FR Doc 07-3509

[Federal Register: August 2, 2007 (Volume 72, Number 148)]
[Proposed Rules]
[Page 42627-43129]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02au07-34]

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Part III

Book 2 of 2 Books

Pages 42627-43130

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 410, 411, 414 et al.

Medicare and Medicaid Programs: CY 2008 Proposed Changes; Proposed Rule

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 414, 416, 419, 482, and 485

[CMS-1392-P]
RIN 0938-AO71

Medicare Program: Proposed Changes to the Hospital Outpatient
Prospective Payment System and CY 2008 Payment Rates; Proposed Changes
to the Ambulatory Surgical Center Payment System and CY 2008 Payment
Rates; Medicare and Medicaid Programs: Proposed Changes to Hospital
Conditions of Participation; Proposed Changes Affecting Necessary
Provider Designations of Critical Access Hospitals

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital
outpatient prospective payment system to implement applicable statutory
requirements and changes arising from our continuing experience with
this system. In this proposed rule, we describe the proposed changes to
the amounts and factors used to determine the payment rates for
Medicare hospital outpatient services paid under the prospective
payment system. These changes would be applicable to services furnished
on or after January 1, 2008.
In addition, this proposed rule would update the revised Medicare
ambulatory surgical center (ASC) payment system to implement certain
related provisions of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA). In this proposed rule, we propose the
applicable relative payment weights and amounts for services furnished
in ASCs, specific HCPCS codes to which the final policies of the ASC
payment system would apply, and other pertinent ratesetting information
for the CY 2008 ASC payment system. These changes would be applicable
to services furnished on or after January 1, 2008.
In this proposed rule, we also are proposing changes to the
policies relating to the necessary provider designations of critical
access hospitals (CAHs) that are being recertified when a CAH enters
into a new co-location arrangement with another hospital or CAH or when
the CAH creates or acquires an off-campus location.
Further, we are proposing changes to several of the current
conditions of participation that hospitals must meet to participate in
the Medicare and Medicaid programs to require the completion and
documentation in the medical record of medical histories and physical
examinations of patients conducted after admission and prior to surgery
or a procedure requiring anesthesia services and for postanesthesia
evaluations of patients before discharge or transfer from the
postanesthesia recovery area.

DATES: To be assured consideration, comments on all sections of the
preamble of this proposed rule must be received at one of the addresses
provided in the ADDRESSES section no later than 5 p.m. on September 14,
2007.

ADDRESSES: In commenting, please refer to file code CMS-1392-P. 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 regulation to http://www.cms.hhs.gov/eRulemaking. Click

on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (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- 1392-P, P.O. Box 8011, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1392-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses: Room
445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 21244-
1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-9994 in advance to schedule your
arrival with one of our staff members.
(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.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
Alberta Dwivedi, (410) 786-0378, Hospital outpatient prospective
payment issues.
Dana Burley, (410) 786-0378, Ambulatory surgical center issues.
Suzanne Asplen, (410) 786-4558, Partial hospitalization and community
mental health centers issues.
Sheila Blackstock, (410) 786-3502, Reporting of quality data issues.
Mary Collins, (410) 786-3189, and
Jeannie Miller, (410) 786-3164, Necessary provider designations for
CAHs Issues.
Scott Cooper, (410) 786-9465, and
Jeannie Miller, (410) 786-3164, Hospital conditions of participation
Issues.

SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this proposed rule to assist us in fully
considering issues and developing policies. You can assist us by
referencing file code CMS-1392-P and the specific ``issue identifier''
that precedes the section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking.
Click on the link ``Electronic Comments on

CMS Regulations'' on that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication

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of a document, at the headquarters of the Centers for Medicare &
Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on
Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule
an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. Free public access is available on a Wide
Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
the World Wide Web; the Superintendent of Documents' home page address
is http://www.gpoaccess.gov/index.html, by using local WAIS client

software, or by telnet to swais.access.gpo.gov, then login as guest (no
password required). Dial-in users should use communications software
and modem to call (202) 512-1661; type swais, then login as guest (no
password required).

Alphabetical List of Acronyms Appearing in the Proposed Rule

ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AMA American Medical Association
APC Ambulatory payment classification
AMP Average manufacturer price
ASC Ambulatory Surgical Center
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance
Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113
BCA Blue Cross Association
BCBSA Blue Cross and Blue Shield Association
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000, Pub. L. 106-554
CAH Critical access hospital
CAP Competitive Acquisition Program
CBSA Core-Based Statistical Area
CCR Cost-to-charge ratio
CERT Comprehensive Error Rate Testing
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP [Hospital] Condition of participation
CORF Comprehensive outpatient rehabilitation facility
CPT [Physicians'] Current Procedural Terminology, Fourth Edition, 2007,
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
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
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
FAR Federal Acquisition Regulations
FDA Food and Drug Administration
FFS Fee-for-service
FSS Federal Supply Schedule
FTE Full-time equivalent
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
HOPD Hospital outpatient department
HOP QDRP Hospital Outpatient Quality Data Reporting Program
ICD-9-CM International Classification of Diseases, Ninth Edition,
Clinical Modification
IDE Investigational device exemption
IOL Intraocular lens
IPPS [Hospital] Inpatient prospective payment system
IVIG Intravenous immune globulin
MAC Medicare Administrative Contractors
MedPAC Medicare Payment Advisory Commission
MDH Medicare-dependent, small rural hospital
MIEA-TRHCA Medicare Improvements and Extension Act under Division B,
Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432
MMA Medicare Prescription Drug, Improvement, and Modernization Act of
2003, Pub. L. 108-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NCD National Coverage Determination
NTIOL New technology intraocular lens
OCE Outpatient Code Editor
OMB Office of Management and Budget
OPD [Hospital] Outpatient department
OPPS [Hospital] Outpatient prospective payment system
PHP Partial hospitalization program
PM Program memorandum
PPI Producer Price Index
PPS Prospective payment system
PPV Pneumococcal pneumonia (virus)
PRA Paperwork Reduction Act
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RHQDAPU Reporting Hospital Quality Data for Annual Payment Update
[Program]
RHHI Regional home health intermediary
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
WAC Wholesale acquisition cost

In this document, we address two payment systems under the Medicare
program: the hospital outpatient prospective payment system (OPPS) and
the revised ambulatory surgical center (ASC) revised payment system.
The provisions relating to the OPPS are included in sections I. through
XV., XVII., and XIX. through XXII. of this proposed rule and in Addenda
A, B, C (Addendum C is available on the Internet only; see section XIX.
of this proposed rule), D1, D2, E, L, and M to this proposed rule. The
provisions related to the revised ASC payment system are included in
sections XVI., XVII., and XIX. through XXII. of this proposed rule and
in Addenda AA, BB, DD1, and DD2 to this proposed rule.

