
and cost information provided to us during the comment period in
addition to our claims data. A commenter provided total charge
information billed to multiple payers, including Medicare, for MEG
services from one hospital which showed charges of about $10,500. Also
included in the information we received during the comment period were
cost estimates for the procedures from various sources, and the
estimates of costs varied considerably. For example, we were provided
with estimates of hospital costs per case for CPT code 95965 that
ranged from $8,321 to $4,054. We believe that some of that variation
may be due to differences in the number of cases used in amortization
estimates, as the costs of the equipment used in MEG procedures are
significant. However, the fact that volume varies from one provider to
another does not mean that we will base our payments on the high cost
per case that results from allocating costs over only a few cases. In
the case of MEG, we are especially sensitive to this given the very low
level of Medicare beneficiary participation in the technology because
of the clinical circumstances in which MEG services are typically
provided. The OPPS payment rates for services need to make appropriate
payments for the services provided to Medicare beneficiaries,
recognizing that, as a budget neutral payment system, the OPPS does not
pay the full hospital costs of services. We expect that our payment
rates generally will reflect the costs that are associated with
providing care to Medicare beneficiaries in cost-efficient settings.
We agree with the APC Panel and the commenters that there are no
currently existing clinical APCs containing other services where MEG
services could be appropriately assigned, based on clinical and
resource homogeneity with other OPPS services. We carefully considered
our claims data, information provided by commenters, and the APC Panel
recommendation that we retain the MEG procedures in New Technology
APCs. As a result of this analysis, we determined that using a 50/50
blend of the code-specific median costs from our most recent CY 2004
hospital claims data and the CY 2005 code-specific payment amounts as
the basis for assignment of the procedures for CY 2006 would be one way
to recognize both the current payment rates for the procedures, which
were originally based on the theoretical costs to hospitals of
providing MEG services, and the median costs based upon our hospital
claims data regarding actual MEG services provided to Medicare
beneficiaries by hospitals. Accordingly, for CY 2006, because we are
not fully confident in our claims data for MEG procedures and there are
no clinical APCs containing other services that share clinical and
hospital resource characteristics with MEG procedures, we believe that
it is most appropriate to place MEG services in New Technology APCs for
CY 2006 to accommodate these adjusted costs. We agree with the
commenters that these APCs should be ``S'' status so no multiple
procedure reduction will apply, as we are determining an adjusted cost
for each specific MEG service. For CPT codes 95965 and 95966, we
averaged the services' median costs from CY 2004 claims data with their
CY 2005 payment rates to determine adjusted costs for the procedures
and, therefore, their appropriate New Technology APC assignments. There
were no CY 2004 claims for CPT code 95967, and thus, no median cost to
use for such an adjustment. For that procedure, we based the New
Technology APC assignment on the historical relationship (66 percent in
CY 2005) between the New Technology APC payment for that procedure and
the New Technology APC payment for CPT code 95966, the code to which
CPT code 95967 is an add-on. We used 66 percent of our CY 2006 payment
rate for CPT code 95966 to determine the adjusted cost of CPT code
95967 and establish the New Technology payment amount for CPT code
95967 for CY 2006. The table below provides the CY 2006 payment rates
and the resulting APC assignments for MEG services.
As suggested by the APC Panel, we will continue to study the APC
assignments for these procedures over the coming year and invite
members of the public to submit any information they believe will be
helpful to us. We have given these procedures special consideration
through this adjustment methodology for CY 2006 to help assure that
Medicare beneficiaries have appropriate access to MEG services. With an
additional year of data and improved consistency of billing by
hospitals providing MEG services, we are hopeful that the claims-based
median costs of these services in future years will more consistently
and appropriately reflect hospitals' costs of providing MEG procedures.
Table 10.--CY 2006 APC Assignments for MEG Services
----------------------------------------------------------------------------------------------------------------
CY 2006
CPT CY 2006 median CY 2005 Adjusted cost payment amount/
cost payment APC
----------------------------------------------------------------------------------------------------------------
95965........................................... $644.71 $5,250 $2,947.35 $2,750/1523
95966........................................... 1,013.34 1,450 1,231.67 1,250/1514
95967........................................... N/A 950 818.97 850/1510
----------------------------------------------------------------------------------------------------------------
[[Page 68580]]
g. Positron Emission Tomography (PET) Scans
(1) Nonmyocardial PET Scans
Positron emission tomography (PET) serves an important role in the
clinical care of many Medicare beneficiaries. As stated in the November
15, 2004 final rule with comment period (69 FR 65716), we believe there
are sufficient claims data to assign nonmyocardial PET scans to a
single clinical APC. However, to minimize any potential impact that a
payment reduction resulting from this move might have had on
beneficiary access to this technology, we set the CY 2005 OPPS payment
for nonmyocardial PET scans based on a 50/50 blend of their CY 2005
median cost and the payment rate of the CY 2004 New Technology APC to
which they were assigned. Therefore, nonmyocardial PET scans were
assigned to New Technology APC 1513 (New Technology--Level XIV ($1,000-
$1,200) for a blended payment rate of $1,150 in CY 2005.
At the February 2005 APC Panel meeting, the Panel agreed with a
presenter's assertion that the resource costs associated with
nonmyocardial PET scans are similar to the costs associated with
myocardial PET scans, and recommended that myocardial PET scans be
placed in the same New Technology APC 1513 in which the nonmyocardial
PET scans currently reside. Furthermore, presenters at the February
2005 APC Panel meeting expressed concern that movement of nonmyocardial
PET scans from their New Technology APC to lower paying clinical APC
0285 could impede beneficiary access to this technology, similar to
concerns articulated by commenters in previous years.
As a result of a recent Medicare national coverage determination
(Publication 100-3, Medicare Claims Processing Manual section 220.6),
effective January 28, 2005, we discontinued the PET G-codes listed in
Table 10, and activated the CPT codes listed below in Table 11 for
myocardial and nonmyocardial PET scans and concurrent PET/CT scans for
anatomical localization. These lists of codes along with claims
processing instructions, are provided in Change Request 3756,
Transmittal 514, Publication 100-04, Medicare Claims Processing Manual.
[GRAPHIC] [TIFF OMITTED] TR10NO05.015
Table 12.--CPT Codes for Covered PET Scan Indications Effective for
Dates of Service on or After January 28, 2005
------------------------------------------------------------------------
CPT code Description
------------------------------------------------------------------------
78459................................ Myocardial imaging, positron
emission tomography (PET),
metabolic evaluation.
78491................................ Myocardial imaging, positron
emission tomography (PET),
perfusion, single study at rest
or stress.
78492................................ Myocardial imaging, positron
emission tomography (PET),
perfusion, multiple studies at
rest and/or stress.
78608................................ Brain imaging, positron emission
tomography (PET); metabolic
evaluation.
78811................................ Tumor imaging, positron emission
tomography (PET); limited area
(e.g., chest, head/neck).
78812................................ Tumor imaging, positron emission
tomography (PET); skull base to
mid thigh.
78813................................ Tumor imaging, positron emission
tomography (PET); whole body.
78814................................ Tumor imaging, positron emission
tomography (PET) with
concurrently acquired computed
tomography (CT) for attenuation
correction and anatomical
localization; limited area
(e.g., chest, head/neck).
78815................................ Tumor imaging, positron emission
tomography (PET) with
concurrently acquired computed
tomography (CT) for attenuation
correction and anatomical
localization; skull base to mid
thigh.
78816................................ Tumor imaging, positron emission
tomography (PET) with
concurrently acquired computed
tomography (CT) for attenuation
correction and anatomical
localization; whole body.
------------------------------------------------------------------------
In the CY 2006 OPPS proposed rule, we proposed to maintain CPT
codes 78608, 78609, 78811, 78812, and 78813 for nonmyocardial PET scans
in New Technology APC 1513 (New Technology--Level XIII, $1,100-$1,200)
at a payment rate of $1,150, the same APC placement as their
predecessor G-codes, to ensure continuing beneficiary
[[Page 68581]]
access to this technology. We also proposed to maintain CPT codes
78814, 78815, and 78816, which describe concurrent PET/CT scans for
anatomical localization, in New Technology APC 1514 (New Technology--
Level XIV, $1,200-$1,300) at a payment rate of $1,250, based on input
claiming that the costs associated with PET/CT technology are higher
than the costs of PET technology alone.
Comment: Several commenters to the November 15, 2004 final rule
with comment period (69 FR 65682) urged that we replace the G-codes for
PET procedures with the established CPT codes for PET scans, while
commenters to the July 25, 2005 proposed rule (70 FR 42674) applauded
our transition to the CPT codes for PET scans. These commenters stated
that movement to the established CPT codes for PET scans would greatly
reduce the burden on hospitals of tracking and billing the G codes
which are not recognized by other payors, and would allow for more
uniform hospital billing of these scans. Furthermore, while a few
commenters urged that we increase the payment for PET scans, the
majority of commenters supported our proposal to maintain nonmyocardial
PET scans in New Technology APC 1513 (paying $1,150), consistent with
the payment level under their predecessor G-codes. Commenters stated
that hospital claims data do not accurately reflect the costs of
providing these services, and beneficiary access to this technology
would be threatened if hospital claims data alone were used to set the
CY 2006 payment rates.
Response: We agree with commenters that movement from the G-codes
to the established CPT codes for PET scans allows for more uniform
billing of these scans. Furthermore, we concur, in general, with
commenters' recommendations that the payment levels under the
established CPT codes for PET scans be consistent with the payment
levels under their predecessor G-codes. Therefore, we are maintaining
newly established CPT codes 78608, 78811, 78812, and 78813 for
nonmyocardial PET scans in New Technology APC 1513 (New Technology--
Level XIII, $1,100-$1,200) at a payment rate of $1,150. In addition,
for myocardial PET scans we are assigning CPT codes 78459 and 78491 to
newly established APC 0306 (Myocardial Positron Emission Tomography
(PET) imaging, single study, metabolic evaluation) and CPT code 78492
to newly established APC 0307 (Myocardial Positron Emission Tomography
(PET) imaging, multiple studies), where the APC medians have been
calculated based on data from their predecessor G-codes, as discussed
in more detail below. However, we are changing the status indicator for
CPT code 78609 (Brain imaging, PET; perfusion evaluation) from ``S''
(separately paid under the OPPS) to ``E'' (not paid under the OPPS)
retroactive to January 28, 2005, as historically there has been and
currently there remains no coverage for this service under the Medicare
program.
Comment: Numerous comments applauded our recognition of the newly
established CPT codes for concurrent PET/CT scans and acknowledgement
of the clinical usefulness of concurrent PET/CT scans for attenuation
correction and anatomical localization in the management of patients
with cancer. However, several commenters expressed concern that the
proposed assignment of PET/CT scans (CPT codes 78814, 78815, and 78816)
to New Technology APC 1514 (paying $1,250) may not adequately cover the
costs of providing PET/CT services. These commenters explained that
hospitals incur more capital and maintenance costs with PET/CT than
with conventional PET. For instance, a large trade association
commented that a new PET/CT scanner costs approximately $1.8 million,
compared to $1.2 million for a conventional PET scanner. Another
commenter quoted annual maintenance costs of approximately $240,000 for
a new PET/CT scanner, compared to $120,000 for a conventional PET
scanner. These commenters asserted that the proposed payment rate for
PET/CT scans does not recognize the additional diagnostic benefits
provided by concurrent PET/CT scans over traditional diagnostic PET and
CT scans. These commenters further explained that the CT scan performed
during a PET/CT is not limited to one part of the body but includes the
entire area imaged by the PET scan and, therefore, is more efficient
than performing one PET scan plus several separate CT scans for
different regions of the body. Several commenters recommended that we
assign the newly established CPT codes for PET/CT scans (CPT codes
77814, 78815, and 78816) to New Technology APC 1519 (paying $1,750)
based on external data and an economic analysis submitted by one of the
commenters, which reported the costs of providing a PET/CT scan at
approximately $1,717. In contrast, a leading mobile provider of PET/CT
scans reported an average cost of $1,485 for providing a PET/CT scan,
which included FDG, mileage to sites, technologists, supplies,
equipment maintenance, and scheduling.
Response: While we acknowledge that concurrent PET/CT scans for
attenuation correction and anatomical localization in the management of
patients with cancer may be clinically useful, we have received no
convincing data that support the assignment of PET/CT scans (CPT codes
78814, 78815, and 78816) to an APC paying higher than $1,250. The
external data and economic analysis submitted by one of the commenters
failed to meet the criterion for consideration of external data that we
proposed in our August 12, 2003 proposed rule (68 FR 47987) and
finalized in our November 7, 2003 final rule (68 FR 63424). The
external data and analysis was not provided with the level of detail
that would have allowed us to verify the claims data nor to have
adjusted the claims data should we have determined an adjustment was
necessary. Furthermore, one commenter reported an average cost of
$1,485 for providing a PET/CT scan, which included FDG, among other
related costs. Considering that FDG will be paid separately at charges
adjusted to cost for CY 2006 (estimated typically to be about $250),
the payment rate of $1,250 for PET/CT scans (not including FDG)
adequately covers the cost of $1,485 that this commenter reported for
providing PET/CT scans (including FDG). While we acknowledge that PET/
CT scanners may be more costly to purchase and maintain than dedicated
PET scanners, a PET/CT scanner is versatile and may also be used to
perform individual CT scans, thereby potentially expanding its use if
PET/CT scan demand is limited. Therefore, for CY 2006, we are
maintaining CPT codes 78814, 78815, and 78816, which describe
concurrent PET/CT scans for attenuation correction and anatomical
localization, in New Technology APC 1514 (New Technology--Level XIV,
$1,200-$1,300) at a payment rate of $1,250.
Comment: One commenter expressed concern that the proposed payment
rate of $1,250 for a PET/CT scan may not cover the costs of a
diagnostic CT when performed in conjunction with a PET/CT scan. The
commenter stated that although many of the technical resources for
acquiring diagnostic CT data when performed as a single acquisition
with a PET/CT scan are the same as for the CT for attenuation
correction and anatomical localization, the initial capital costs are
greater for a PET/CT scanner capable of performing a diagnostic CT. In
addition, there are added costs for acquiring the diagnostic CT data
such as for the contrast agent and appropriate personnel. This
commenter expressed interest in a continued dialogue with CMS on the
issue of appropriate payment for the
[[Page 68582]]
technical costs of performing a diagnostic CT acquired simultaneously
with a PET/CT scan.
Response: We appreciate the commenter's concerns regarding
appropriate billing and OPPS payment for a PET scan with CT for
attenuation correction and anatomical localization and a diagnostic CT
scan performed as a single acquisition. We will consider this issue
should we issue more specific hospital billing guidance regarding
various combinations of medically reasonable and necessary PET and CT
scans.