Table of Contents

I. Background for the OPPS
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 of the APC Panel
2. Establishment of the APC Panel
3. APC Panel Meetings and Organizational Structure
E. Provisions of the Medicare Improvements and Extension Act
under Division B of Title I of the Tax Relief and Health Care Act of
2006

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F. Summary of the Major Contents of This Proposed Rule
1. Proposed Updates Affecting OPPS Payments
2. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
3. Proposed OPPS Payment for Devices
4. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals
5. Proposed Estimate of OPPS Transitional Pass-Through Spending
for Drugs, Biologicals, and Devices
6. Proposed OPPS Payment for Brachytherapy Sources
7. Proposed OPPS Coding and Payment for Drug Administration
Services
8. Proposed OPPS Hospital Coding and Payment for Visits
9. Proposed OPPS Payment for Blood and Blood Products
10. Proposed OPPS Payment for Observation Services
11. Proposed Procedures That Will Be Paid Only as Inpatient
Services
12. Proposed Nonrecurring Technical and Policy Changes
13. Proposed OPPS Payment Status and Comment Indicators
14. OPPS Policy and Payment Recommendations
15. Proposed Update of the Revised ASC Payment System
16. Proposed Quality Data for Annual Payment Updates
17. Proposed Changes Affecting Necessary Provider Critical
Access Hospitals (CAHs) and Hospital Conditions of Participation
(CoPs)
18. Regulatory Impact Analysis
II. Proposed Updates Affecting OPPS Payments
A. Proposed Recalibration of APC Relative Weights
1. Database Construction
a. Database Source and Methodology
b. Proposed Use of Single and Multiple Procedure Claims
(1) Proposed Use of Date of Service Stratification and a Bypass
List To Increase the Amount of Data Used To Determine Medians
(2) Exploration of Allocation of Packaged Costs to Separately
Paid Procedure Codes
c. Proposed Calculation of CCRs
2. Proposed Calculation of Median Costs
3. Proposed Calculation of OPPS Scaled Payment Weights
4. Proposed Changes to Packaged Services
a. Background
b. Addressing Growth in OPPS Volume and Spending
c. Proposed Packaging Approach
(1) Guidance Services
(2) Image Processing Services
(3) Intraoperative Services
(4) Imaging Supervision and Interpretation Services
(5) Diagnostic Radiopharmaceuticals
(6) Contrast Agents
(7) Observation Services
d. Proposed Development of Composite APCs
(1) Background
(2) Proposed Low Dose Rate (LDR) Prostate Brachytherapy
Composite APC
(a) Background
(b) Proposed Payment for LDR Prostate Brachytherapy
(3) Proposed Cardiac Electrophysiologic Evaluation and Ablation
Composite APC
(a) Background
(b) Proposed Payment for Cardiac Electrophysiologic Evaluation
and Ablation
e. Service-Specific Packaging Issues
B. Proposed Payment for Partial Hospitalization
1. Background
2. Proposed PHP APC Update
3. Proposed Separate Threshold for Outlier Payments to CMHCs
C. Proposed Conversion Factor Update
D. Proposed Wage Index Changes
E. Proposed Statewide Average Default CCRs
F. Proposed OPPS Payments to Certain Rural Hospitals
1. Hold Harmless Transitional Payment Changes Made by Pub. L.
109-171 (DRA)
2. Proposed Adjustment for Rural SCHs Implemented in CY 2006
Related to Pub. L. 108-173 (MMA)
G. Proposed Hospital Outpatient Outlier Payments
H. Calculation of the Proposed National Unadjusted Medicare
Payment
I. Proposed Beneficiary Copayments
1. Background
2. Proposed Copayment
3. Calculation of a Proposed Adjusted Copayment Amount for an
APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
A. Proposed Treatment of New HCPCS and CPT Codes
1. Proposed Treatment of New HCPCS Codes Included in the April
and July Quarterly OPPS Updates for CY 2007
2. Proposed Treatment of New Category I and III CPT Codes and
Level II HCPCS Codes
B. Proposed Changes--Variations Within APCs
1. Background
2. Application of the 2 Times Rule
3. Proposed Exceptions to the 2 Times Rule
C. New Technology APCs
1. Introduction
2. Proposed Movement of Procedures From New Technology APCs to
Clinical APCs
a. Positron Emission Tomography (PET)/Computed Tomography (CT)
Scans (New Technology APC 1511)
b. IVIG Preadministration-Related Services (New Technology APC
1502)
c. Other Services in New Technology APCs
D. Proposed APC-Specific Policies
1. Hyperbaric Oxygen Therapy (APC 0659)
2. Skin Repair Procedures (APCs 0024, 0025, 0027, and 0686)
3. Cardiac Computed Tomography and Computed Tomographic
Angiography (APCs 0282, 0376, 0377, and 0398)
4. Ultrasound Ablation of Uterine Fibroids With Magnetic
Resonance Guidance (MRgFUS) (APCs 0195 and 0202)
5. Single Allergy Tests (APC 0381)
6. Myocardial Positron Emission Tomography (PET) Scans (APC
0307)
7. Implantation of Cardioverter-Defibrillators (APCs 0107 and
0108)
8. Implantation of Spinal Neurostimulators (APC 0222)
9. Stereotactic Radiosurgery (SRS) Treatment Delivery Services
(APCs 0065, 0066, and 0067)
10. Blood Transfusion (APC 0110)
11. Screening Colonscopies and Screening Flexible
Sigmoidoscopies (APCs 0158 and 0159)
IV. Proposed OPPS Payment for Devices
A. Proposed Treatment of Device-Dependent APCs
1. Background
2. Proposed Payment
3. Proposed Payment When Devices Are Replaced With Partial
Credit to the Hospital
B. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
a. Background
b. Proposed Policy
2. Proposed Provisions for Reducing Transitional Pass-Through
Payments to Offset Costs Packaged Into APC Groups
a. Background
b. Proposed Policy
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
A. Proposed Transitional Pass-Through Payment for Additional
Costs of Drugs and Biologicals
1. Background
2. Drugs and Biologicals with Expiring Pass-Through Status in CY
2007
3. Drugs and Biologicals With Proposed Pass-Through Status in CY
2008
B. Proposed Payment for Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs and
Biologicals
3. Proposed Payment for Drugs and Biologicals Without Pass-
Through Status That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs
(1) Background
(2) Proposed Payment Policy
(3) Proposed Payment for Blood Clotting Factors
(4) Proposed Payment for Radiopharmaceuticals
(a) Background
(b) Proposed Payment for Diagnostic Radiopharmaceuticals
(c) Proposed Payment for Therapeutic Radiopharmaceuticals
b. Proposed Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital
Claims Data
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, Radiopharmaceuticals, and Devices
A. Total Allowed Pass-Through Spending
B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Brachytherapy Sources
A. Background
B. Proposed Payment for Brachytherapy Sources

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VIII. Proposed OPPS Drug Administration Coding and Payment
A. Background
B. Proposed Coding and Payment for Drug Administration Services
IX. Proposed Hospital Coding and Payments for Visits
A. Background
B. Proposed Policies for Hospital Outpatient Visits
1. Clinic Visits: New and Established Patient Visits and
Consultations
2. Emergency Department Visits
C. Proposed Visit Reporting Guidelines
1. Background
2. CY 2007 Work on Visit Guidelines
3. Proposed Visit Guidelines
X. Proposed OPPS Payment for Blood and Blood Products
A. Background
B. Proposed Payment for Blood and Blood Products
XI. Proposed OPPS Payment for Observation Services
XII. Proposed Procedures That Will Be Paid Only as Inpatient
Procedures
A. Background
B. Proposed Changes to the Inpatient List
XIII. Proposed Nonrecurring Technical and Policy Changes
A. Outpatient Hospital Services and Supplies Incident to a
Physician Service
B. Interrupted Procedures
C. Transitional Adjustments Hold Harmless Provisions
D. Reporting of Wound Care Services
E. Reporting of Cardiac Rehabilitation Services
F. Reporting of Bone Marrow and Stem Cell Processing Services
XIV. Proposed OPPS Payment Status and Comment Indicators
A. Proposed Payment Status Indicator Definitions
1. Proposed Payment Status Indicators to Designate Services That
Are Paid under the OPPS
2. Proposed Payment Status Indicators to Designate Services That
Are Paid Under a Payment System Other Than the OPPS
3. Proposed Payment Status Indicators to Designate Services That
Are Not Recognized under the OPPS But That May Be Recognized by
Other Institutional Providers
4. Proposed Payment Status Indicators to Designate Services That
Are Not Payable by Medicare
B. Proposed Comment Indicator Definitions
XV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
B. APC Panel Recommendations
XVI. Proposed Update of the Revised Ambulatory Surgical Center
Payment System
A. Legislative and Regulatory Authority for the ASC Payment
System
B. Rulemaking for the Revised ASC Payment System
C. Revisions to the ASC Payment System Effective January 1, 2008
1. Covered Surgical Procedures under the Revised ASC Payment
System
a. Definition of Surgical Procedure
b. Identification of Surgical Procedures Eligible for Payment
under the Revised ASC Payment System
c. Payment for Covered Surgical Procedures under the Revised ASC
Payment System
(1) General Policies
(2) Office-Based Procedures
(3) Device-Intensive Procedures
(4) Multiple and Interrupted Procedure Discounting
(5) Transition to Revised ASC Payment Rates
2. Covered Ancillary Services under the Revised ASC Payment
System
a. General Policies
b. Payment Policies for Specific Items and Services
(1) Radiology Services
(2) Brachytherapy Sources
(3) Drugs and Biologicals
(4) Implantable Devices with Pass-Through Status under the OPPS
(5) Corneal Tissue Acquisition
3. General Payment Policies
a. Geographic Adjustment
b. Beneficiary Coinsurance
D. Proposed Treatment of New HCPCS Codes
1. Treatment of New CY 2008 Category I and III CPT Codes and
Level II HCPCS Codes
2. Proposed Treatment of New Mid-Year Category III CPT Codes
3. Proposed Treatment of Level II HCPCS Codes Released on a
Quarterly Basis
E. Proposed Updates to Covered Surgical Procedures and Covered
Ancillary Services
1. Identification of Covered Surgical Procedures
a. General Policies
b. Proposed Changes in Designation of Covered Surgical
Procedures as Office-Based
c. Proposed Changes in Designation of Covered Surgical
Procedures as Device-Intensive
2. Proposed Changes in Identification of Covered Ancillary
Services
F. Proposed Payment for Covered Surgical Procedures and Covered
Ancillary Services
1. Proposed Payment for Covered Surgical Procedures
a. Proposed Update to Payment Rates
b. Payment Policies When Devices Are Replaced at No Cost or With
Credit
(1) Policy When Devices Are Replaced at No Cost or With Full
Credit
(2) Proposed Policy When Implantable Devices Are Replaced With
Partial Credit
2. Proposed Payment for Covered Ancillary Services
G. Physician Payment for Procedures and Services Provided in ASC
H. Proposed Changes to Definitions of ``Radiology and Certain
Other Imaging Services'' and ``Outpatient Prescription Drugs''
I. New Technology Intraocular Lenses
1. Background
2. Changes to the NTIOL Determination Process Finalized for CY
2008
3. NTIOL Application Process for CY 2008 Payment Adjustment
4. Classes of NTIOLS Approved for Payment Adjustment
5. Payment Adjustment
6. Proposed CY 2008 ASC Payment for Insertion of IOLs
J. Proposed ASC Payment and Comment Indicators
K. ASC Policy and Payment Recommendations
L. Proposed Calculation of the ASC Conversion Factor and ASC
Payment Rates
1. Overview
2. Budget Neutrality Requirement
3. Calculation of the ASC Payment Rates for CY 2008
4. Calculation of the ASC Payment Rates for CY 2009 and
FutureYears
XVII. Reporting Quality Data for Annual Payment Rate Updates
A. Background
1. Reporting Hospital Outpatient Quality Data for Annual Payment
Update
2. Reporting ASC Quality Data for Annual Payment Increase
B. Proposed Hospital Outpatient Measures
C. Other Proposed Hospital Outpatient Measures
D. Proposed Implementation of the HOP QDRP
E. Proposed Requirements for HOP Quality Data Reporting for CY
2009 and Subsequent Calendar Years
1. Administrative Requirements
2. Data Collection and Submission Requirements
3. HOP QDRP Validation Requirements
F. Publication of HOP QDRP Data Collected
G. Proposed Attestation Requirement for Future Payment Years
H. HOP QDRP Reconsiderations
I. Reporting of ASC Quality Data
XVIII. Proposed Changes Affecting Critical Access Hospitals (CAHs)
and Hospital Conditions of Participation (CoPs)
A. Proposed Changes Affecting CAHs
1. Background
2. Co-Location of Necessary Provider CAHs
3. Provider-Based Facilities of CAHs
4. Termination of Provider Agreement
5. Proposed Regulation Changes
B. Proposed Revisions to Hospital CoPs
1. Background
2. Provisions of the Proposed Regulations
a. Proposed Timeframes for Completion of the Medical History and
Physical Examination
b. Proposed Requirements for Preanesthesia and Postanesthesia
Evaluations
c. Proposed Technical Amendment to Nursing Services CoP
XIX. Files Available to the Public Via the Internet
A. Information in Addenda Related to the CY 2008 Hospital OPPS
B. Information in Addenda Related to the CY 2008 ASC Payment
System
XX. Collection of Information Requirements
XXI. Response to Comments
XXII. Regulatory Impact Analysis
A. Overall Impact
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Small Rural Hospitals

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4. Unfunded Mandates
5. Federalism
B. Effects of OPPS Changes in This Proposed Rule
1. Alternatives Considered
2. Limitation of Our Analysis
3. Estimated Impact of This Proposed Rule on Hospitals and CMHCs
4. Estimated Effect of This Proposed Rule on Beneficiaries
5. Conclusion
6. Accounting Statement
C. Effects of ASC Payment System Changes in This Proposed Rule
1. Alternatives Considered
2. Limitations on Our Analysis
3. Estimated Effects of This Proposed Rule on ASCs
4. Estimated Effects of This Proposed Rule on Beneficiaries
5. Conclusion
6. Accounting Statement
D. Effects of the Proposed Requirements for Reporting of Quality
Data for Hospital Outpatient Settings
E. Effects of the Proposed Policy on CAH Off-Campus and Co-
Location Requirements
F. Effects of Proposed Policy Revisions to the Hospital CoPs
G. Executive Order 12866