(2) Myocardial PET Scans
Comment: Two commenters to the November 15, 2004 final rule with
comment period (69 FR 65682) urged CMS to delete HCPCS code G0230 (PET
imaging, metabolic assessment for myocardial viability following
inconclusive SPECT study) and recognize CPT code 78459 (myocardial
imaging, positron emission tomography, metabolic evaluation) by
changing its status indicator from ``B'' to ``S.''
Response: As a result of a recent Medicare national coverage
determination Publication 100-3, Medicare Claims Processing Manual
section 220.6), effective January 28, 2005, we discontinued HCPCS code
G0230 and activated CPT code 78459, changing its status indicator from
``B'' to ``S.'' For CY 2006, we are maintaining CPT code 78459 as the
active code for billing ``myocardial imaging, positron emission
tomography, metabolic evaluation.''
Comment: Several commenters to the November 15, 2004 final rule
with comment period (69 FR 65682) and the CY 2006 OPPS proposed rule
(70 FR 42674) stated that the payment rate for APC 0285 does not
accurately reflect the costs associated with performing multiple
studies of PET myocardial perfusion imaging. They noted that, as
configured, APC 0285 violated the two times rule for CY 2005 and was
proposed as an exception to the two times rule for CY 2006. These
commenters suggested that CMS split myocardial PET scans into two APCs
to distinguish the resource consumption differences between single-
study and multiple-study PET imaging.
Response: We agree with commenters that the significant cost
differences between single study and multiple studies myocardial PET
imaging services reflected in our historical hospital claims data for
the G-code myocardial PET scan services support the splitting of APC
0285 into two myocardial PET scan APCs for more accurate rate-setting
for these services for CY 2006. Furthermore, the splitting of APC 0285
resolves the two times violation that occurred in the CY 2006 proposed
rule configuration of APC 0285. Therefore, we are assigning single-
study myocardial PET imaging procedures and metabolic evaluation of
myocardial PET imaging to APC 0306 (Myocardial Positron Emission
Tomography (PET) imaging, single study, metabolic evaluation) with a
median cost of $800, based on the CY 2004 hospital claims data for the
predecessor G-codes that have been replaced with CPT codes 78459 and
78491. In addition, we are assigning multiple-study myocardial PET
imaging procedures to APC 0307 (Myocardial Positron Emission Tomography
(PET) imaging, multiple studies) with a median cost of $2,482, based on
the CY 2004 hospital claims data for the predecessor G-codes that have
been replaced with CPT code 78492.
Comment: One commenter explained that myocardial PET perfusion
studies may be performed with or without gating similar to myocardial
SPECT procedures. However, for myocardial PET perfusion studies, there
are no additional codes to describe gating; therefore, the provider
receives the same payment regardless of having performed a gated study
versus a non-gated study. The commenter requested that the payment rate
for myocardial PET perfusion studies be adjusted to assure proper
payment for gated studies.
Response: While we recognize that the CPT codes describing
myocardial PET scans make no distinction between gated and non-gated
studies, we received numerous comments urging that we discontinue the
G-codes for PET scans and recognize these CPT codes for PET scans.
Furthermore, the splitting of the myocardial PET scans into two APCs to
distinguish single-study imaging from multiple-study imaging, as
discussed in detail above, may improve payment for certain gated
studies that involve multiple studies and address the commenter's
concern for adequate payment for gated studies.
h. Proton Beam Treatment
In the CY 2005 OPPS 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 for 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 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 for the proposed 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 was $934 derived from
partial CY 2004 claims data at the time of development of the CY 2006
proposed rule. 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 proposed 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 for CY 2006.
Comment: Numerous commenters applauded our proposal to reassign CPT
codes 77523 (Proton treatment delivery, intermediate) and 77525 (Proton
[[Page 68583]]
treatment delivery, complex) from New Technology APC 1510 (New
Technology--Level X ($800-$900) to clinical APC 0667 (Level II Proton
Beam Radiation Therapy), setting payment on the median cost of $1,133
derived from the CY 2004 claims, an increase from the median cost of
$934 in the proposed rule. Commenters also supported our proposal to
maintain CPT codes 77520 (Proton treatment delivery; simple, without
compensation) and 77522 (Proton treatment delivery; simple, with
compensation) in APC 0664 (Level I Proton Beam Radiation Therapy),
setting the payment on the median cost of $947 derived from the full
year CY 2004 claims. Commenters stated that these proposed payments
more accurately reflect the significant capital expense and operating
costs of a proton beam therapy center. Commenters also were pleased
with our proposal to maintain separate APCs for distinguishing simple
from intermediate and complex proton beam therapies, stating that the
distinction is necessary to differentiate between the resource demands
of the different treatment levels. Commenters urged CMS to continue
protecting beneficiary access to this technology, especially during
this early stage of clinical adoption to ensure economic viability of
both existing facilities and those in various stages of construction
and development.
Response: We agree with commenters that the CY 2004 median cost
data for proton beam therapy services more accurately reflect the
significant capital expense and high operating costs of a proton beam
therapy facility. Furthermore, our reassignment of CPT codes 77523 and
77525 from New Technology APC 1510 to clinical APC 0667 based on the
improved median cost data and stable frequency is consistent with our
policy of transitioning New Technology services into a clinically
appropriate APC with payment based on median cost data once the data
for these services become sufficiently stable to protect patient access
to such services. Therefore, we are finalizing our proposal to reassign
intermediate and complex proton beam therapy services (CPT codes 77523
and 77525) from New Technology APC 1510 to clinical APC 0667, and to
maintain simple proton beam therapy services (CPT codes 77520 and
77522) in APC 0664 for CY 2006.
i. Smoking Cessation Counseling
Comment: Two commenters expressed concern about our proposal to
move smoking cessation HCPCS codes G0375 (Smoking and tobacco-use
cessation counseling visit; 3-10 minutes) and G0376 (Smoking and
tobacco-use cessation counseling visit; greater than 10 minutes) from
their current New Technology APC 1501 (Level I, $0-$50) with a payment
rate of $25, to New Technology APC 1491 (Level IA, $0-$10) with a
payment rate of $5. Both commenters contended that the current payment
rate of $25 is not sufficient to cover resources associated with this
type of visit. Both commenters expressed the conviction that, once
claims data reflecting the costs of the service become available, it
would become clear that a payment rate closer to $52 is warranted. One
commenter urged us to maintain these codes in their current New
Technology APC until provider claims data become available. The other
commenter took the position that placement in a New Technology APC is
not appropriate, as the services could reasonably be placed in an
existing clinical APC. Specifically, this commenter recommended that
HCPCS codes G0375 and G0376 be assigned immediately to APC 0600 (Low
Level Clinic Visits), which the commenter considers appropriate in
terms of resource costs and clinical characteristics. Finally, both
commenters pointed out that there was an inconsistency in our tables in
the proposed rule with regard to the APC assignments of codes G0375 and
G0376. Specifically, Table 10 in the proposed rule (70 FR 42706) showed
HCPCS code G0375 assigned to New Technology APC 1491 (with a payment
rate of $5), while HCPCS code G0376 was assigned to New Technology APC
1492 (with a payment rate of $15). However, Addendum B of the proposed
rule (70 FR 42936) showed both HCPCS codes G0375 and G0376 assigned to
New Technology APC 1491 (with a payment rate of $5).
Response: We thank the commenters for bringing to our attention a
typographical error that appeared in Table 10 of the proposed rule (70
FR 42706). This error did not come to our attention in time for
correction. Our intent, as indicated in Addendum B, was to assign both
HCPCS codes G0375 and G0376 to APC 1491 (with a payment rate of $5). We
regret the error. We do not agree with the commenter who suggested that
it is appropriate at this time to remove HCPCS codes G0375 and G0376
from assignment to a New Technology APC and to assign them to clinical
APC 0600 (Low Level Clinic Visits). One purpose of assignment to a New
Technology APC is to provide an opportunity to collect claims data from
our system, in order to allow for the ultimate placement of a code in
the most appropriate clinical APC in terms of hospital resource
requirements. At this time, we lack any data that would justify placing
these codes in the clinical APC recommended by the commenter or in any
other clinical APC. We believe that these smoking cessation services,
because they are so specifically defined with respect to coding and
coverage, may not require similar hospital resources as those required
of other services assigned to APC 0600. As two specific G-codes were
developed for these new smoking cessation services, the specific
services likely bear little clinical resemblance to many of the
evaluation and management services assigned to APC 0600, whose median
cost currently reflects CY 2004 claims from hospitals. We also cannot
agree with the commenter recommending placement of these codes in one
or more higher-paying New Technology APCs. Our proposal to reassign
these codes from their current New Technology APC 1501 (with a payment
rate of $25) to New Technology APC 1491 (with a payment rate of $5) was
based on our assessment that the hospital facility resources required
for this service are likely to be very limited. At the time of
activation of these new G-codes in CY 2005, New Technology APC 1501 was
the New Technology APC applicable to new OPPS services with expected
hospital costs of between $0 and $50. As we proposed to refine the New
Technology cost bands for CY 2006 and are finalizing that proposal in
this final rule, we believe that for CY 2006 assignment of the smoking
cessation G-codes to New Technology APC 1491 now more appropriately
reflects the hospital resources required for these services. Therefore,
for CY 2006, we are finalizing that proposal in this final rule.
However, for CY 2007 rate-setting, we will reassess the APC placement
of these codes in light of the available partial year CY 2005 hospital
claims data.
j. Stereoscopic Kv X-ray
Comment: A number of commenters addressed our creation of a new
code for stereoscopic kilovolt x-ray imaging, HCPCS code C9722
(Stereoscopic kilovolt x-ray imaging with infrared tracking for
localization of target volume), and assignment of the service to a New
Technology APC. Commenters stated that the ``definition,'' which
appears to refer to the code descriptor, combines two technologies into
one HCPCS code. A commenter claimed that this descriptor excludes other
superior technologies to acquire kilovolt (kV) x-ray images for
localization of target volume that do not rely on infrared
[[Page 68584]]
tracking. Commenters asserted that the key feature of the service is
the use of kV x-ray imaging for localization of target volume, while
the infrared tracking feature is used for patient monitoring only to
ensure immobilization, not for positioning and localization. A
commenter stated that many kV x-ray systems do not use infrared
tracking. The commenters, including a number of cancer centers,
recommended modifying the descriptor of HCPCS code C9722 to
``Stereoscopic kV x-ray imaging with or without infrared tracking for
localization of target volume,'' claiming that this would allow
hospitals equal reimbursement for providing the service regardless of
the vendor from whom they bought the kV x-ray equipment. One commenter
stated that the kV x-ray is part of Image Guided Radiation Therapy
(IGRT), a new generation of conformal radiation therapy techniques, and
that it was working with the CPT Editorial Panel to submit CPT
applications for stereoscopic x-ray guidance, as well as other IGRT
technologies. A commenter stated that there is a new CPT code for
stereoscopic x-ray guidance effective January 1, 2006, and recommended
that we crosswalk HCPCS code C9722 to the new CPT code.
Response: The AMA's CPT Editorial Panel created new CPT code 77421,
``Stereoscopic X-ray guidance for localization of target volume for the
delivery of radiation therapy'', which will be effective January 1,
2006. We will replace HCPCS code C9722 with CPT code 77421 for CY 2006,
mapping the new code to the same New Technology APC as for CY 2005--APC
1502. As with the instructions embedded in the descriptor for HCPCS
code C9722, CPT code 77421 should not be reported with the five G-codes
for stereotactic radiosurgery treatment to be billed under the OPPS in
CY 2006. As CPT code 77421 makes no reference to infrared tracking, the
commenters' concerns are addressed by the use of this CPT code and its
descriptor.
k. Stereotactic Radiosurgery (SRS)
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 HCPCS code 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 CY 2004, so we have only one year of hospital claims
data reflecting costs of all 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 proposed 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.
In the CY 2006 proposed rule, we acknowledged 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
indicated that we had no need to separately track SRS planning
services, which share clinical and resource homogeneity with other
radiation treatment planning 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 together the median costs of the following
CPT codes
[[Page 68585]]
that we found to be regularly billed with SRS delivery (CPT code 61793
in the available hospital data): 77295, 77300, 77370, and 77315. In the
CY 2006 proposed rule, our examination of the costs from the CY 2004
claims data available to us at that time for the above-mentioned CPT
codes closely approximated 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 utilized for the proposed rule
totaled $1,297, while the median cost for HCPCS code G0242 was $1,366
and the median cost for HCPCS code G0338 was $1,100 based on the
partial year CY 2004 claims data. In addition, three of the above-
mentioned CPT codes were included on the proposed bypass list for CY
2006, so we did 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 proposed 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 acknowledged 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
proposed for CY 2006, might 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 specifically requested
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 did 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.
As discussed in detail above, the APC Panel recommended that CMS
create a single HCPCS code to encompass both Cobalt 60-based and linear
accelerator-based SRS planning. Furthermore, the Panel recommended that
we make no changes to the coding or APC placement of SRS treatment
delivery HCPCS codes G0173, G0243, G0251, G0339, and G0340 for CY 2006.
For reasons discussed below, we are discontinuing HCPCS codes G0242
and G0338 for the reporting of charges for SRS planning under the OPPS
for CY 2006, and instructing hospitals to bill charges for SRS
planning, regardless of the mode of treatment delivery, using all of
the available CPT codes that most accurately reflect the services
provided. In addition, while we are reassigning HCPCS code G0243 to
clinical APC 0127 for CY 2006, we are making no changes to the APC
placement of SRS treatment delivery HCPCS codes G0173, G0251, G0339,
and G0340.
We received a number of public comments on these SRS issues.
Comment: We received numerous comments supporting our proposal to
discontinue HCPCS codes G0242 (Cobalt 60-based stereotactic
radiosurgery planning) and G0338 (Linear accelerator-based SRS
planning) for the reporting of charges for SRS planning, and to
instruct hospitals to bill charges for SRS planning using available CPT
codes that most accurately reflect the services provided. These
commenters agreed that available CPT codes more accurately describe the
services involved in SRS planning and are less administratively
burdensome for providers because other payors recognize them. Some
commenters urged that we retain separate codes for reporting the
planning and treatment delivery of Cobalt 60-based SRS, whether through
the use of existing G-codes (HCPCS codes G0242 and G0243) or through
available CPT codes. Several of these commenters explained that
although the planning and treatment delivery of Cobalt 60-based SRS
most often occur on the same date of service, there are instances in
which the planning and treatment are not delivered on the same date of
service due to an unanticipated problem that arises during the planning
that precludes the treatment delivery. In such instances where only
planning for the Cobalt 60-based SRS is performed, commenters stated
that CMS would need to clarify how providers should bill these services
if separate codes are not maintained for the planning and treatment
delivery of Cobalt 60-based SRS. Commenters expressed concern that
combining the planning code (HCPCS code G0242) and treatment delivery
code (HCPCS code G0243) for Cobalt 60-based SRS into a single
combination code would necessitate the use of a modifier when they are
not performed on the same date of service and would complicate the
billing of these services and increase the administrative burden on
hospitals. One commenter suggested that, if we decide to maintain HCPCS
code G0242 for Cobalt 60-based SRS planning rather than transition to
the CPT codes, we consider placing the planning code (HCPCS code G0242)
on the bypass list as an alternative solution to generating more single
bills for future rate-setting, rather than combining the planning and
treatment delivery codes for Cobalt 60-based SRS into a single
combination code.
In contrast, a few commenters urged that we continue to recognize
HCPCS codes G0242 and G0338 for the reporting of SRS planning rather
than transition to the available CPT codes that describe these
services. These commenters predicted that another year of stability
would allow CMS to collect more reliable data for use in setting the CY
2008 payment rates for SRS planning services.
Many commenters urged that we refrain from treating various forms
of SRS (i.e., Cobalt 60-based and linear accelerator-based) differently
by ``bundling'' planning into the treatment delivery for Cobalt 60-
based SRS by creating a single combination code, while ``unbundling''
planning and treatment delivery for linear accelerator-based SRS by
paying separately for these services. These commenters asserted that
the planning and treatment delivery of SRS, regardless of the form of
delivery, are clinically distinct services that should be reported
separately to distinguish their distinct resource requirements. One
commenter refuted claims that the administration of the planning and
treatment delivery of SRS on the same date of service is unique to
Cobalt 60-based SRS, arguing that the planning and treatment delivery
of LINAC-based SRS likewise are typically performed on the same day,
and that a mere time proximity of the two services does not necessitate
a single combination code for either form of SRS. Several commenters
cautioned against establishing different coding schemes for various SRS
services that would likely cause confusion for coders, inaccurate
coding, and unreliable data for future rate setting.
[[Page 68586]]
Numerous other commenters urged CMS to combine the planning code
(HCPCS code G0242) and treatment delivery code (HCPCS code G0243) for
Cobalt 60-based SRS into a single surgical code, preferably CPT code
61793 (stereotactic radiosurgery, particle beam, gamma ray, or linear
accelerator, one or more sessions), which would replace all of the SRS
G codes regardless of the mode of delivery. These commenters stated
that the planning and treatment delivery of Cobalt 60-based SRS are
always performed on the same day and that a single combination code
would be less confusing for coders, provide more accurate claims data,
and result in a more appropriate payment for Cobalt 60-based SRS. While
some of these commenters urged that we assign this single combination
code to a higher paying New Technology APC consistent with its CY 2004
median cost data until more accurate cost data are available for
determining an appropriate clinical APC, other commenters strongly
opposed the designation of Cobalt 60-based SRS as a new technology
service, noting that Cobalt 60-based SRS became a standard of care for
treating cancer patients over two decades ago and a new technology
label is no longer appropriate. Commenters stated that CMS' designation
of Cobalt 60-based SRS as a new technology service has led other
insurers to consider the treatment to be experimental, which frequently
delays, and sometimes prevents, access to treatment for critically ill
patients. These commenters urged that we assign this new combination
code reflecting planning and delivery of Cobalt 60-based SRS to a
surgical APC and set the payment based on the median cost calculated
from the CY 2004 hospital claims data. Some of these commenters
recommended that this single combination code describe all forms of
SRS, while other commenters emphasized the importance of maintaining
separate combination codes for Cobalt 60-based SRS and LINAC-based SRS
to distinguish the significant clinical and resource cost differences
associated with these services.
One commenter urged that if CMS replaces the G-codes for SRS
planning with available CPT codes describing these services, we should
not assign HCPCS code G0243 (Cobalt 60-based SRS treatment delivery) to
a New Technology APC paying higher than its CY 2005 payment rate of
$5,250. This commenter supported our proposal to make no changes to the
APC placement of SRS treatment delivery codes that describe a complete
course of treatment in one session, stating that the proposed payment
of $5,250 for all single session SRS treatment services for CY 2006 is
appropriate based on the hospital resources involved in furnishing
these services.
Response: We thank the many commenters for their insightful
thoughts and recommendations for the reporting of hospital charges for
SRS services under the OPPS for CY 2006. In recognition of the
heightened level of diligence that the current coding scheme for SRS
services requires of hospital coders to ensure that charges for these
services are reported under the appropriate G-code, we carefully
considered several options for simplifying the coding scheme for SRS
services while maintaining a certain level of data specificity to
reflect the differential clinical considerations and hospital resource
utilization that are necessary to inform future rate setting.
First, we considered several recommendations by commenters to
bundle the planning for Cobalt 60-based SRS into the treatment delivery
(HCPCS code G0243) for Cobalt 60-based SRS by either establishing a
single combination G-code describing both the planning and delivery of
Cobalt 60-based SRS or by instructing providers to report CPT code
61793 for such services. However, we agree with the majority of
commenters who expressed strong opposition to a single combination G-
code or CPT code to report the planning and treatment delivery of
Cobalt 60-based SRS, noting the following concerns: (1) The
administrative burden on providers of maintaining duplicative codes for
SRS planning to accommodate various payors (that is, G-codes for
Medicare and CPT codes for non-Medicare payors); (2) the added
complexity of attaching a modifier to the code for instances when
planning and delivery are not provided on the same date of service
because treatment does not proceed due to an unanticipated problem; (3)
the confusion for coders and unreliable data that could emanate from
inconsistent coding schemes for different forms of SRS (that is, Cobalt
60-based and LINAC-based SRS); and (4) the nonspecificity of the
descriptor for CPT code 61793 which describes all forms of SRS
treatment delivery and makes no mention of SRS planning services. We
also agree with the majority of commenters who stated that the G-codes
(G0242 and G0338) for SRS planning are duplicative of existing CPT
codes that adequately describe such services and that are much less
administratively burdensome on hospitals because they are recognized by
non-Medicare payors. Furthermore, our analysis of the CY 2004 claims
data revealed that the median costs for HCPCS codes G0242 and G0338
closely approximated the sum of the median costs for the CPT codes
(77295, 77300, 77315, 77370) that were most commonly billed under the
OPPS for SRS planning prior to the establishment of HCPCS codes G0242
and G0338. In addition, we remind commenters that three of the above-
mentioned CPT codes are included on the bypass list for CY 2006, so we
do not anticipate that the billing of these codes on the same day as an
SRS treatment delivery service will cause significant problems with
multiple bills for SRS services, eliminating any need for recognizing a
single combination G-code or CPT code which describes both planning and
treatment delivery SRS services for the purpose of generating more
single bills. Finally, based on additional confirmation from commenters
that the similarities in clinical characteristics and resource costs
associated with treatment planning for services delivering radiation,
regardless of the mode of treatment delivery, dispel the need to
separately track planning services for SRS, we are discontinuing HCPCS
codes G0242 and G0338 for the reporting of charges for SRS planning
under the OPPS for CY 2006, and instructing hospitals to bill charges
for SRS planning, regardless of the mode of treatment delivery, using
all of the available CPT codes that most accurately reflect the
services provided.
We also agree with the majority of commenters who strongly urged
that we reassign HCPCS code G0243 (Cobalt 60-based treatment delivery)
from New Technology APC 1528 to a clinical APC, pointing out that
Cobalt 60-based SRS became a standard of care for treating cancer
patients over two decades ago and, therefore, a new technology label no
longer appropriately describes the service. Furthermore, the median
costs from hospital claims for HCPCS code G0243 based on a significant
number of single claims each year have been quite stable over the past
three years, supporting movement of this service out of a New
Technology APC and into a clinical APC based on its median cost data
from CY 2004. Therefore, we are reassigning HCPCS code G0243 from New
Technology APC 1528 to clinical APC 0127 and setting its payment rate
based on a median cost of $7,297 for CY 2006.
Lastly, we agree with commenters who emphasized the significant
clinical and resource cost differences associated with the treatment
delivery of Cobalt 60-based SRS and LINAC-based SRS, and
[[Page 68587]]
that establishment of a single code to describe all forms of SRS
treatment delivery would result in a loss of essential data specificity
for determining appropriate future payment rates for these services.
For instance, based on the CY 2004 claims data, the median costs for
the various forms of SRS treatment delivery ranged from $2,502 to
$7,296. These significant differences in median cost data emphasize the
importance of maintaining different codes that distinguish the various
forms of SRS treatment delivery for the purpose of setting the most
appropriate payment rates for these services. We believe it would be
premature, as well, to move the LINAC-based SRS treatment delivery
procedures to clinical APCs for CY 2006 because we have only one year
of claims data reflecting their current coding structure, although we
have hundreds of single claims for some of the services. We will be
examining our claims data carefully for the next OPPS update, because
we will then have 2 years of data for these LINAC-based SRS treatment
delivery services now assigned to New Technology APCs. Therefore, we
are maintaining HCPCS codes G0173 and G0339 in New Technology APC 1528,
HCPCS code G0251 in New Technology APC 1513, and HCPCS code G0340 in
New Technology APC 1525 for CY 2006. And as mentioned elsewhere in this
section, we are reassigning HCPCS code G0243 from New Technology APC
1528 to clinical APC 0127.
Comment: One commenter urged that we create a new CPT code titled
``Surgeon-based Gamma Stereotactic Radiosurgery, complete course, one
procedure, per lesion'' to describe Cobalt 60-based SRS planning and
treatment delivery and assign this CPT code to a new surgical APC
titled ``Surgeon-based Gamma Stereotactic Radiosurgery.'' This
commenter recommended that we set the payment rate of this new APC
based on the combined median costs from claims data for HCPCS codes
G0242 and G0243.
Response: We appreciate the commenter's suggestion; however, CMS
does not possess the authority to create CPT codes, which are
established and maintained by the American Medical Association.
Furthermore, under the OPPS, we do not label APCs according to the type
of clinician delivering the service (that is, surgeon versus non-
surgeon) because such categorization is irrelevant to establishing
payment for hospital services billed under the OPPS. Rather, we provide
titles for clinical APCs that describe the actual hospital services
assigned to the APCs for which providers should report their hospital
costs and charges. In addition, as discussed above, we agree with the
majority of commenters who opposed the recognition of a single
combination code (that is, CPT code 61793) for the planning and
delivery of Cobalt 60-based SRS services, for reasons stated
previously, i.e. the administrative burden of maintaining duplicative
codes, the added complexity of attaching a modifier to the code for
instances when planning and delivery are not provided on the same date
of service because treatment does not proceed due to an unanticipated
problem, the confusion for coders and unreliable data that could
emanate from inconsistent coding schemes for different forms of SRS
(that is, Cobalt 60-based and LINAC-based SRS), and the nonspecificity
of the descriptor for CPT code 61793 which describes all forms of SRS
treatment delivery and makes no mention of SRS planning services.
Therefore, as discussed elsewhere in this section, for CY 2006, we are
discontinuing HCPCS code G0242 and recognizing existing CPT codes for
the reporting of Cobalt 60-based SRS planning, and moving HCPCS code
G0243 (Cobalt 60-based SRS treatment delivery) from New Technology APC
1528 to clinical APC 0127 based on a median cost of $7,296.
Comment: Several commenters recommended that we make HCPCS code
G0339 (Image guided, robotic, linear accelerator-based (LINAC) SRS
treatment delivery, complete session, first session of fractionated
treatment) a permanent code and continue to pay this service at the CY
2005 payment rate of $5,250. These commenters also recommended that we
eliminate HCPCS code G0340 (Image guided, robotic, linear accelerator-
based (LINAC) SRS treatment delivery, fractionated treatment, 2nd-5th
sessions) and instruct hospitals to report HCPCS code G0339 for all
fractionated treatment sessions, stating that the resource costs are
the same for each session regardless of the number of treatment
sessions that the patient receives.
Response: We disagree with the commenters' assertions that the
resource costs are the same for each session of image-guided, robotic
LINAC-based SRS treatment delivery regardless of the number of
treatment sessions that the patient receives. Based on CY 2004 claims
data, the median cost for HCPCS code G0339 ($4,917) was considerably
higher than the median cost for HCPCS code G0340 ($2,502), and does not
support the elimination of HCPCS code G0340 or its payment at a rate
comparable to the payment rate for HCPCS code G0339. As the SRS
treatment delivery G-codes are national Level II HCPCS codes that we
utilize for billing SRS treatments in the OPPS, we are uncertain what
changes the commenter would like us to make for the codes to be
``permanent.'' Therefore, for CY 2006, we are maintaining HCPCS code
G0339 in New Technology APC 1528, and HCPCS code G0340 in New
Technology APC 1525.
Comment: One commenter urged CMS to assign HCPCS codes G0251 and
G0340, for fractionated non-robotic and image-guided robotic LINAC-
based SRS respectively, to the same APC, contending that these
procedures involve similar resources and should be paid equally. In
contrast, another commenter asserted that image-guided robotic LINAC-
based SRS is substantially more resource intensive than non-robotic
LINAC-based SRS, and that CMS should maintain HCPCS code G0251 in a
separate APC from HCPCS code G0340 to distinguish their levels of
resource requirements.
Response: We began recognizing HCPCS code G0251 to describe
fractionated sessions of non-robotic LINAC-based SRS treatment delivery
in CY 2004, which yielded no single procedure claims data for HCPCS
code G0251 to substantiate a similarity or lack of similarity of its
resource costs in comparison with HCPCS code G0340 (fractionated, 2nd-
5th sessions, image-guided robotic LINAC-based SRS treatment delivery).
However, the large divergence in the median cost of $2,802 for the
complete session of non-robotic LINAC-based SRS treatment delivery
(HCPCS code G0173), in comparison with the median cost of $4,917 for
the complete and first fractionated sessions of image-guided robotic
LINAC-based SRS treatment delivery (HCPCS code G0339), indicates that
fractionated image-guided robotic LINAC-based SRS treatment delivery is
likely substantially more resource intensive than fractionated non-
robotic LINAC-based SRS treatment delivery. Therefore, for CY 2006, we
are maintaining HCPCS code G0251 in New Technology APC 1513 and HCPCS
code G0340 in New Technology APC 1525. However, for CY 2007, we will
reexamine our APC placement of HCPCS codes G0251 and G0340 based on CY
2005 hospital claims data.
Comment: One commenter to the November 15, 2004 final rule with
comment period (69 FR 65682) disagreed with CMS' statement that CPT
codes 0082T (Stereotactic body radiation, treatment delivery, one or
more treatment areas, per day) and
[[Page 68588]]
0083T (Stereotactic body radiation therapy, treatment management, per
day) are bundled into the current G-codes for SRS treatment delivery.
The commenter stated that stereotactic body radiation treatment
delivery and management are new technologies and, thus, are not
included in the current G-codes for SRS treatment delivery; however,
the commenter provided no cost data nor any explanation as to how
stereotactic body radiation treatment differs from the current
procedures described by the G-codes for SRS treatment delivery.