Regulation Text

Addenda

Addendum A--Proposed OPPS APCs for CY 2008
Addendum AA--Proposed ASC Covered Surgical Procedures for CY 2008
(Including Surgical Procedures for Which Payment is Packaged)
Addendum B--Proposed OPPS Payment By HCPCS Code for CY 2008
Addendum BB--Proposed ASC Covered Ancillary Services Integral to
Covered Surgical Procedures for CY 2008 (Including Ancillary
Services for Which Payment Is Packaged)
Addendum D1--Proposed OPPS Payment Status Indicators
Addendum D2--Proposed OPPS Comment Indicators
Addendum DD1--Proposed ASC Payment Indicators
Addendum DD2--Proposed ASC Comment Indicators
Addendum E--Proposed HCPCS Codes That Would Be Paid Only as
Inpatient Procedures for CY 2008
Addendum L--Proposed Out-Migration Adjustment
Addendum M--Proposed HCPCS Codes for Assignment to Composite APCs
for CY 2008

I. Background for the OPPS

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 (BBA) of 1997 (Pub. L. 105-33) added section
1833(t) to the Social Security Act (the Act) authorizing implementation
of a PPS for hospital outpatient services (OPPS).
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act
(BBRA) of 1999 (Pub. L. 106-113) made major changes in the hospital
OPPS. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act (BIPA) of 2000 (Pub. L. 106-554) made further changes in
the OPPS. Section 1833(t) of the Act was also amended by the Medicare
Prescription Drug, Improvement, and Modernization Act (MMA) of 2003
(Pub. L. 108-173). The Deficit Reduction Act (DRA) of 2005 (Pub. L.
109-171), enacted on February 8, 2006, made additional changes in the
OPPS. In addition, the Medicare Improvements and Extension Act under
Division B of Title I of the Tax Relief and Health Care Act (MIEA-
TRHCA) of 2006 (Pub. L. 109-432), enacted on December 20, 2006, made
further changes in the OPPS. A discussion of these provisions is
included in sections I.E., VII., and XVII. of this proposed rule.
The OPPS was first implemented for services furnished on or after
August 1, 2000. Implementing regulations for the OPPS are located at 42
CFR Part 419.
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment
classification (APC) group to which the service is assigned. We use the
Healthcare Common Procedure Coding System (HCPCS) codes (which include
certain Current Procedural Terminology (CPT) codes) and descriptors to
identify and group the services within each APC group. The OPPS
includes payment for most hospital outpatient services, except those
identified in section I.B. of this proposed rule. Section
1833(t)(1)(B)(ii) of the Act provides for Medicare payment under the
OPPS for hospital outpatient services designated by the Secretary
(which includes partial hospitalization services furnished by community
mental health centers (CMHCs)) and hospital outpatient services 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 added provisions 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.
The OPPS rate is an unadjusted national payment amount that
includes the Medicare payment and the beneficiary copayment. This rate
is divided into a labor-related amount and a nonlabor-related amount.
The labor-related amount is adjusted for area wage differences using
the hospital inpatient wage index value for the locality in which the
hospital or CMHC is located.
All services and items within an APC group are comparable
clinically and with respect to resource use (section 1833(t)(2)(B) of
the Act). In accordance with section 1833(t)(2) of the Act, subject to
certain exceptions, 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, which we refer to as
``transitional pass-through payments,'' for at least 2 but not more
than 3 years for certain drugs, biological agents, brachytherapy
devices used for the treatment of cancer, and categories of other
medical devices. For New Technology services that are not eligible for
transitional pass-through payments, and for which we lack sufficient
data to appropriately assign them to a clinical APC group, we have
established special APC groups based on costs, which we refer to as New
Technology APCs. These New Technology APCs are designated by cost bands
which allow us to provide appropriate and consistent payment for
designated new procedures that are not yet reflected in our claims
data. Similar to pass-through payments, an assignment to a New
Technology APC is temporary; that is, we retain a service within a New
Technology APC until we acquire sufficient data to assign it to a
clinically appropriate APC group.

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

[[Page 42633]]

1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical
and occupational therapy, and speech-language pathology services, for
which payment is made under a fee schedule. 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 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 (CLFS);
services for beneficiaries with end-stage renal disease (ESRD) that are
paid under the ESRD composite rate; and services and procedures that
require an inpatient stay that are paid under the hospital inpatient
prospective payment system (IPPS). We set forth the services that are
excluded from payment under the OPPS in Sec. 419.22 of the
regulations.
Under Sec. 419.20(b) 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, no less often than annually, and to revise the
groups, relative payment weights, and other adjustments that take into
account changes in medical practices, changes in technologies, and the
addition of new services, new cost data, and other relevant information
and factors.
Since initially implementing the OPPS, we have published final
rules in the Federal Register annually to implement statutory
requirements and changes arising from our continuing experience with
this system. We published in the Federal Register on November 24, 2006
the CY 2007 OPPS/ASC final rule with comment period (71 FR 67960). In
that final rule with comment period, we revised the OPPS to update the
payment weights and conversion factor for services payable under the CY
2007 OPPS on the basis of claims data from January 1, 2005, through
December 31, 2005, and to implement certain provisions of Pub. L. 108-
173 and Pub. L. 109-171. In addition, we responded to public comments
received on the provisions of the November 10, 2005 final rule with
comment period (70 FR 86516) pertaining to the APC assignment of HCPCS
codes identified in Addendum B of that rule with the new interim (NI)
comment indicator; and public comments received on the August 23, 2006
OPPS/ASC proposed rule for CY 2007 (71 FR 49506).

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, and redesignated by section 202(a)(2) of the BBRA, requires
that we consult with an outside panel of experts to review the clinical
integrity of the payment groups and their weights under the OPPS. The
Act further specifies that the panel will act in an advisory capacity.
The Advisory Panel on Ambulatory Payment Classification (APC) Groups
(the APC Panel), discussed under section I.D.2. of this proposed rule,
fulfills these requirements. The APC Panel is not restricted to using
data compiled by CMS, 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 signed the initial charter
establishing the APC Panel. This expert panel, which may be composed of
up to 15 representatives of providers subject to the OPPS (currently
employed full-time, not as consultants, in their respective areas of
expertise), reviews clinical data and advises CMS about the clinical
integrity of the APC groups and their weights. For purposes of this
Panel, consultants or independent contractors are not considered to be
full-time employees. The APC Panel is technical in nature, and is
governed by the provisions of the Federal Advisory Committee Act
(FACA). Since its initial chartering, the Secretary has renewed the APC
Panel's charter three times: on November 1, 2002; on November 1, 2004;
and effective November 21, 2006. The current charter specifies, among
other requirements, that the APC Panel continue to be technical in
nature; be governed by the provisions of the FACA; may convene up to
three meetings per year; has a Designated Federal Officer (DFO); and is
chaired by a Federal official designated by the Secretary.
The current APC Panel membership and other information pertaining
to the APC Panel, including its charter, Federal Register notices,
meeting dates, agenda topics, and meeting reports can be viewed on the
CMS Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage
.