Instead, the commenter simply requested that CMS designate these new
tracking codes for stereotactic body radiation treatment delivery and
management as new technology services and assign these codes to a New
Technology APC.
Response: We disagree with the commenter's unsubstantiated
assertion that the current G-codes for SRS treatment delivery do not
already describe or include some services that could also be identified
as stereotactic body radiation treatment delivery and management
described by CPT codes 0082T and 0083T, respectively. Furthermore, we
received no evidence to support the commenter's assertion that these
services represent new technologies that could not be represented in
our hospital claims data. Therefore, for CY 2006, we are maintaining
CPT code 0082T with a status indicator of ``B'' because we consider an
alternate code to be available for billing this service under the OPPS.
Likewise, for CY 2006, we are maintaining CPT code 0083T with a status
indicator of ``N'', indicating that the charges for this service are
packaged into the payment for other services paid separately under the
OPPS.
D. APC--Specific Policies
We received many comments on our proposed changes to specific
groups of services as discussed in the CY 2006 OPPS proposed rule
preamble and displayed in Addendum B. We have grouped these comments,
and our responses, into five general clinical categories as shown
below.
We received one comment that generally addresses our APC assignment
methodology.
Comment: One commenter objected to the placement of codes for
unlisted services in the lowest APC that is clinically appropriate and
to the lack of discussion of this policy in the CY 2006 OPPS proposed
rule. The commenter asked that CMS examine claims data and match
unlisted services to the diagnosis to determine if there is a more
appropriate APC than the lowest level.
Response: We discussed this policy in the CY 2005 OPPS proposed
rule which we published on August 16, 2004 (69 FR 50448), and we made
our existing policy final in the November 15, 2004 final rule (69 FR
65682). We proposed no changes to this policy in the CY 2006 OPPS
proposed rule (which we published on July 25, 2005 (70 FR 42674)) and,
therefore, we have not changed the policy. The HCPCS codes for unlisted
services should be used only if there is no existing code that can be
used alone or with existing modifiers to report the service that was
furnished. We believe that their use should be very rare. We do not
believe that examination of the diagnoses on claims for unlisted
procedures would enable us to properly place the codes into APCs
because there are so many different types of services at different
levels of resource use that could apply to a single diagnosis. There is
a 2-year lag between the year of hospital claims data and the OPPS
payment rates that are established based on the data. New procedure-
specific HCPCS codes are developed on an annual basis, and there are
continuous changes in procedures for many diagnoses as medical practice
evolves. Therefore, we have no confidence that the array of unlisted
services billed by hospitals, and by implication their median costs, in
a given year for patients with certain diagnoses would necessarily have
any relationship to unlisted services, and their median costs, billed 2
years later for patients with the same diagnoses. Moreover, placing
unlisted services in the lowest level APC encourages use of existing
codes where it is possible and also encourages development of new HCPCS
codes for services for which codes do not exist.
1. Cardiac and Vascular Procedures
a. Acoustic Heart Sound Recording and Analysis
Comment: One commenter requested that CMS change the status
indicator for CPT code 0069T (Acoustic heart sound recording and
computer analysis only). The commenter requested that we assign the
procedure to APC 0099 with an ``S'' status indicator rather than ``N,''
as is currently assigned to CPT code 0069T. The commenter stated that
the test's current status as a packaged procedure results in
inequitable payment to the hospital. They stated that the cost of an
EKG with the acoustic heart sounds recording is $55 whereas, the cost
of an EKG without is $31, and that because we have packaged the
procedure, the hospital is underpaid by $24 for each test it performs.
Response: It is our understanding that the acoustic heart sound
recording and analysis is intended for a specific, targeted group of
patients to enhance the provider's ability to diagnose heart failure.
The technology, as described by CPT code 0069T, always is performed in
conjunction with an EKG and as such is ideal for packaging. It is the
hospitals responsibility to increase their charges to reflect the
additional costs for those EKGs that include the acoustic heart sound
recording. If the hospital uses the test according to the manufacturer
guidelines, the costs will be distributed over the large number of EKGs
that are performed in the hospital outpatient department and, over
time, the additional costs may be recognized in the OPPS rates as
increased median costs for EKGs in general.
Comment: One commenter requested that CPT code 0069T (Acoustic
heart sound recording and computer analysis only) become separately
payable. The commenter was concerned that CMS interpreted the code to
be an add-on code to an EKG procedure. The commenter clarified that CPT
code 0069T is often used as a stand-alone procedure, provided without
an EKG procedure.
Response: We are accepting the APC Panel's recommendations that CPT
code 0069T remain packaged for CY 2006. The Panel reviewed this code
and determined it to be an add-on code to an electrocardiography
service, as indicated by the American Medical Association's descriptor
of this code. In addition, we are concerned that there may be
unnecessary utilization of this procedure if it is separately payable
because it is an add-on code to EKG services, for which there were
almost 6 million claims under the OPPS in CY 2004. Lastly, we continue
to believe that this service is a minor procedure that may be performed
quickly accompanied by an EKG and likely other separately payable
services, and thus is appropriately packaged.
b. Cardiac Electrophysiologic Services (APC 0087)
Comment: Commenters objected to the decline in proposed payment
rate for APC 0087 from prior years. They also objected to what they
view as a two times violation in APC 0087 and asked that we move
electrophysiologic ``mapping'' CPT codes 93609, 93613, and 93631 to APC
0086 because the CPT code median costs for these codes are much higher
than the median costs for the other codes in APC 0087. They state that
because ``mapping'' CPT codes 93609, 93613, and 93631 are billed with
other cardiac electrophysiologic services
[[Page 68589]]
already assigned to APC 0086, then these ``mapping'' services should
also be assigned to the same clinical APC. They also asked that we use
only claims that contain the device codes required for these CPT codes
in setting the median cost for the APC into which CMS places these
codes.
Response: We disagree that there is a 2 times violation, under our
rules, in APC 0087. The law permits an exception to the two times rule
for ``low volume items and services.'' We define any service that does
not meet our test as a ``significant service'' to be a ``low volume
item or service.'' A significant service is a service with a single
bill frequency greater than 1,000 (which no services in APC 0087 meet)
or a service with a single bill frequency greater than 99 and more than
2 percent of the single bills (which no services in APC 0087 meet).
Because APC 0087 does not have any codes which meet the test of being
significant, all of the codes in APC 0087 are ``low volume'' under our
definition, and there is no two times violation.
Notwithstanding the absence of a 2 times violation under our rules,
we acknowledge the commenter's concerns, and we will ask for the APC
Panel's views regarding the assignment of these codes to APC 0087 in
preparation for the CY 2007 OPPS update. We also recognize that, for
many of the procedures assigned to APC 0087, multiple procedure claims
are the norm. We will also work with the APC Panel to develop potential
strategies which could enable us to use more claims for rate setting
for these cardiac electrophysiologic services. We disagree, however,
that because the electrophysiology ``mapping'' codes are performed with
other cardiac electrophysiology studies, the clinical and resource
characteristics of the ``mapping'' procedures necessarily are similar
to the base services provided.
See section IV.A. for our discussion of adjustments to median costs
for device-dependent APCs for the CY 2006 OPPS. See Table 16 for the
adjusted median cost for APC 0087 for the CY 2006 OPPS.
c. Cardioverter-Defibrillator Implantation (APC 0107, 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
the 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, which constitute the majority of claims under these APCs,
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 cost 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. For each unique scenario, 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 were shown in the proposed rule in
Tables 16 and 17.
We proposed to set the medians for these APCs at 85 percent of
their CY 2005 payment medians and based our modeling of the scalar and
the impact analysis on that proposal, although we believed 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 proposed to adjust the median costs for these APCs in the
same manner as other device-dependent APCs, we stated in the proposed
rule that 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 specifically invited 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 rate-setting in order to improve the accuracy of median costs based
upon hospital claims.
We received many public comments concerning our proposal.
Comment: Many commenters stated that the payments CMS proposed for
APCs 0107 and 0108 are inadequate to cover the acquisition costs of the
[[Page 68590]]
devices, much less the full hospital costs of providing the services.
They asserted that the proposed payments for APCs 0107 and 0108 are
only 84 percent of the cost of the device alone, leaving the hospital
with an out of pocket loss for the device and no payment for the
service costs. They indicated that if the proposed payment rates are
made final, APCs 0107 and 0108 will have incurred reductions of 20.5
percent and 29.4 percent respectively since CY 2002. They urged that
CMS use external data for the device portion of the median cost or at a
minimum, accept the APC Panel recommendation to set the payment rate
for APCs 0107 and 0108 at no less than the CY 2005 OPPS payment rate
updated by the full market basket increase. They say that beneficiary
access to care will be inhibited by continued inadequate payments for
these services.
Response: We have considered the comments and, as proposed, will
adjust the medians for the services in APCs 0107 and 0108 under the
same policy being applied to other device-dependent APCs. See section
IV.A. of this preamble for our discussion of the use of external data,
and requests to update the CY 2005 OPPS median costs and payment rates
by the market basket for purposes of setting the CY 2006 OPPS payments.
Also see section IV. A. of this preamble for our discussion of
adjustments to median costs for device-dependent APCs. See Table 16 for
the CY 2006 adjusted median costs for device-dependent APCs, including
APCs 0107 and 0108.
Comment: One commenter supported the recommendations of the APC
Panel that CMS package CPT codes 93640 and 93641 (electrophysiologic
evaluation at time of initial implantation or replacement of
cardioverter-defibrillator) and treat CPT code 33241 (subcutaneous
removal of cardioverter-defibrillator) as a bypass code when it appears
on claims with services assigned to APCs 0107 or 0108. The commenter
believed that these changes would result in a more robust set of claims
to be used to set the median costs for APCs 0107 and 0108. Other
commenters indicate that with or without these changes, the increased
volume of claims is unlikely to result in adequate median costs for
these procedures.
Response: We believe that it may be appropriate to package CPT
codes 93640 and 93641 into the services assigned to APCs 0107 and 0108,
and that it may be appropriate to bypass CPT code 33241 only when it
appears on the same claim with codes in APCs 0107 or 0108, and we will
explore doing this in the future. The APC Data Subcommittee will
continue to advise us on efforts to increase the amount of usable
claims data for services that very frequently are provided along with
other separately payable procedures.
As noted above, consistent with payment for other device-dependent
APCs, the CY 2006 OPPS payment for APCs 0107 and 0108 is set based on
90 percent of the CY 2005 OPPS adjusted median cost. See Table 16 for a
complete listing of device-dependent APCs and the adjusted median costs
on which the payment rates are based.
d. Endovenous Ablation (APC 0092)
Comment: One commenter addressed our final rule (November 15, 2004)
regarding the APC assignment of new CPT codes 36475 (Endovenous
radiofrequency ablation, first vein) and 36476 (Endovenous
radiofrequency ablation, vein add-on). The commenter asserted that the
assignment to APC 0092 (Level I Vascular Ligation) was inappropriate
and results in payment that is inadequate to cover the costs of the
procedure. The commenter recommended creation of two new APCs, Level I
and Level II endovenous ablation procedures, and advocated assignment
of both CPT codes 36475 and 36476 to the higher of the two levels. The
commenter stated that radiofrequency (RF) ablation procedures are quite
different from other vein stripping methods and require substantially
more operating room time and hospital resources than do vein stripping
or endovenous laser procedures.
Further, the commenter stated that our assignment of CPT codes
36475 and 36476 to APC 0092 was inconsistent with the cost data CMS
analyzed for making pass-through payments for the ablation catheter
(HCPCS code C1888, which expires December 31, 2005). The commenter
asserted that we failed to add the costs for the ablation device into
the procedure when we made the assignment to APC 0092. The commenter
also stated that hospitals and the manufacturer have submitted cost
information and charge data to CMS that support assignment of the
procedures to an APC with a payment rate of about $2,500.
We received one comment, from the same commenter, on our proposed
rule. The commenters stated that the RF ablation procedures are more
like those assigned to APC 0086, Ablate Heart Dysrythm Focus, than
those in APC 0092 (Level I Vascular Ligation). Similar to its comment
on the final rule, the commenter recommended that CMS reassign CPT
codes 36475 and 36476 to a new APC with a payment amount of
approximately $2,800. The commenter also recommended that we assign new
CPT codes 36478 (Endovenous ablation therapy of incompetent vein,
extremity, inclusive of all imaging guidance and monitoring,
percutaneous, laser; first vein treated) and 36479 (Endovenous ablation
therapy of incompetent vein, extremity, inclusive of all imaging
guidance and monitoring, percutaneous, laser; second and subsequent
veins treated in a single extremity, each through separate access
sites) to the lower level of the two new endovascular ablation
procedure APCs that they requested, with a payment rate of
approximately $2,300.
In its proposed rule comments, the commenter provided detailed
information about the costs of the endovenous ablation procedures from
the practice expense cost inputs for the Medicare Physician Fee
Schedule. The commenter based its recommendations for OPPS payment on
those data and provided prices for the RF ablation catheter ($680) and
the laser fiber kit ($325), as well as for the capital equipment for
each procedure type.
Response: Prior to the CY 2005 implementation of CPT codes 36475
and 36476 for radiofrequency ablation and CPT codes 36478 and 36479 for
laser ablation, the radiofrequency ablation device used in the
endovenous ablation procedure was coded using HCPCS code C1888
(Catheter, ablation, non-cardiac, endovascular) and was separately paid
as a pass-through until December 31, 2004 when the pass-through status
expired.
We received a significant number of bills for HCPCS code C1888
(1787 units) in CY 2004 and considered the median cost ($636) based on
those bills, along with clinical information and historical hospital
claims data for other OPPS services in making the APC assignments of
the new CPT codes. We assigned all RF and laser endovenous ablation
procedures for the first vein and second and subsequent veins to APC
0092, status indicator ``T,'' with other vein procedures and a CY 2005
payment rate of $1,538. However, in response to the comment we
reconsidered our decision. While there are no two times rule violations
for APCs 0092 and 0091 for CY 2006, the median costs for individual
procedures assigned to those APCs significantly overlap. Nevertheless,
APC 0091 has a somewhat higher payment rate for CY 2006. Given the
costs for the disposables and other resources used in delivery of both
laser and RF endovenous ablation services, we determined that
assignment to the higher paying of these APCs was a more
[[Page 68591]]
accurate placement than APC 0092 as we proposed. Therefore, for CY
2006, CPT codes 36475, 36476, 36478, and 36479 will be assigned to APC
0091. The ``T'' status of the APC should ensure appropriate payment
when ablation of more than one vein is performed in an operative
session. For CY 2007 we will have hospital claims data for those codes
for the first time, and, with the assistance of the APC Panel, we will
reconsider the APC assignments for them and the other procedures
assigned to APCs 0091 and 0092 because we believe that for procedures
assigned to APCs 0091 and 0092 CY 2007 APC reconfiguration may be
advisable.
e. External Counterpulsation Therapy (APC 0678)
Comment: One commenter submitted comments about external
counterpulsation therapy (EECP, HCPCS code G0166). The commenter
requested that we base the CY 2006 payment for this procedure on the
OPPS relative weight for the procedure from CY 2005. The commenter was
concerned because the OPPS rate for this procedure has decreased every
year since CY 2000, and they believed that the lower payments might
result in diminished beneficiary access to the therapy. The commenter
believed that the low costs in the CMS data may be due to hospitals
filing inaccurate claims.