3. APC Panel Meetings and Organizational Structure
The APC Panel first met on February 27, February 28, and March 1,
2001. Since the initial meeting, the APC Panel has held 11 subsequent
meetings, with the last meeting taking place on March 7 and 8, 2007.
Prior to each meeting, we publish a notice in the Federal Register to
announce the meeting, and when necessary to solicit and announce
nominations for the APC Panel's membership.
The APC Panel has established an operational structure that, in
part, includes the use of three subcommittees to facilitate its
required APC review process. The three current subcommittees are the
Data Subcommittee, the Observation and Visit Subcommittee, and the
Packaging Subcommittee. The Data Subcommittee is responsible for
studying the data issues confronting the APC Panel, and for
recommending options for resolving them. The Observation and Visit
Subcommittee reviews and makes recommendations to the APC Panel on all
technical issues pertaining to observation services and hospital
outpatient visits paid under the OPPS (for example, APC configurations
and APC payment weights). The Packaging Subcommittee studies and makes
recommendations on issues pertaining to services that are not
separately payable under the OPPS, but whose payments are bundled or
packaged into APC payments. Each of these subcommittees was established
by a majority vote from the full APC Panel during a scheduled APC Panel
meeting, and their continuation as subcommittees was approved at the
March 2007 APC Panel meeting. All subcommittee recommendations are
discussed and voted upon by the full APC Panel.
Discussions of the recommendations resulting from the APC Panel's
March

[[Page 42634]]

2007 meeting are included in the sections of this proposed rule that
are specific to each recommendation. For discussions of earlier APC
Panel meetings and recommendations, we reference previous hospital OPPS
final rules or the Web site mentioned earlier in this section.

E. Provisions of the Medicare Improvements and Extension Act Under
Division B of Title I of the Tax Relief and Health Care Act of 2006

The Medicare Improvements and Extension Act under Division B of
Title I of the Tax Relief and Health Care Act (MIEA-TRHCA) of 2006,
Pub. L. 109-432, enacted on December 20, 2006, included the following
provisions affecting the OPPS:
1. Section 107(a) of the MIEA-TRHCA amended section 1833(t)(16)(C)
of the Act to extend the period for payment of brachytherapy devices
based on the hospital's charges adjusted to cost for 1 additional year,
through December 31, 2007.
2. Section 107(b)(1) of the MIEA-TRHCA amended section
1833(t)(2)(H) of the Act by adding stranded and non-stranded devices
furnished on or after July 1, 2007, as additional classifications of
brachytherapy devices for which separate payment groups must be
established for payment under the OPPS. Section 107(b)(2) of the MIEA-
TRCHA provides that the Secretary may implement the section 107(b)(1)
amendment to section 1833(t)(2)(H) of the Act ``by program instruction
or otherwise.''
3. Section 109(a) of the MIEA-TRHCA added new paragraph (17) to
section 1833(t) of the Act which authorizes the Secretary, beginning in
2009 and each subsequent year, to reduce the OPPS full annual update by
2.0 percentage points if a hospital paid under the OPPS fails to submit
data as required by the Secretary in the form and manner specified on
selected measures of quality of care, including medication errors. In
accordance with this provision, the selected measures are those that
are appropriate for the measurement of quality of care furnished by
hospitals in the outpatient setting, that reflect consensus among
affected parties and, to the extent feasible and practicable, that
include measures set forth by one or more of the national consensus
entities, and that may be the same as those required for reporting by
hospitals paid under the IPPS. This provision specifies that a
reduction for 1 year cannot be taken into account when computing the
OPPS update for a subsequent year. In addition, this provision requires
the Secretary to establish a process for making the submitted data
available for public review.

F. Summary of the Major Contents of This Proposed Rule

In this proposed rule, we are setting forth proposed changes to the
Medicare hospital OPPS for CY 2008. These changes would be effective
for services furnished on or after January 1, 2008. We are also setting
forth proposed changes to the Medicare ASC payment system for CY 2008.
These changes would be effective for services furnished on or after
January 1, 2008. The following is a summary of the major changes that
we are proposing to make:
1. Proposed Updates Affecting OPPS Payments
In section II. of this proposed rule, we set forth--
The methodology used to recalibrate the proposed APC
relative payment weights.
The proposed payment for partial hospitalization services,
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.
The proposed retention of our current policy to use the
IPPS wage indices to adjust, for geographic wage differences, the
portion of the OPPS payment rate and the copayment standardized amount
attributable to labor-related cost.
The proposed update of statewide average default CCRs.
The proposed application of hold harmless transitional
outpatient payments (TOPs) for certain small rural hospitals.
The proposed payment adjustment for rural SCHs.
The proposed calculation of the hospital outpatient
outlier payment.
The calculation of the proposed national unadjusted
Medicare OPPS payment.
The proposed beneficiary copayments for OPPS services.
2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies
In section III. of this proposed rule, we discuss the proposed
additions of new procedure codes to the APCs; our proposal to establish
a number of new APCs; and our analyses of Medicare claims data and
certain recommendations of the APC Panel. We also discuss the
application of the 2 times rule and proposed exceptions to it; proposed
changes to specific APCs; and the proposed movement of procedures from
New Technology APCs to clinical APCs.
3. Proposed OPPS Payment for Devices
In section IV. of this proposed rule, we discuss proposed payment
for device-dependent APCs and the pass-through payment for specific
categories of devices.
4. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals
In section V. of this proposed rule, we discuss the proposed CY
2008 OPPS payment for drugs, biologicals, and radiopharmaceuticals,
including the proposed payment for drugs, biologicals, and
radiopharmaceuticals with and without pass-through status.
5. Proposed Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, and Devices
In section VI. of this proposed rule, we discuss the estimate of CY
2008 OPPS transitional pass-through spending for drugs, biologicals,
and devices.
6. Proposed OPPS Payment for Brachytherapy Sources
In section VII. of this proposed rule, we discuss our proposal
concerning coding and payment for brachytherapy sources.
7. Proposed OPPS Coding and Payment for Drug Administration Services
In section VIII. of this proposed rule, we set forth our proposed
policy concerning coding and payment for drug administration services.
8. Proposed OPPS Hospital Coding and Payments for Visits
In section IX. of this proposed rule, we set forth our proposed
changes to policies for the coding and reporting of clinic and
emergency department visits and critical care services on claims paid
under the OPPS.
9. Proposed OPPS Payment for Blood and Blood Products
In section X. of this proposed rule, we discuss our proposed
payment for blood and blood products.
10. Proposed OPPS Payment for Observation Services
In section XI. of this proposed rule, we discuss the proposed
payment policies for observation services furnished to patients on an
outpatient basis.
11. Proposed Procedures That Will Be Paid Only as Inpatient Services
In section XII. of this proposed rule, we discuss the procedures
that we are

[[Page 42635]]

proposing to remove from the inpatient list and assign to APCs.
12. Proposed Nonrecurring Technical and Policy Changes
In section XIII. of this proposed rule, we set forth our proposals
for nonrecurring technical and policy changes and clarifications
relating to outpatient hospital services and supplies incident to a
physician service; payment for interrupted procedures prior to and
after the administration of anesthesia; transitional adjustments to
payments for covered outpatient services furnished by small rural
hospitals and SCHs located in rural areas; and reporting requirements
for wound care services, cardiac rehabilitation services, and bone
marrow and stem cell processing services.
13. Proposed OPPS Payment Status and Comment Indicators
In section XIV. of this proposed rule, we discuss proposed changes
to the definitions of status indicators assigned to APCs and present
our proposed comment indicators for the OPPS/ASC final rule with
comment period.
14. OPPS Policy and Payment Recommendations
In section XV. of this proposed rule, we address recommendations
made by MedPAC and the APC Panel regarding the OPPS for CY 2008.
15. Proposed Update of the Revised ASC Payment System
In section XVI. of this proposed rule, we discuss the proposed
update of the revised ASC payment system payment rates for CY 2008. We
also discuss our proposed changes to our regulations Sec. 414.22
(b)(5)(i)(A) and (B) regarding physician payment for performing
noncovered ASC surgical procedures in ASCs. In addition, we are
proposing to revise the definitions of ``radiology and certain other
imaging services'' and ``outpatient prescription drugs'' when provided
integral to an ASC covered surgical procedure.
16. Reporting Quality Data for Annual Payment Rate Updates
In section XVII. of this proposed rule, we discuss the proposed
quality measures for reporting hospital outpatient quality data for CY
2009 and subsequent years and set forth the requirements for data
collection and submission for the annual payment update. We also
briefly discuss the legislative provisions of the MIEA-TRHCA that give
the Secretary authority to develop quality measures for reporting by
ASCs.
17. Proposed Changes Affecting Necessary Provider Critical Access
Hospitals (CAHs) and Hospital Conditions of Participation (CoPs)
In section XVIII. of this proposed rule, we discuss our proposed
changes affecting necessary provider designations for CAHs that are
being recertified when the CAH enters into a new co-location
arrangement with another hospital or CAH or when the CAH creates or
acquires an off-campus location. We also discuss our proposed changes
relating to several hospital CoPs to require the completion of physical
examinations and medical histories, and documentation in the medical
records, for patients after admission and prior to surgery or a
procedure requiring anesthesia services and for postanesthesia
evaluations of patients before discharge or transfer from the
postanesthesia recovery area.
18. Regulatory Impact Analysis
In section XXII. of this proposed rule, we set forth an analysis of
the impact the proposed changes will have on affected entities and
beneficiaries.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Weights

(If you choose to comment on issues in this section, please include
the caption ``APC Relative Weights'' at the beginning of your comment.)
1. Database Construction
a. Database Source and Methodology
Section 1833(t)(9)(A) of the Act requires that the Secretary review
and revise the relative payment weights for APCs at least annually. In
the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we
explained in detail how we calculated the relative payment weights that
were implemented on August 1, 2000, for each APC group. Except for some
reweighting due to a small number of APC changes, these relative
payment weights continued to be in effect for CY 2001. This policy is
discussed in the November 13, 2000 interim final rule (65 FR 67824
through 67827).
We are proposing to use the same basic methodology that we
described in the April 7, 2000 OPPS final rule with comment period to
recalibrate the APC relative payment weights for services furnished on
or after January 1, 2008, and before January 1, 2009. That is, we are
proposing to recalibrate the relative payment weights for each APC
based on claims and cost report data for outpatient services. We are
proposing to use the most recent available data to construct the
database for calculating APC group weights. For the purpose of
recalibrating the proposed APC relative payment weights for CY 2008, we
used approximately 131 million final action claims for hospital OPD
services furnished on or after January 1, 2006, and before January 1,
2007. (For exact counts of claims used, we refer readers to the claims
accounting narrative under supporting documentation for this proposed
rule on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/
). Of the 131 million final action claims

for services provided in hospital outpatient settings, approximately
101 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 101 million claims,
approximately 46 million were not for services paid under the OPPS or
were excluded as not appropriate for use (for example, erroneous cost-
to-charge ratios (CCRs) or no HCPCS codes reported on the claim). We
were able to use approximately 50 million whole claims of the
approximately 54 million claims that remained to set the OPPS APC
relative weights we are proposing for the CY 2008 OPPS. From the 50
million whole claims, we created approximately 88 million single
records, of which approximately 58 million were ``pseudo'' single
claims (created from multiple procedure claims using the process we
discuss in this section). Approximately 822,000 claims trimmed out on
cost or units in excess of 3 standard deviations from the
geometric mean, yielding approximately 87 million single bills used for
median setting. Ultimately, we were able to use for proposed CY 2008
ratesetting some portion of 92 percent of the CY 2006 claims containing
services payable under the OPPS.
The proposed APC relative weights and payments for CY 2008 in
Addenda A and B to this proposed rule were calculated using claims from
this period that were processed before January 1, 2007, 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 continue to believe that it is
appropriate to use the most current full calendar year claims data and
the most

[[Page 42636]]