Response: Although the OPPS payment rate for EECP has decreased
every year since CY 2000 as noted by the commenter, we are committed to
relying on our hospital claims data for this APC. In addition, we note
that the total numbers of OPPS claims for this service have increased
over the past several years, from 26,836 in CY 2002, to 37,568 in CY
2003, and again to 40,362 in our most recent claims data for CY 2004.
We have no reason to believe that Medicare beneficiaries are having
trouble accessing this therapy. Hospitals have been billing Medicare
for EECP since CY 2000 and so should be filing accurate bills. The
procedure is in an APC that has no other procedures that can affect its
median, and the median cost for the CY 2006 OPPS is based on more than
38,000 single claims. Therefore, we will finalize our proposed CY 2006
APC assignment and payment rate for APC 0678, based on our standard
OPPS methodology.
f. Intracardiac Echocardiography (APC 0670)
Comment: One comment submitted comments about the APC assignment
for CPT code 93662 (Intracardiac echocardiography during therapeutic/
diagnostic intervention, including imaging supervision and
interpretation). The commenter objected to the procedure's assignment
to APC 0670 (Level II Intravascular and Intracardiac Ultrasound and
Flow Reserve) for several reasons. First among those reasons was that
the procedure should not be assigned to the same APC as is CPT code
92978, Intravascular ultrasound (coronary vessel or graft) during
diagnostic evaluation and/or therapeutic intervention including imaging
supervision, interpretation and report. The commenter stated that the
two procedures are dissimilar clinically and with respect to resource
consumption. The differences between the two procedures listed by the
commenter were: the intracardiac echocardiography (ICE) procedure can
be used to image the entire heart rather than just a coronary vessel as
does the intravascular ultrasound (IVUS) procedure; ICE is closely
associated with electrophysiology and interventional cardiology
procedures; IVUS is an imaging technique used as an adjunct to
coronary/peripheral stent deployment; IVUS catheters cost from $500 to
$700 whereas ICE catheters cost from $900 to $2,800; and the mean and
median costs for the procedures are very different.
Response: The ICE procedure is a CPT code ``add-on,'' and so
normally is not reported alone on OPPS bills. For that reason, only 10
of the 541 claims for the procedure were single claims that we could
use to calculate its procedure-specific median cost of $1,815. In fact,
all four of the procedures assigned to APC 0670 are ``add-on'' codes,
and two of the procedures had no single claims for CY 2004 because one
of the codes, CPT code 31620 (Endobronchial ultrasound (EBUS) during
bronchoscopic diagnostic or therapeutic intervention(s)), was new for
CY 2005 and CPT code 93571 (Intravascular Doppler velocity and/or
pressure derived coronary flow reserve measurement (coronary vessel or
graft) during coronary angiography including pharmacologically induced
stress; initial vessel) was packaged under the OPPS in CY 2004 and when
unpackaged for CY 2005, no single claims were available. The fourth
code in APC 0670, CPT code 92978, the IVUS procedure, had a median cost
of $1,505 and 115 single claims and, therefore, had a disproportionate
influence on the median cost for the APC.
We do not agree that there are no significant clinical similarities
among the procedures assigned to APC 0670. These similarities include
their ``add-on'' status and their use of intravascular or
intrabronchial catheters or wires with complex capabilities to provide
clinical information, such as images or flow data. The hospital
resources required for all of these services are highly related to the
costs of the technologies used for the procedures. In general, our
hospital claims data are quite consistent with assignment of CPT code
93662 to APC 0670 with a median cost of $1,505 for CY 2006, along with
the other services previously described. We note that our CY 2004 total
claims volume for CPT code 93662 almost doubled between CY 2003 and CY
2004, providing no evidence that Medicare beneficiaries are having
trouble accessing this service.
As discussed elsewhere in this preamble, we are working on
alternative strategies for determining the costs for procedures that
are reported as CPT ``add-on'' codes. When we are better able to
identify those costs, we will reevaluate the assignment of the ICE and
IVUS procedures. At this time, however, we believe that APC 0670 is the
most appropriate assignment for CPT codes 93662 and 92978.
g. Percutaneous Thrombectomy and Thrombolysis (APC 0676)
Comment: One commenter submitted comments regarding the APC
assignment for CPT code 92973, Percutaneous transluminal coronary
thrombectomy and CPT code 37195 (Thrombolysis, cerebral, by intravenous
infusion). The commenter stated that the payment rate for APC 0676
(Thrombolysis and Thrombectomy) was based largely on only one of the
procedures assigned to the APC, CPT code 36550 (Declotting by
thrombolytic agent of implanted vascular access device or catheter),
and that it was inappropriately low for CPT codes 92973 and 37195. The
commenter stated that the procedures coded by CPT codes 92973 and 37195
require a mechanical device costing hundreds of dollars or significant
quantities of expensive lytic agents, respectively. The comment also
suggested that the difficulty that CMS has in obtaining accurate cost
data for these procedures is due to the fact that they are rarely
reported as single claims, and that next year there will be new codes
for percutaneous thrombectomy that will help to remedy that situation.
Response: For CY 2006, we proposed to retain CPT code 92973 in APC
0676 and to remove CPT code 37195 from the inpatient list and assign it
to APC 0676 as well. The median cost for each of these procedures was
based on one single claim each, out of 149 and 28 total claims
respectively. The very low volume of single claims is expected for
these two procedures because CPT code
[[Page 68592]]
92973 is an ``add-on'' code and would not be expected to be reported
alone, and CPT code 37195 was on the inpatient list in CY 2004, and
therefore, we do not have many outpatient hospital claims for it.
The commenter's point that the APC 0676 payment rate was based
mainly on one of the other procedures assigned to that APC is correct.
The procedure coded with CPT code 36550 (Declotting by thrombolytic
agent of implanted vascular access device or catheter) had a very high
volume of single claims with a procedure-specific median cost of $128
so that its claims disproportionately influenced the APC median cost of
$135. There were 5,099 single claims for that procedure and the next
highest volume of single claims in APC 0676 was only 439 claims for CPT
code 37201 (Transcatheter therapy, infusion for thrombolysis other than
coronary).
While we acknowledge the small number of claims for CPT code 92973,
we agree with the commenter than its continued assignment to APC 0676
could lead to significant underpayment for this service that utilizes a
costly catheter. Therefore, we will reassign CPT code 92973 to APC 0088
(Thrombectomy) with an APC median of $2,171 for CY 2006, where other
procedures that are more clinically and resource coherent with CPT code
92973 reside. As this service is an ``add-on'' code to other surgical
procedures and is assigned status indicator ``T,'' we expect that its
payment rate will be reduced by 50 percent when it is correctly billed
with other surgical procedures.
With respect to CPT code 37195, we will finalize its assignment to
APC 0676 for CY 2006. We expect that the lytic drugs that will be
administered to a patient during this procedure will generally be
separately payable under the OPPS, as well as some of the other
services that typically will be provided to a patient receiving
cerebral thrombolysis by intravenous infusion. While we expect that
performance of this procedure in the hospital outpatient setting will
remain rare, we believe that APC 0676 should make appropriate payment
for CPT code 37195 for CY 2006. As always, we will examine the costs
from hospital claims as new data become available to ensure that the
OPPS payment is appropriate.
h. Coronary Flow Reserve (APCs 0416 and 0670)
Comment: One commenter requested that CMS make permanent the
revised APC 0670 (Level II Intravascular and Intracardiac Ultrasound
and Flow Reserve) and new APC 0416 (Level I Intravascular and
Intracardiac Ultrasound and Flow Reserve), as presented in the November
15, 2004 final rule. In addition, the commenter requested that we
reactivate discontinued HCPCS code C3556 which was used previously for
three specific brands of sensors, including guidewire-mounted coronary
flow reserve sensors. The commenter believed that the requirement to
report HCPCS device codes for device-dependent APCs would result in
inaccurate cost information for the flow reserve sensors because these
devices are currently coded using HCPCS code C1769 which is also used
to code all types of guidewires.
Response: We appreciate the comment concerning these new and
revised APCs as we published them in the November 15, 2004 final rule.
We have made those changes final.
Beginning April 1, 2001, many manufacturer and device-specific
HCPCS codes established for device pass-through payment purposes were
discontinued in favor of more general codes to describe categories of
devices. HCPCS code C3556 was discontinued as of April 1, 2001 as part
of that action. The guidewire-mounted coronary flow reserve sensors
previously reported with HCPCS code C3556 were cross-walked to HCPCS
code C1769, which was established for coding guidewires. The Medicare,
Medicaid and SCHIP Benefits Improvement and Protection Act (BIPA) of
2000 required us to establish categories, or types, of devices and no
longer create codes to describe each device specifically. Further, we
do not create new device codes unless one is needed to support accurate
payment for devices that meet our criteria for transitional pass-
through payment. There is no such need in this case as the guidewire-
mounted coronary flow reserve sensor received its full period of device
pass-through payments.
We do not believe that use of HCPCS code C1769 will result in
inaccurate cost data for coronary flow reserve measurement services.
Reporting the device code on claims for device-dependent procedures is
meant to ensure that the bills upon which we rely for calculation of
the median costs include the device costs integral to the procedures.
We base this policy on our belief that if a hospital includes the code
for the device on the bill, even though there is no separate payment
for the device, the bill is more likely to be an accurate and complete
report of hospital charges (and thereby, costs). We expect that
hospitals reporting the required guidewire device C-code along with a
coronary flow reserve measurement service will provide an appropriate
charge for the device used in the procedure.
The new requirement for device coding is one technique that we
believe will help us to address the ongoing problem of hospitals
inadvertently failing to accurately and fully bill the charges for all
hospital resources utilized to perform procedures. By requiring that
the device code be on the claim, we are more confident that the device
costs have been included in the hospital's bill and that we will
capture accurate costs for rate setting for the procedure as a whole.
i. Vascular Access Procedures (APCs 0621, 0622, and 0623)
Many of the codes that currently describe vascular access
procedures were new in the CY 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, for the proposed rule we developed a new APC configuration for
vascular access procedure codes and several other related codes. The
proposed new assignments were supported by CY 2004 hospital claims data
and are based on median cost and clinical considerations.
Thus, for CY 2006 we proposed 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 proposed placed all of the procedures
currently
[[Page 68593]]
assigned to APC 0187 into more clinically appropriate APCs. We also
proposed 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 clinical
APCs were comprised of a different mix of codes than is currently the
case for the CY 2005 OPPS. There were no codes assigned to APC 0187
because the only procedures that remained in APC 0187 after reassigning
the vascular access procedures as we proposed 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
proposed 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 proposed to create three new clinical 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 also
proposed to rename APCs 0109 and 0115 as follows: APC 0109 (Removal of
Implanted Devices); and APC 0115 (Cannula/Access Device Procedures).
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 proposed the APC modifications for CY 2006 OPPS as
summarized in Table 13 of the proposed rule (70 FR 42713).
We received a few comments on our proposal.
Comment: All of the comments were supportive of our reconfiguration
of the APCs and encouraged us to make the proposal final.
Response: We appreciate the commenters' support.
Therefore, we are finalizing our proposal without modification for
FY 2006.
BILLING CODE 4120-01-P
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[GRAPHIC] [TIFF OMITTED] TR10NO05.016
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BILLING CODE 4120-01-C
2. Radiology, Radiation Oncology, and Nuclear Medicine
a. Angiography and Venography (APCs 0279, 0280, and 0668)
Comment: One commenter supported our proposal to reassign CPT code
75790 (Angiography, arteriovenous shunt, radiological supervision and
interpretation) from APC 0281 (Venography of Extremity) to APC 0279
(Level II Angiography and Venography except Extremity). However, this
same commenter objected to our proposal to move CPT codes 75820
(Venography, extremity, unilateral, radiological supervision and
interpretation) and 75822 (Venography, extremity, unilateral,
radiological supervision and interpretation) from APC 0281 (Venography
of Extremity) to APC 0668 (Level I Angiography and Venography except
Extremity). The commenter contended that CPT codes 75790, 75820, and
75822 share similar clinical characteristics and resource requirements
and, therefore, should be mapped to the same APC 0279. For instance,
the commenter stated that all three services require the use of
guidewires, catheters, local anesthetic, and contrast. Furthermore, the
commenter asserted that CPT code 75822 involves a bilateral procedure
which requires much higher resource costs than other services assigned
to APC 0668. Lastly, the commenter stated that CPT codes 75790, 75820,
and 75822 share similar clinical characteristics with CPT code 75658
(Angiography, brachial, retrograde, radiological supervision and
interpretation), which currently resides in APC 0279, differing only
with respect to whether a vein is accessed versus an artery in an
extremity. The commenter urged that CMS reassign CPT codes 75790,
75820, and 75822 to APC 0279 for CY 2006. In addition, the commenter
recommended that CMS modify the title of APC 0668 to exclude language
referring to extremities based on the commenter's belief that none of
the other CPT codes assigned to APC 0668 relate to extremities.
Response: Based on our analysis of our CY 2004 claims data we
disagree with the commenter that services described by CPT codes 75790,
75820, and 75822 require similar hospital resources. CPT code 75790 has
a median cost of $548, based on over 18,000 single claims from CY 2004,
and is assigned to APC 0279 (Level II Angiography and Venography),
which has a median cost of $517. We believe that this APC appropriately
reflects the clinical and hospital resource characteristics of CPT code
75790 and provides appropriate payment to hospitals for this service.
In contrast, CPT code 75720 has a median cost of only $258, based
on almost 3,500 single claims that represent over half of the total
claims for the service. Similarly, CPT code 75722 has a median cost of
$349, based on over 2,400 claims that represent more than half of the
total claims for the service. Both of these procedures are assigned to
APC 0668 which has a median cost of $375. We believe that APC 0668
appropriately reflects the clinical and hospital resource
characteristics of both of these procedures. Thus, although these three
codes were assigned to the same clinical APC 0281 for CY 2005, when we
eliminated that APC and reassigned the three services, we were able to
place them in such a way as to provide more accurate payments for each
of the services.