recently submitted cost reports to calculate the median costs which we
are proposing to convert to relative payment weights for purposes of
calculating the CY 2008 payment rates.
b. Proposed Use of Single and Multiple Procedure Claims
For CY 2008, in general, we are proposing to continue to use single
procedure claims to set the medians on which the APC relative payment
weights would be based, with some exceptions as discussed below. 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. 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 if a service is
frequently performed in combination with others, the individual
services are more complex and more resource-intensive than if they were
performed alone. Stakeholders have suggested that including data from
multiple procedure claims could increase the median cost estimates for
the individual services. They believe that depending upon single
procedure claims alone results in basing relative payment weights on
the least costly services that are not representative of the typical
services, thereby introducing downward bias to the medians on which the
weights are based.
We generally use single procedure claims to set the median costs
for APCs because we believe that it is important that the OPPS relative
weights on which payment rates are based be appropriate when one and
only one procedure is furnished and 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. 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 claims for multiple procedures. We engaged in several efforts
this year to improve our use of multiple procedure claims for
ratesetting. As we have for several years, we continue to use date of
service stratification and a list of codes to be bypassed to convert
multiple procedure claims to ``pseudo'' single procedure claims. We
also continued our internal efforts to better understand the patterns
of services and costs from multiple bills toward the goal of using more
multiple bill information by assessing the amount of packaging in the
multiple bills and, specifically, by exploring the amount of packaging
for drug administration services in the single and multiple bill
claims. Moreover, in many cases, the proposed expansion of packaging
also enables the use of more claims data by enabling us to treat claims
with multiple procedure codes as single claims. We refer readers to
section II.A.4. of this proposed rule for a full discussion of this
proposal for CY 2008.
(1) Proposed Use of Date of Service Stratification and a Bypass List To
Increase the Amount of Data Used To Determine Medians
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 refer to
these newly created single procedure claims as ``pseudo'' single claims
because they were submitted by providers as multiple procedure claims.
The history of our use of a bypass list to generate ``pseudo'' single
claims is well documented, most recently in the CY 2007 OPPS/ASC final
rule with comment period (71 FR 67969 through 67970).
The date of service stratification and bypass list process we used
for the CY 2007 OPPS (combined with the packaging changes we are
proposing in section II.A.4. of this proposed rule) resulted in our
being able to use some part of approximately 92 percent of the total
claims that are eligible for use in the OPPS ratesetting and modeling
for this proposed rule. This process enabled us to create, for CY 2008
approximately 58 million ``pseudo'' singles and approximately 30
million ``natural'' single bills. For this proposed rule, ``pseudo''
single procedure bills represented 66 percent of all single bills used
to calculate median costs. This compares favorably to the CY 2007 OPPS
final rule data in which ``pseudo'' single bills represented 68 percent
of all single bills used to calculate the median costs on which the CY
2007 OPPS payment rates were based. We believe that the reduction in
the percent of ``pseudo'' single bills and the corresponding increase
in the proportion of ``natural'' single bills occurred largely because
of our proposal to increase packaging as discussed in section II.A.4.
of this proposed rule. In many cases, the packaging proposal for CY
2008 enabled us to use claims that would otherwise have been considered
to be multiple procedure claims and, absent the proposal for additional
packaging, could have been used for ratesetting only if we had been
able to create ``pseudo'' single claims from them.
For CY 2008, we are proposing to bypass 425 HCPCS codes that are
identified in Table 1 of this proposed rule. We are proposing to
continue the use of the codes on the CY 2007 OPPS bypass list but to
remove codes we are proposing to package for CY 2008. We also are
proposing to remove codes that were on the CY 2007 bypass list that
ceased to meet the empirical criteria under the proposed packaging
changes when clinical review confirmed that their removal would be
appropriate in the context of the full proposal for the CY 2008 OPPS.
Since the inception of the bypass list, we have calculated the percent
of natural single bills that contained packaging for each code and the
amount of packaging in each ``natural'' single bill for each code. We
retained the codes on the previous year's bypass list and used the
update year's data to determine whether it would be appropriate to add
additional codes to the previous year's bypass list. The entire list
(including the codes that remained on the bypass list from prior years)
was open to public comment. For this CY 2008 proposed rule, we
explicitly reviewed all ``natural'' single bills against the empirical
criteria for all codes on the CY 2007 bypass list because of the
proposal for greater packaging discussed in section II.A.4. of this
proposed rule, as this effort increased the packaging associated with
some codes. We removed 106 HCPCS codes from the CY 2007 bypass list for
the CY 2008 proposal. We note also that many of the codes we are
proposing to newly package for CY 2008 were on the bypass list used for
setting the OPPS payment rates for CY 2007 and are no longer proposed
for bypass because we are proposing to package them, as discussed in
more detail below. We also are proposing to add to the bypass list
HCPCS codes that, using the proposed rule data, meet the same
previously established empirical criteria for the bypass list that are
reviewed below or which our clinicians believe would have little
associated packaging if the services were correctly coded.
The CY 2008 packaging proposal minimally reduced the percentage of
total claims that we were able to use, in whole or in part, from 93
percent for CY 2007 to 92 percent for this proposed rule. The proposed
packaging approach increased the number of ``natural'' single bills, in
spite of reducing the

[[Page 42637]]

universe of codes requiring single bills for ratesetting, but reduced
the number of ``pseudo'' single bills. More ``natural'' single
procedure bills can be created by the packaging of codes that always
appear with another procedure because these dependent services are
supportive of and ancillary to the primary independent procedures for
which payment is being made. A claim containing two independent
procedure codes on the same date of service and not on the bypass list
previously could not be used for ratesetting, but packaging the cost of
one of the codes on the claim frees the claim to be used to calculate
the median cost of the procedure that is not packaged. On the other
hand, our proposed packaging approach reduced the number of codes
eligible for the bypass list because of the limitation on packaging set
by our previously established empirical criteria. A smaller bypass list
and the presence of greater packaging on claims reduced the final
number of ``pseudo'' single claims. In prior years, roughly 68 percent
of single bills were ``pseudo'' single bills, but based on the CY 2008
proposed rule data, 66 percent of single bills were ``pseudo'' singles.
Moreover, the number of ``natural'' single bills and ``pseudo'' single
bills are reduced by the volume of services that we are proposing to
package. Hence, our CY 2008 proposal to package payment for some HCPCS
codes with relatively high frequencies would eliminate for ratesetting
the number of available ``natural'' and ``pseudo'' single bills
attributable to the codes that we are proposing to package.
As in prior years, we are proposing to use the following empirical
criteria to determine the additional codes to add to the CY 2007 bypass
list to create the CY 2008 bypass list. We assume 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 are 100 or more single claims for the code. This
number of single claims ensures that observed outcomes are sufficiently
representative of packaging that might occur in the multiple claims.
Five percent or fewer of the single claims for the code
have 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 claims
is 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.
In addition, we are proposing to add to the bypass list codes that
our clinicians believe have minimal associated packaging based on their
clinical assessment of the full CY 2008 OPPS proposal. We note that
this list contains bypass codes that are appropriate to claims for
services in CY 2006 and, therefore, includes codes that have been
deleted for CY 2007. Moreover, there are codes on the bypass list that
are new for CY 2007 and which are appropriate additions to the bypass
list in preparation for use of the CY 2007 claims for creation of the
CY 2009 OPPS.
In order to keep the established empirical criteria for the bypass
list constant, we are seeking public comment on whether we should
adjust the $50 packaging cost criterion for inflation each year and, if
so, recommendations for the source of the adjustment. Adding an
inflation adjustment factor would ensure that the same amount of
packaging associated with candidate codes for the bypass list is
reviewed each year relative to nominal costs.