We appreciate the commenter's drawing our attention to the phrase
``Except Extremity'' that remained in the APC titles for APCs 0668,
0279, and 0280 after we eliminated the CY 2005 APC for extremity
venography services. For CY 2006, we have removed the phrase ``Except
Extremity'' from the APC title for APCs 0668, 0279, and 0280, so they
are now renamed Levels I, II, and III Angiography and Venography,
respectively.
b. Brachytherapy (APCs 0312, 0313, and 0651)
Comment: Commenters objected to the proposed reduction in the
payment rates for APCs 0312, 0313 and 0651 for the CY 2006 OPPS. They
indicated that the reductions could result in decreased access to care.
They recommended that CMS use only claims on which a brachythearpy
source appears with the procedure code, which they describe as
``correctly coded'' claims, as the basis for the median cost
calculations for these APCs. They indicated that using only claims on
which the brachytherapy source code was billed results in median costs
that are higher than the median costs calculated using all single
procedure claims. At its August 2005 meeting, the APC Panel recommended
that we evaluate this proposal. The commenters also asked that CMS
expand the adjustment proposed for selected device dependent APCs to
APCs 0312, 0313 and 0651. They asked that CMS consider alternative
methodologies to utilize single and multiple procedure claims for rate
setting purposes so that more claims could be used. They also asked
that CMS use external proprietary and confidential data to determine
median costs for rate-setting. They said that because brachytherapy
sources are required to furnish these services, they should be treated
like device dependent APCs with regard to adjustment of medians and
required editing for the presence of sources on the claims.
Response: We have not accepted the commenters' recommendations to
use external data for the reasons we cite in the discussion of external
data in section II. of this preamble. Moreover, we have not accepted
the recommendation that we use only claims that contain a brachytherapy
source on the claim to calculate the median costs for APCs 0312, 0313,
and 0651 because we believe that the presence of a source on the claim
is not relevant, since sources are paid separately. While the median
costs presented by the commenters based on claims that contain sources
resulted in higher median costs, we do not see a valid reason to limit
the claims to claims with sources because the presence of the source is
not relevant to the median cost of the procedural APC. We have no
reason to believe that the claims without sources on the claim do not
contain the full charges for the procedural services furnished. We have
applied adjustments to the median costs for device dependent APCs for
CY 2006 because of the difficulties in ensuring device charges are
fully reflected on claims for these services, thus allowing appropriate
packaging of the device costs into the APC payments. This rationale
does not apply to the APCs for application of brachytherapy sources, so
we have not applied the device dependent APC median adjustment policy
to APCs 0312, 0313, and 0651 for CY 2006.
We disagree that these services should be treated like device
dependent APCs solely because they require brachytherapy sources. The
critical distinction is that the APC payment for device dependent APCs
includes payment for the packaged devices, while payment for these
brachytherapy source application APCs is exclusive of payment for the
sources, which are paid on the basis of charges reduced to cost. The
editing for the presence of key devices on claims for services assigned
device dependent APCs is not ``correct coding'' editing. Instead, the
edit is made to maximize the likelihood that the charge for the
principle device required to perform the service is included on the
claim so that we will capture the cost of the device in setting the
median cost for the APC.
Although the brachytherapy procedure comments have largely
[[Page 68596]]
focused on the payment for CPT code 77778, the application of the
brachytherapy sources, we note that all the related procedures, such as
needle or catheter use and placement, must be considered for a full
analysis of payment for brachytherapy services. The brachytherapy
source application service is but one component of the entire
procedure. The hospital also bills for the placement of the needles or
catheters, the imaging and planning services, and is paid separately
for the sources at charges reduced to costs.
Because of the particularly large drop in median cost from the
median based on CY 2003 data compared to the median cost based on CY
2004 claims data for APC 0651, we extensively reviewed the cost of APC
0651, which is most commonly billed for the provision of interstitial
prostate brachytherapy and frequently appears on the same claim with
CPT code 55859, the code for placement of needles or catheters into the
prostate. Contrary to the commenters' belief that ``correctly coded''
claims for CPT code 77778 also contain brachytherapy sources, in most
cases of prostate brachytherapy both CPT codes 55859 and 77778 are
found on the same claim with a radiologic guidance code (often CPT
codes 76000 or 76965) and/or with a radiation planning code (usually
CPT code 77290). This results in a correctly coded claim for
interstitial brachytherapy designated as a multiple procedure claim.
Furthermore, these claims not only contain the two major procedures
(CPT codes 55859 and 77778), but they also often contain the three
ancillary procedures (CPT codes 76000, 76965 and/or 77290), which are
not on the bypass list because they have packaging in excess of $50 or
they have packaging on more than 5 percent of single bills.
In our review, we identified 11,341 claims containing both CPT
codes 55859 and 77778 on the same date of service. We then looked for
claims in this subgroup that contained no separately paid codes other
than the three ancillary services (after we applied the bypass list and
removed any codes on it). This gave us 7,533 claims containing CPT
codes 55859 and 77778 with no other major procedures except for the 3
ancillary services. We believe that claims with CPT codes 55859, 77778
and one or more of these 3 ancillary services represent the most
typical combinations of services furnished when brachytherapy sources
are applied. We then calculated two combination median costs: a
combination package and combination bypass. The first combination
median cost was calculated by treating these three codes as if they
were grouped into one comprehensive service by adding the costs of
these codes to the costs on the claim for CPT codes 55859 and 77778 and
all other packaged costs. This ``combination group median'' is
$3,187.86. This ``combination group median'' overstates the costs of
CPT codes 55859 and 77778 by the extent to which the costs of the three
ancillary services and the packaging that is associated with them are
reflected in it. We then calculated a second combination median cost in
which we treated these three ancillary codes as if they were on the
bypass list by removing the line item charges for these codes and
associated all packaging on the claim with CPT codes 55859 and 77778.
This ``combination bypass median'' is $2,968.64. This ``combination
bypass median'' overstates the costs of CPT codes 55859 and 77778 to
the extent that the packaged costs associated with the 3 ancillary
services are reflected in it.
We then compared the sum of the single bill medians calculated from
our OPPS stated methodology for CPT codes 55859 and 77778 to both of
these combination medians. The sum of the single bill medians for these
codes (without any costs from the three ancillary procedures) is
$2,662.62. We then summed the medians for CPT codes 55859, 77778,
76000, and 77290, a typical combination of codes for these services,
resulting in a sum of $2,975.50, similar in range to both the
``combination group median'' and the ``combination bypass median.''
Under our analysis, the sum of the single bill medians for
insertion of needles or catheters in the prostate and the application
of brachytherapy sources is well within the range of the combination
medians we calculated based on the multiple procedure claims.
Accordingly, we have no reason to believe that the single bill median
costs for the services reported by CPT codes 55859 and 77778 do not
otherwise appropriately reflect the costs for those services.
Therefore, we have used the standard OPPS methodology for clinical
brachytherapy services to set the payment rates for the CY 2006 OPPS.
Comment: One commenter stated that date of service stratification
results in pseudo single claims for APCs 0312 and 0651 that lack
packaging because all packaging on the claim has the same date of
service as the other procedure on the claim (i.e. not the procedure
code in APC 0312 or 0651). The commenter indicated that the median
costs for these ``pseudo no package'' claims is significantly lower
than the medians for other single procedure bills for these services
and, therefore, should be deleted from the claims used to set the
median costs for these APCs.
Response: We have no basis to believe that the charges for the
procedure code are not all-inclusive charges for all packaged items and
services associated with the procedure when a single charge appears for
a procedure code. Again, we encourage hospitals to bill all relevant
HCPCS codes that appropriately reflect the services provided.
c. Computed Tomography (APCs 0283 and 0333)
Comment: One commenter supported our proposal to pay separately for
low osmolar contrast material (LOCM) and most magnetic resonance
contrast agents. However, the commenter expressed concern that the
separate payment for these agents will not adequately compensate for
the reduced payment which CMS proposed for APCs 0283 (CT with contrast)
and 0333 (CT and CTA without contrast followed by contrast). The
commenter stated that they did not understand CMS' rationale for
proposing to reduce payments for APCs 0283 and 0333 to a level that
results in an overall net loss for contrast-enhanced CT studies.
Response: We do not agree with the commenter's assertion that the
proposed CY 2006 payment rates for APCs 0283 and 0333 will necessarily
reduce overall payments for contrast-enhanced CT studies. First, the
proposed CY 2006 payments for APCs 0283 and 0333 decreased by less than
3 percent compared to their CY 2005 payment rates. Second, our proposal
to pay separately for LOCM products (HCPCS codes Q9945 through Q9951)
as a result of the mean costs per day of their predecessor codes (HCPCS
codes A4644 through A4646) exceeding $50, may increase overall payments
for some contrast-enhanced CT studies while decreasing overall payments
for other contrast-enhanced CT studies, depending on the volume and
concentration of the LOCM used. The CY 2006 final payment rates for
APCs 0283 and 0333 were calculated from CY 2004 hospital claims data
utilizing the standard OPPS methodology based on our comprehensive
payment policies for CY 2006, which include unpackaging LOCM.
Therefore, hospital charges for LOCM in association with single
claims for services assigned to APCs 0283 and 0333 were not packaged
into the median cost calculations for these APCs. As a result, we would
expect the APC payment rates for APCs 0283 and 0333 to decline slightly
for CY 2006. For CY 2006, we are applying our standard
[[Page 68597]]
OPPS rate setting methodology using CY 2004 hospital claims data to set
the payment rates for APCs 0283 and 0333, and are paying separately for
LOCM based on the payment methodology described in section V.B.3.a.(3)
of this preamble.
d. Computed Tomographic Angiography (APC 0333)
In Addendum B of the CY 2006 proposed rule (70 FR 42776), we
proposed to maintain a number of imaging procedures discussed below in
their CY 2005 APCs.
Comment: Several comments expressed concern that the CY 2006
proposed payment rate for Computerized Tomographic Angiography (CTA)
procedures (APC 0662) continues to be lower than the proposed payment
rate for conventional CT procedures. These commenters recommended that
CMS set the payment rate for CTA procedures at a level equal to the
payment for a CT scan (APC 0333) plus a three-dimensional image
reconstruction (APC 0282) by either increasing the payment for APC 0662
or reassigning CTA procedures to an existing APC whose payment rate
more closely reflects the resource costs of performing CTA procedures.
Response: As we stated in the November 15, 2004 final rule with
comment period (69 FR 65722), accurate cost information about the cost
of image reconstruction for CTA specifically, and for CT alone as
utilized with CTA, would be required in order to implement the
commenter's suggestion that we make the payment rate for CTA (APC 0662)
equal to the sum of the rates for CT alone (APC 333) plus image
reconstruction (APC 282). Such cost information is not available. The
CY 2004 image reconstruction CPT code 76375 (coronal, sagittal,
multiplanar, oblique, 3-dimensional and/or holographic reconstruction
of computed tomography, magnetic resonance imaging, or other
tomographic modality) is not limited to image reconstruction performed
for CTA and may be used in a number of other procedures. Based on the
available CPT codes for CTA, we would not expect any current
utilization of CPT code 76375 to be for CTA post-image processing,
unless there was no appropriate CTA code to describe the body region
imaged, which we believe would rarely be the case. In addition, we
would not expect our current cost data for CTA alone to necessarily
reflect the resources utilized for the CT portion of CTA.
Commenters provided no evidence suggesting that Medicare
beneficiaries have experienced difficulty accessing these services in
the hospital outpatient setting. To the contrary, our number of claims
for CTA procedures increased steadily between CY 2002 and CY 2003 and
nearly doubled from CY 2003 to CY 2004. Furthermore, we used over 50
percent (99,000 single claims out of nearly 180,000 total claims) of
the CY 2004 claims for CTA procedures to calculate the CY 2006 payment
rate for these services.
We now have several years of robust claims data for CTA procedures
and have no reason to doubt this data. Based on the full year of CY
2004 data, the median costs for the APCs 0333 (CT) and 0662 (CTA) are
about equal, and have decreased minimally from their median costs based
on CY 2003 claims data. Because hospitals set their own charges for
services, which we then convert to costs, we still see no reason why
adding the costs for CT alone plus the costs for image reconstruction
would necessarily provide a better estimate of costs for CTA than our
analysis of our specific CTA claims. Furthermore, no other existing
clinical APC appears to contain services that share more clinical and
resource cost homogeneity with CTA procedures than APC 0662, whose
median cost reflects solely the claims data from 8 CTA procedures. For
this reason, we are not reassigning CTA procedures to any other
clinical APC(s) for CY 2006. Instead, for CY 2006, we are applying our
standard OPPS rate-setting methodology for calculating the payment rate
for CTA procedures residing in APC 0662. Once again, we encourage all
hospitals to take all actions necessary to ensure that they are billing
accurately and including in their charges all resources utilized to
deliver CTA services.
e. Computed Tomographic Guidance (APC 0332)
Comment: One commenter objected to the proposed payment rate of
$194 for CPT code 76362 (Computed tomography guidance for, and
monitoring of, visceral tissue ablation), which was proposed to be
assigned to APC 0332 (Computerized Axial Tomography and Computerized
Angiography without Contrast) for CY 2006. The commenter said that,
although CMS included only 9 single claims in the calculation of the
$371 median cost for CPT code 76362 in the proposed rule, they
identified 202 single bills with a median cost of $580 for CPT code
76362. The commenter indicated that it found that CPT code 76362 was
not being treated as a major procedure in CMS' median cost
calculations, and it could not determine if CMS packaged the cost for
CPT code 76362 into the payment for the other separately payable
procedure on the claim. The commenter indicated that it simulated
removing the exception (although they did not specify what they did)
and by doing so found 202 single bills with a median cost of $580 for
the code. The commenter asked that we place CPT code 76362 in New
Technology APC 1507 (Level VII $500-$600) so that payment would be set
at $550. The commenter also requested that CMS add CPT code 76362 to
the bypass list in future years.
Response: We do not agree that CPT code 76362 would be
appropriately assigned to New Technology APC 1507 because CT is not a
new technology. The use of CT guidance for and monitoring of visceral
tissue ablation is a more recent application of this well-established
technology. We acknowledge that we have few single bills upon which to
base our calculation of the median cost of this service, but this is
consistent with our expectations based on the nature of the service. We
believe that all correctly coded claims would also include a CPT code
for the specific ablation service that was monitored using CT and
billed along with CPT code 76362.
We believe that the primary costs directly attributable to CTP code
76362, as opposed to the accompanying ablation procedure, are the
hospital resources required for the lengthy operation of the necessary
CT scanner. In examining the clinical characteristics of the use of CT
for visceral tissue ablation, we believe that the CT use time for the
procedure, although variable depending on the specific ablation
procedure provided, would typically be longer than the CT use time for
most noncontrast CTs assigned to APC 0332.
Because the commenter indicated their comfort with CPT code 76362
being added to the bypass list, we analyzed the line item charges for
all units of service of CPT code 76362 billed by hospitals in CY 2004.
The median charge per unit based on over 1,000 units was $1,165.
Application of a hospital average CCR of 0.28 for the diagnostic
radiology cost center to the median charge of $1,165 for CPT code 76362
yielded a procedure-specific line item cost of approximately $325 for
this service. This is quite consistent with our final single claim
median cost of $363 based on 9 single claims.
Therefore, we are reassigning CPT code 76362 to APC 0333
(Computerized Axial Tomography and Computerized Angiography Without
Contrast Followed by Contrast) with an APC median cost of $303 for CY
2006, where
[[Page 68598]]
CT procedures that include both noncontrast and contrast studies in one
examination session reside. We believe that, although the ablation
monitoring service is not necessarily provided both without and with
contrast, the longer time of use of the CT scanner for CPT code 76362
is more consistent with the scanner use time for services assigned to
APC 0333. In addition, the median cost of APC 0333 is similar to the
median cost of CPT code 76362 based on single claims and to the other
cost estimate based on our analysis of all billed units of the code.
With respect to the commenter's data findings, CPT code 76362 is
considered to be a minor procedure (notwithstanding the status
indicator of ``S''), because it so frequently occurs on the same claim
as other separately paid procedures and is ancillary to them. As such,
when a minor procedure is on the same claim as a major procedure, the
claim is considered to be a single major procedure claim and the costs
of the minor procedure are not used to set the median for the minor
procedure, nor are they packaged into the payment for the major
procedure. The only single claims that are used in the calculation of
the median cost for the minor procedure code and, therefore, for the
APC to which the code is assigned are single minor procedure claims
which are derived from circumstances in which the minor procedure
appears alone on a claim or when it appears as one of several multiple
minor procedures on a claim and can be split off because the services
have different dates of service.
We considered making CPT code 76362 a major procedure and adding
the service to the bypass list. However, the code does not meet the
empirical criteria we have established for considering new additions to
the bypass list. Of the total claims for CPT code 76362, we had only 9
single procedure claims (less than the 100 required for a code to go
onto the bypass list); 6 of the 9 claims (67 percent) contained
packaged services (more than the 5 percent limit) that yielded a median
of $1,231 (considerably above the $50 median limit). Hence, because the
data for CPT code 76362 from CY 2004 do not meet any of the criteria
for addition of the code to the bypass list, we will not convert it to
a major procedure and add it to the bypass list for CY 2006. However,
we will consider for CY 2007 whether we should make an exception to our
empirical criteria for additions to the bypass list for services such
as CPT code 76362. We will continue to develop a more appropriate
median cost for the procedure and it seems plausible that the procedure
should have very little associated packaging.
f. Computerized Reconstruction (APC 0417)
Comment: One comment expressed concern about the payment rate for
HCPCS code G0288 (Reconstruction, computed tomographic angiography of
aorta for preoperative planning and evaluation post vascular surgery).
The commenter was concerned because the proposed rule indicated that
the rate for HCPCS code G0288 would decrease for CY 2006, continuing a
trend of decreases that began in CY 2004. The commenter made several
recommendations to CMS that it believed would help to limit the
decreased rate for CY 2006 and to prevent continuation of the downward
trend for coming years. The first recommendation was for CMS to mandate
which revenue code hospitals are to use to report HCPCS code G0288. The
commenter recommended use of revenue code 0780, Telemedicine. This was
based on their finding that hospitals used 17 different revenue codes
to report HCPCS code G0288. The commenter stated that more consistent
use of a revenue code would alleviate the effects of providers not
billing charges high enough to result in cost findings near the
acquisition costs.
Next, the commenter recommended that for CY 2006, CMS use the
hospital overall CCRs to calculate the median for HCPCS code G0288. The
commenter believed use of the overall CCRs would increase the median
for APC 0417 to approximately $415.
Third, the commenter recommended as a fallback measure, in case the
first two recommendations could not be implemented, that CMS should use
the CY 2005 rate, adjusted upward in accordance with the CY 2006
conversion factor, for APC 0417 in CY 2006.
Finally, the commenter requested that the descriptor for HCPCS code
G0288 be revised to read, ``Three-dimensional pre-operative and post-
operative computer-aided measurement planning and simulation in
accordance with measurements and modeling specifications of the Society
for Vascular Surgery.'' They stated that the revised descriptor would
ensure that the code would be used more accurately.
Response: Regarding the commenter's last request, that we revise
the descriptor for HCPCS code G0288, we do not believe that is
necessary. HCPCS code G0288 was revised in CY 2004 to clarify that the
service can be provided for both treatment planning prior to surgery
and for postsurgical monitoring. Other than this one comment, we have
had no indication that there is confusion among providers about when to
use the code. In addition, we generally allow hospitals to allocate
their charges across revenue codes as they feel is appropriate to their
specific institutional settings, and we see no reason to deviate from
this policy for the service described by HCPCS code G0288. We do not
understand how specifying a revenue code for reporting would
necessarily ensure adequate hospital charges for the service.
In response to the commenter's recommendations regarding our
hospital cost data, we conducted a detailed examination of our CY 2004
claims data and, like the commenter, found that hospitals used 17
different revenue codes to report HCPCS code G0288. However, we also
found that although 8 different cost centers for HCPCS code G0288 were
used in our conversion of charges to costs for the service, for 83
percent of the approximately 5,300 single bills utilized for rate
setting we converted hospital charges to costs using one cost center,
namely Diagnostic Radiology. Therefore, while we acknowledge that
utilizing an overall hospital CCR for HCPCS code G0288 yields a higher
median cost, $335 for APC 0417 based on our analysis, as opposed to a
median cost of $235 utilizing our standard revenue code to cost center
crosswalk, we do not believe that it would be appropriate to substitute
specific hospital overall CCRs in our calculation of this APC's median.
We utilize one hospital-specific departmental CCR for the conversion of
charges to costs for most of the single claims, and we have no reason
to believe that the CCR in this case is inappropriate. Also, hospitals
should bill adequate and complete charges for the service to account
for all of the hospital resources required.
Additionally, we see no reason to adjust the payment rate for APC
0417 to the CY 2005 rate adjusted upward in accordance with the CY 2006
conversion factor. We note that despite reductions in payment rates
over the last several years, the number of total procedures billed
under the OPPS for HCPCS code G0288 has continued to rise from 2,065 in
CY 2002, to 4,733 in CY 2003, and most recently to 8,421 in CY 2004. We
have no evidence that Medicare beneficiaries are having trouble
accessing this service based on our hospital claims information.
Therefore, we believe that it is appropriate for us to use our
historical hospital cost data as the basis for the CY 2006 payment
amount, and we are
[[Page 68599]]
finalizing our payment rate for APC 0417 at $235.66 for CY 2006.
g. Diagnostic Computed Tomographic Colonography (APC 0333)
We proposed to reassign CPT 0067T (diagnostic computed tomographic
colonography (CTC-Dx)) to APC 0333 (CT and CTA without contrast
followed by contrast) for CY 2006.
Comment: One commenter responded to the November 15, 2004 final
rule with comment period (69 FR 65682), explaining that CPT code 0067T
(diagnostic computed tomographic colonography (CTC-Dx)) was established
in CY 2005 to replace the previous coding scheme for CT colonography
involving two computed tomography (CT) scans (i.e., abdomen and pelvis)
and three-dimensional image reconstruction. Furthermore, the commenter
explained that the two CT components of a CTC-Dx may be administered in
a variety of ways: (1) CT without contrast, (2) CT with contrast, or
(3) CT without contrast followed by a CT scan with contrast. The
commenter stated that CMS' assignment of CPT code 0067T to APC 0332 (CT
and CTA without contrast) for CY 2005 failed to recognize the cost
differential between a CT scan and the variety of ways in which a CTC-
Dx scan is administered, along with the costs associated with the
three-dimensional image reconstruction. The commenter urged CMS to
reconsider the APC placement of CPT code 0067T, taking into account its
advantages as a less invasive and less costly alternative to a
colonoscopy.
Response: Due to the recent establishment of CPT code 0067T in CY
2005, we will have no hospital claims data for determining its resource
requirements until CY 2007. For CY 2005, we assigned CPT code 0067T to
APC 0332 (CT and CTA without contrast) because we considered the
clinical characteristics of CTC-Dx to be relatively similar to other
services assigned to APC 0332. We thank the commenter for bringing to
our attention the variety of ways in which a CTC-Dx can be
administered, notably a CT scan without contrast followed by a CT scan
with contrast. In light of this additional information, for CY 2006 we
proposed to reassign CPT 0067T to APC 0333 (CT and CTA without contrast
followed by contrast), where similar services reside involving a CT
scan without contrast followed by a CT scan with contrast. We are
finalizing our proposal to reassign CPT 0067T to APC 0333 for CY 2006.
However, in preparation for CY 2007 rate setting, we will reexamine the
APC placement of CPT code 0067T based on available CY 2005 hospital
claims data.
h. Intensity Modulated Radiation Therapy (IMRT) (APCs 0310 and 0412)
In Addendum B of the CY 2006 proposed rule, we proposed to maintain
CPT code 77301 (Radiotherapy dose plan, intensity modulated radiation
therapy (IMRT)) in APC 0310 (Level III Therapeutic Radiation Treatment
Preparation) based on the CY 2004 hospital claims data submitted for
CPT code 77301. In addition, we proposed to maintain CPT codes 0073T
(Compensator-based IMRT treatment delivery) and 77418 (Multileaf
collimator-based intensity modulated treatment delivery) in APC 0412
(IMRT treatment delivery) for CY 2006.
We received several public comments related to IMRT issues.
Comment: One commenter expressed concern that the proposed payment
rate for CPT code 77301 does not reflect the actual physics planning
time and resources for this procedure. The commenter recommended that
we take into consideration the costs associated with IMRT planning for
a typical head and neck case, including the time spent by the
dosimetrists, physicists, and physicians, when setting the payment for
CPT code 77301.
Response: The proposed procedure-specific median cost of $827 for
CPT code 77301 was calculated using 16,417 single procedure claims out
of 16,885 total claims (97 percent of the total claims). We proposed to
maintain CPT code 77301 in APC 0310 (Level III Therapeutic Radiation
Treatment Preparation) grouped with only one other service, CPT code
77295 (Set radiation therapy field), whose proposed median procedure-
specific cost of $844 had the effect of increasing the proposed payment
for CPT code 77301 due to its significantly higher single frequency of
claims used to set the payment for APC 0310. We have no reason to
believe that the single procedure claims for CPT code 77301 that
represent IMRT planning for head and neck treatment reflect more
accurate costs and charges than those claims for CPT 77301 that
represent IMRT planning for other body areas. Thus, we would have no
justification for discarding such a subset of claims that appear to be
accurately reported under CPT code 77301, but merely require less
resource utilization for certain covered clinical indications. Rather,
the high percentage of single procedure claims for this service, which
remains at 97 percent for the final rule data, along with its
relatively stable median cost for several years, confirms our belief
that the CY 2006 median cost for CPT code 77301 accurately reflects
hospitals' costs for the service. We believe these data represent, on
average, the resources consumed by hospitals for the provision of IMRT
planning services. We note that the OPPS does not provide payment for
physicians' professional services that may be required for procedures.
Therefore, for CY 2006, we are maintaining CPT code 77301 in APC 0310
with an APC median cost of $825, higher than the final code-specific
median cost of CPT code 77301 of $786.
Comment: In response to the November 15, 2004 final rule with
comment period (69 FR 65682) and the CY 2006 OPPS proposed rule (70 FR
42674), several commenters applauded our decision to establish a
national payment rate for category III CPT code 0073T for compensator-
based IMRT treatment delivery. These commenters stated that our
decision to pay for compensator-based IMRT treatment delivery will
encourage patient access and diffusion of this cost-effective
technology. Furthermore, these commenters agreed with our rationale to
assign CPT codes 0073T (Compensator-based IMRT treatment delivery) and
77418 (Multileaf collimator-based IMRT treatment delivery) to the same
APC 0412 (IMRT treatment delivery) for rate setting purposes, noting
that the IMRT treatment delivery costs are virtually identical for both
modalities. In contrast, one commenter to the November 15, 2004 final
rule with comment period (69 FR 65682) was opposed to the assignment of
CPT code 0073T to APC 0412. This commenter explained that CPT code
0073T was created specifically to distinguish compensator-based IMRT
treatment delivery from multileaf collimator-based IMRT treatment
delivery, described by CPT code 77418. The commenter believed that the
assignment of CPT codes 0073T and 77418 to the same APC 0412 precludes
CMS from collecting distinct claims data for each code, and urged CMS
to assign CPT code 0073T to a New Technology APC and reserve APC 0412
for CPT code 77418.
Response: Our decision to place CPT codes 0073T and 77418 in the
same APC 0412 supports the clinical homogeneity of APC 0412. Because we
had no CY 2003 claims data for the newly established Category III CPT
code 0073T, we concluded that its resource costs were likely reflected
to some degree in the costs and charges reported for CPT code 77418,
considering that this was the only CPT code available to providers for
the billing of compensator-based IMRT treatment delivery prior to
January 1, 2005. Contrary to a belief held by one of the commenters,
the assignment of CPT codes 0073T and
[[Page 68600]]
74418 to the same APC 0412 for payment purposes does not preclude CMS
from collecting distinct claims data for these two codes. Once the CY
2005 claims data for CPT code 0073T become available for setting the CY
2007 payment rate, we will reexamine the APC placement of CPT code
0073T. In the meantime, for CY 2006 we will maintain CPT codes 0073T
and 77418 in the same APC 0412.
Comment: One commenter explained that, effective January 1, 2005,
the descriptor for CPT code 77418 (Multileaf collimator-based intensity
modulated treatment delivery) was changed to explicitly exclude
compensator-based IMRT treatment delivery and a new Category III code
0073T was created to describe compensator-based IMRT delivery. This
commenter requested that we either update the December 19, 2003
Medicare Program Transmittal 32 (CR 3007) or issue a new Medicare
Program Transmittal to include compensator-based IMRT treatment
delivery code 0073T. The commenter provided CMS with recommended
language to clarify the billing of compensator-based IMRT treatment
delivery under the OPPS for CY 2006.
Response: We appreciate the commenter bringing to our attention the
need to update our billing guidance to reflect the newly established
Category III CPT code 0073T for the billing of compensator-based IMRT
treatment delivery. We thank the commenter for providing CMS with
recommended language and will consider such language as we revise our
guidance on the billing of compensator-based IMRT treatment delivery
under the OPPS for CY 2006.
i. Kidney Imaging (APC 0267)
Comment: One commenter expressed concern that CMS's proposed
reassignment of CPT code 78700 (Kidney imaging, static) from APC 0404
(Level I Renal and Genitourinary Studies) to APC 0267 (Level III
Diagnostic Ultrasound) disrupts the clinical homogeneity of the two
APCs. The commenter stated that the resource requirements and clinical
characteristics of kidney imaging have not changed in the past year and
urged CMS to maintain CPT code 78700 in APC 0404 for CY 2006.
Response: We agree with the commenter's observation that the
clinical attributes of CPT code 78700 more closely resemble the
services assigned to APC 0404 rather than APC 0267. Although our
proposal to reassign CPT code 78700 to APC 0267 was based on its median
cost data collected for the proposed rule, the more recent median cost
data from CY 2004 for CPT code 78700 do not preclude its return to APC
0404. Therefore, in the interest of preserving the clinical homogeneity
of APCs 0267 and 0404, we are not adopting our proposed reassignment
and will retain CPT code 78700 in APC 0404 for CY 2006.
j. Magnetic Resonance Guided Focused Ultrasound Ablation (APC 0193)
We received one public comment on the CY 2006 OPPS proposed rule
concerning the APC assignments for HCPCS codes 0071T and 0072T, along
with several related comments on the November 15, 2004 final rule with
comment period.
Comment: Several commenters submitted comments on the November 15,
2004 final rule regarding the APC assignments of magnetic resonance
guided focused ultrasound (MRgFUS) therapy for uterine fibroids. We
proposed to retain magnetic resonance guided focused ultrasound
(MRgFUS) procedures in APC 0193 for CY 2006. The commenters believed
that the procedure's assignment to APC 0193 (Level V Female
Reproductive Procedures) resulted in significant underpayment. They
asserted that MRgFUS is a new technology and that CMS should assign the
two Category III CPT codes to two separate New Technology APCs, based
on external cost data, until adequate claims data are available upon
which to base assignments to clinical APCs.
More recently, hospital and manufacturer representatives made a
presentation at the August 2005 meeting of the APC Panel and also
commented on our July 25, 2005 proposed rule. The Panel recommended
that CMS work with stakeholders to assign CPT codes 0071T and 0072T,
focused ultrasound ablation of uterine leiomyomata including magnetic
resonance guidance, to an appropriate New Technology APC(s).
The procedures are coded with Category III CPT codes 0071T (Focused
ultrasound ablation of uterine leiomyomata, including MR guidance;
total leiomyomata volume less than 200 cc of tissue) and 0072T (Focused
ultrasound ablation of uterine leiomyomata, including MR guidance;
total leiomyomata volume greater or equal to 200 cc of tissue). These
codes were new CPT codes in CY 2006. The commenters and the presenters
at the APC Panel suggested that we assign CPT code 0071T to New
Technology APC 1528 (Level XXV) and CPT code 0072T to New Technology
APC 1532 (Level XXVI).
Response: In light of the additional information that has been
presented to us, we agree that it would be more accurate to assign the
two procedures to separate APCs to account for the higher level of
resources required to ablate the larger growths. However, we do not
agree that it is most appropriate to assign MRgFUS procedures to New
Technology APCs 1528 and 1532. Although FDA approval of one specific
ablation technology was relatively recent, MRgFUS therapy bears a
significant relationship to technologies already in widespread use in
hospitals, in particular MRI and ultrasound services. The use of
focused ultrasound for thermal tissue ablation has been in development
for decades, and the recent application of MRI to focused ultrasound
therapy provides monitoring capabilities that may make the therapy more
clinically useful. We believe that MRgFUS therapy is a new and
integrated application of existing technologies (MRI and ultrasound)
and, therefore, is not necessarily most accurately assigned to a New
Technology APC. We believe that the technology used in this service
fits as well into existing clinical APCs for female reproductive
services, as do many other modalities that are currently assigned to
those clinical groups. In addition, MRgFUS procedures are most often
performed on younger women and are only seldom performed on Medicare
beneficiaries. We believe that placing them in clinical APCs with other
female reproductive procedures will enable us both to set accurate
payment amounts and to maintain appropriate clinical homogeneity of the
APCs.
Cost data for MRgFUS procedures provided to us for two hospitals
showed high, but disparate costs. The costs per case reported by each
of the hospitals were significantly different from one another and were
much higher than reports of costs from other publicly available
sources. We suspect that much of the variation reflects differences in
capital costs and projections of utilization and procedure times, as
well as in the types of personnel used to perform the procedures. We
understand that the MRI equipment can also be used to perform
conventional MRI procedures, and the MRI equipment costs should be
allocated accordingly so that amortization of the costs will be shared
by those tests. The OPPS payment rates for services need to make
appropriate payments for the services to Medicare beneficiaries,
recognizing that, as a budget neutral payment system, the OPPS does not
pay the full hospital costs of services. We expect that our
[[Page 68601]]
payment rates generally will reflect the costs that are associated with
providing care to Medicare beneficiaries in cost-efficient settings.
We compared the necessary hospital resources for the MRgFUS
procedures, including specialized equipment, MRI/procedure room time,
personnel, anesthesia and other required resources, to various other
procedures for which we have historical hospital claims data.
Additionally, we took into consideration projected costs for the MRgFUS
procedures submitted to us, and other available information regarding
the clinical characteristics and costs of those services. Upon
consideration of all of the information available to us, we have
determined that a higher level of payment would be more appropriate for
the MRgFUS procedures. However, we are rejecting the recommendation of
the APC Panel, and we will assign CPT codes 0071T and 0072T to APC 0195
(Level IX Female Reproductive Procedures) and 0202 (Level X Female
Reproductive Procedures), respectively for CY 2006. These new APC
assignments provide significantly higher payment rates than we proposed
for these services in CY 2006. We believe that these placements in APCs
0195 and 0202 will provide appropriate payments for MRgFUS services to
provide access for Medicare beneficiaries who need them.
k. Non-Imaging Nuclear Medicine Studies (APC 0389)
In Addendum B of the CY 2006 proposed rule (70 FR 42776), we
proposed to maintain CPT codes 78270 (Vitamin B-12 absorption study;
without intrinsic factor), 78271 (Vitamin B-12 absorption study; with
intrinsic factor), and 78272 (Vitamin B-12 absorption study; with and
without intrinsic factor) in APC 0389 (Non-Imaging Nuclear Medicine)
for CY 2006.
We received one public comment related to the above-mentioned
nuclear medicine procedures.
Comment: One commenter expressed concern that the resource
requirements associated with CPT codes 78271 (Vitamin B-12 absorption
study; with intrinsic factor), and 78272 (Vitamin B-12 absorption
study; with and without intrinsic factor) far exceed the median cost of
APC 0389 (Non-imaging Nuclear Medicine) in which they reside. The
commenter noted that the exceptionally low single claim counts for
these procedures have little or no impact on the overall median cost
for APC 0389 due to the thousands of other single claim counts for
lower cost CPT codes that reside in APC 0389. To protect beneficiary
access to these services, the commenter requested that CMS consider
either freezing the payment rate for APC 0389 at its CY 2005 payment
rate or buffering the proposed 12 percent decrease from its CY 2005
payment rate. The commenter noted that, in addition to underpayment for
the nuclear medicine procedures, the three radiopharmaceuticals that
could be used in the tests ( C1079--Supply of radiopharmaceutical
diagnostic imaging agent, cyanocobalamin Co-57/58, per 0.5 mCi; C9013--
Supply of Co-57 cobaltous chloride, radiopharmaceutical diagnostic
imaging agent; and Q3012--Supply of oral radiopharmaceutical diagnostic
imaging agent, cyanocobalamin cobalt Co-57, per 0.5 mCi) were proposed
to change from status indicator ``K'' in CY 2005 to status indicator
``N'' for CY 2006. The commenter was concerned that the packaging of
the necessary radiopharmaceuticals, in addition to the reduced payment
rate for the tests, could threaten Medicare beneficiaries' access to
these procedures.
Response: While we acknowledge the commenter's concern that the
procedure-specific median costs for CPT codes 78271 ($244) and 78272
($310) appear to far exceed the median cost of APC 0389 ($86) for CY
2006 based on the CY 2004 hospital claims data, we remind the commenter
that the exceptionally low single claim counts that they brought to our
attention for CPT codes 78271 (9 single claims) and 78272 (5 single
claims) significantly increase the volatility of their median costs
from year-to-year. Moreover, the higher CY 2005 single claim counts for
CPT codes 78271 (209 single claims) and 78272 (133 single claims) based
on the CY 2003 hospital claims data yielded lower median costs for CPT
codes 78271 ($98) and 78272 ($159). These lower median costs may have
been due to separate CY 2005 payments for the required
radiopharmaceuticals, in comparison with the median costs from CY 2004
claims developed based on the CY 2006 payment policy of packaging the
radiopharmaceuticals.
In reviewing the claims data for all of the CPT codes assigned to
APC 0389 for CY 2005, we noted that, in addition to CPT codes 78271 and
78272, several other services had consistently higher procedure-
specific median costs than the CY 2006 APC median cost ($86), including
CPT code 78003 (Thyroid uptake; stimulation, suppression or discharge);
CPT code 78190 (Kinetics, study or platelet survival, with or without
differential organ/tissue localization); CPT code 78270 (Vitamin B-12
absorption study; without intrinsic factor); and CPT code 78191
(Platelet survival study) with median costs of $167, $170, $186, and
$384, respectively. As these services were all low volume, with fewer
than 100 claims each, there was no two times violation in APC 0389,
despite the finding that the least expensive procedure assigned to APC
0389 had a median cost of $76. The higher level of hospital resources
required for the more costly non-imaging nuclear medicine procedures
was notable.
While we will not adjust the CY 2006 median cost of APC 0389 by
using its CY 2005 median cost or dampening the decline between CY 2005
and CY 2006 as suggested by the commenter, we acknowledge that the
structure of the APC would benefit from reconfiguration. Therefore, we
are splitting the services assigned to APC 0389 for CY 2005 into two
groupings for CY 2006: APC 0389, Level I Non-Imaging Nuclear Medicine;
and newly created APC 0392, Level II Non-Imaging Nuclear Medicine. The
assignment of CPT codes to these two APCs is shown in Table 14 below.
Table 14.--Assignment of CPT Codes to APCs 0389 and 0392 for CY 2006
------------------------------------------------------------------------
APC 0389 APC 0392
------------------------------------------------------------------------
78725, Kidney function study........... 78003, Thyroid, stimulation,
suppression.
78000, Thyroid, single uptake.......... 78190, Platelet survival,
kinetics.
78001, Thyroid, multiple uptakes....... 78191, Platelet survival.
78999U, Nuclear diagnostic exam........ 78270, Vitamin B-12 absorption
exam; without intrinsic
factor.
78271, Vitamin B-12 absorption
exam; with intrinsic factor.
78272, Vitamin B-12 absorption
exam; with and without
intrinsic factor.
------------------------------------------------------------------------
[[Page 68602]]
In this reconfiguration, the median cost of APC 0389 for CY 2006 is
$85, and the median cost for APC 0392 is $209. We believe that these
new APC configurations will result in more accurate payments for non-
imaging nuclear medicine studies, by improving clinical and resource
homogeneity within the groupings. We note that for the purposes of any
studies contemplated by the commenter, different codes will be
available for reporting the required radiopharmaceuticals in the CY
2006 OPPS. Specifically HCPCS code C9013 will be deleted, HCPCS code
A9546 (Cobalt CO-57/58, cyanocobalamin, diagnostic, per study dose, up
to 1 microcurie) will replace HCPCS code C1079, and HCPCS code A9559
(Cobalt CO-57 cyanocobalamin, oral, diagnostic, per study dose, up to 1
microcurie) will replace HCPCS code Q3012. We anticipate that these new
permanent HCPCS codes for radiopharmaceuticals will simplify billing
and provide more accurate hospital claims data as the basis for
potential packaging determinations in future years. With the transition
to these new radiopharmaceutical HCPCS codes, we will closely monitor
the claims data for APCs 0389 and 0392 in the future, as any changes in
the packaging status of required radiopharmaceuticals could affect the
median costs of services assigned to them and alter the resource
homogeneity of the groupings.
l. Therapeutic Radiation Treatment (APC 0304)
Comment: One commenter objected to our proposal to maintain CPT
code 77370 (Radiation physics consult) in APC 0304 (Level I Therapeutic
Radiation Treatment Preparation) for CY 2006, noting that the procedure
experienced over a 50 percent decrease in its payment rate between CYs
2004 and 2005. The commenter explained that this procedure often
involves a significant amount of time spent by the physics department
in developing the treatment planning, immobilization, and proper beam
placement for the patient. The commenter requested that CMS consider
the amount of time spent by the physicists and dosimetrists in
collaborating with the physician when determining the APC placement of
CPT code 77370 for CY 2006.
Response: The CY 2006 median cost of $140 for CPT code 77370 is
based on 96 percent of the CY 2004 total claims (41,123 single
procedure claims out of 42,753 total claims). Similarly, the CY 2005
median cost of $136 for CPT code 77370 was based on 95 percent of the
CY 2003 total claims (40,723 single procedure claims out of 42,985
total claims). The robust claims data reported by hospitals over the
past several years support the placement of CPT code 77370 in APC 0304
for CY 2006. Furthermore, the commenter provided no supporting evidence
that the proposed payment of $105 for CY 2006 would jeopardize
beneficiary access to this service. Therefore, for CY 2006 we are
maintaining CPT code 77370 in APC 0304.
m. Urinary Bladder Study (APC 0340)
At the February 2005 APC panel meeting, the APC Panel recommended
that we move CPT code 78730 (Urinary bladder residual study) from APC
0340 (Minor Ancillary Procedures) to APC 0404 (Level I Renal and
Genitourinary Studies) for CY 2006, suggesting that the CY 2003 data
for CPT code 78730 may have been derived from incorrectly coded
hospital claims. For reasons discussed in detail below, we are
maintaining CPT code 78730 in APC 0340 for CY 2006.
We received a number of public comments related to such imaging
procedures.
Comment: One commenter stated that the resource requirements of CPT
code 78730 (Urinary bladder residual study) do not resemble other
services assigned to APC 0340 (Minor Ancillary Procedures). The
commenter explained that the high volume and low median cost data for
CPT code 78730 resulted from inappropriate use of this code to report
other services unrelated to nuclear medicine. The commenter noted that
during the February 2005 APC Panel meeting, the APC Panel recommended
that CMS move CPT code 78730 from APC 0340 to APC 0404 (Level I Renal
and Genitourinary Studies), suggesting that the CY 2003 data for CPT
code 78730 may have been derived from incorrectly coded hospital
claims. The commenter urged CMS to recognize the full costs associated
with the nuclear medicine aspects of the procedure by reassigning CPT
code 78730 to APC 0404 for CY 2006.
Response: In the November 15, 2004 final rule with comment period
(69 FR 65705), we noted that CPT code 78730 was originally created and
valued for the MPFS as a procedure requiring the services of a nuclear
medicine technician, but that the use of the code subsequently had
changed to be used primarily by urologists rather than by nuclear
medicine physicians. While we reassigned CPT code 78730 to APC 0340 for
CY 2005 based