Table 1.--Proposed CY 2008 Bypass Codes for Creating ``Pseudo'' Single
Claims for Calculating Median Costs
------------------------------------------------------------------------
HCPCS code Short descriptor
------------------------------------------------------------------------
11056............................ Trim skin lesions, 2 to 4.
11057............................ Trim skin lesions, over 4.
11300............................ Shave skin lesion.
11301............................ Shave skin lesion.
11719............................ Trim nail(s).
11720............................ Debride nail, 1-5.
11721............................ Debride nail, 6 or more.
11954............................ Therapy for contour defects.
17003............................ Destruct premalg les, 2-14.
31231............................ Nasal endoscopy, dx.
31579............................ Diagnostic laryngoscopy.
51798............................ Us urine capacity measure.
54240............................ Penis study.
56820............................ Exam of vulva w/scope.
67820............................ Revise eyelashes.
69210............................ Remove impacted ear wax.
69220............................ Clean out mastoid cavity.
70030............................ X-ray eye for foreign body.
70100............................ X-ray exam of jaw.
70110............................ X-ray exam of jaw.
70120............................ X-ray exam of mastoids.
70130............................ X-ray exam of mastoids.
70140............................ X-ray exam of facial bones.
70150............................ X-ray exam of facial bones.
70160............................ X-ray exam of nasal bones.
70200............................ X-ray exam of eye sockets.
70210............................ X-ray exam of sinuses.
70220............................ X-ray exam of sinuses.
70250............................ X-ray exam of skull.
70260............................ X-ray exam of skull.
70328............................ X-ray exam of jaw joint.
70330............................ X-ray exam of jaw joints.
70336............................ Magnetic image, jaw joint.
70355............................ Panoramic x-ray of jaws.
70360............................ X-ray exam of neck.
70370............................ Throat x-ray & fluoroscopy.
70371............................ Speech evaluation, complex.
70450............................ Ct head/brain w/o dye.
70480............................ Ct orbit/ear/fossa w/o dye.
70486............................ Ct maxillofacial w/o dye.
70490............................ Ct soft tissue neck w/o dye.
70544............................ Mr angiography head w/o dye.
70551............................ Mri brain w/o dye.
71010............................ Chest x-ray.
71015............................ Chest x-ray.
71020............................ Chest x-ray.
71021............................ Chest x-ray.
71022............................ Chest x-ray.
71023............................ Chest x-ray and fluoroscopy.
71030............................ Chest x-ray.
71034............................ Chest x-ray and fluoroscopy.
71035............................ Chest x-ray.
71100............................ X-ray exam of ribs.
71101............................ X-ray exam of ribs/chest.
71110............................ X-ray exam of ribs.
71111............................ X-ray exam of ribs/chest.
71120............................ X-ray exam of breastbone.
71130............................ X-ray exam of breastbone.
71250............................ Ct thorax w/o dye.
72010............................ X-ray exam of spine.
72020............................ X-ray exam of spine.
72040............................ X-ray exam of neck spine.
72050............................ X-ray exam of neck spine.
72052............................ X-ray exam of neck spine.
72069............................ X-ray exam of trunk spine.
72070............................ X-ray exam of thoracic spine.
72072............................ X-ray exam of thoracic spine.
72074............................ X-ray exam of thoracic spine.
72080............................ X-ray exam of trunk spine.
72090............................ X-ray exam of trunk spine.
72100............................ X-ray exam of lower spine.
72110............................ X-ray exam of lower spine.
72114............................ X-ray exam of lower spine.
72120............................ X-ray exam of lower spine.
72125............................ Ct neck spine w/o dye.
72128............................ Ct chest spine w/o dye.
72131............................ Ct lumbar spine w/o dye.
72141............................ Mri neck spine w/o dye.
72146............................ Mri chest spine w/o dye.
72148............................ Mri lumbar spine w/o dye.
72170............................ X-ray exam of pelvis.
72190............................ X-ray exam of pelvis.
72192............................ Ct pelvis w/o dye.
72202............................ X-ray exam sacroiliac joints.
72220............................ X-ray exam of tailbone.
73000............................ X-ray exam of collar bone.
73010............................ X-ray exam of shoulder blade.
73020............................ X-ray exam of shoulder.
73030............................ X-ray exam of shoulder.
73050............................ X-ray exam of shoulders.
73060................ X-ray exam of humerus.
73070................ X-ray exam of elbow.
73080................ X-ray exam of elbow.
73090................ X-ray exam of forearm.
73100................ X-ray exam of wrist.
73110................ X-ray exam of wrist.
73120................ X-ray exam of hand.

[[Page 42638]]

73130................ X-ray exam of hand.
73140................ X-ray exam of finger(s).
73200................ Ct upper extremity w/o dye.
73218................ Mri upper extremity w/o dye.
73221................ Mri joint upr extrem w/o dye.
73510................ X-ray exam of hip.
73520................ X-ray exam of hips.
73540................ X-ray exam of pelvis & hips.
73550................ X-ray exam of thigh.
73560................ X-ray exam of knee, 1 or 2.
73562................ X-ray exam of knee, 3.
73564................ X-ray exam, knee, 4 or more.
73565................ X-ray exam of knees.
73590................ X-ray exam of lower leg.
73600................ X-ray exam of ankle.
73610................ X-ray exam of ankle.
73620................ X-ray exam of foot.
73630................ X-ray exam of foot.
73650................ X-ray exam of heel.
73660................ X-ray exam of toe(s).
73700................ Ct lower extremity w/o dye.
73718................ Mri lower extremity w/o dye.
73721................ Mri jnt of lwr extre w/o dye.
74000................ X-ray exam of abdomen.
74010................ X-ray exam of abdomen.
74020................ X-ray exam of abdomen.
74022................ X-ray exam series, abdomen.
74150................ Ct abdomen w/o dye.
74210................ Contrst x-ray exam of throat.
74220................ Contrast x-ray, esophagus.
74230................ Cine/vid x-ray, throat/esoph.
74246................ Contrst x-ray uppr gi tract.
74247................ Contrst x-ray uppr gi tract.
74249................ Contrst x-ray uppr gi tract.
76020................ X-rays for bone age.
76040................ X-rays, bone evaluation.
76061................ X-rays, bone survey.
76062................ X-rays, bone survey.
76065................ X-rays, bone evaluation.
76066................ Joint survey, single view.
76070................ Ct bone density, axial.
76071................ Ct bone density, peripheral.
76075................ Dxa bone density, axial.
76076................ Dxa bone density/peripheral
76077................ Dxa bone density/v-fracture.
76078................ Radiographic absorptiometry.
76100................ X-ray exam of body section.
76400................ Magnetic image, bone marrow.
76510................ Ophth us, b & quant a.
76511................ Ophth us, quant a only.
76512................ Ophth us, b w/non-quant a.
76513................ Echo exam of eye, water bath.
76514................ Echo exam of eye, thickness.
76516................ Echo exam of eye.
76519................ Echo exam of eye.
76536................ Us exam of head and neck.
76645................ Us exam, breast(s).
76700................ Us exam, abdom, complete.
76705................ Echo exam of abdomen.
76770................ Us exam abdo back wall, comp.
76775................ Us exam abdo back wall, lim.
76778................ Us exam kidney transplant.
76801................ Ob us < 14 wks, single fetus.
76805................ Ob us >/= 14 wks, sngl fetus.
76811................ Ob us, detailed, sngl fetus.
76816................ Ob us, follow-up, per fetus.
76817................ Transvaginal us, obstetric.
76830................ Transvaginal us, non-ob.
76856................ Us exam, pelvic, complete.
76857................ Us exam, pelvic, limited.
76870................ Us exam, scrotum.
76880................ Us exam, extremity.
76970................ Ultrasound exam follow-up.
76977................ Us bone density measure.
76999................ Echo examination procedure.
77300................ Radiation therapy dose plan.
77301................ Radiotherapy dose plan, imrt.
77315................ Teletx isodose plan complex.
77326................ Brachytx isodose calc simp.
77327................ Brachytx isodose calc interm.
77328................ Brachytx isodose plan compl.
77331................ Special radiation dosimetry.
77336................ Radiation physics consult.
77370................ Radiation physics consult.
77401................ Radiation treatment delivery.
77402................ Radiation treatment delivery.
77403................ Radiation treatment delivery.
77404................ Radiation treatment delivery.
77407................ Radiation treatment delivery.
77408................ Radiation treatment delivery.
77409................ Radiation treatment delivery.
77411................ Radiation treatment delivery.
77412................ Radiation treatment delivery.
77413................ Radiation treatment delivery.
77414................ Radiation treatment delivery.
77416................ Radiation treatment delivery.
77418................ Radiation tx delivery, imrt.
77470................ Special radiation treatment.
77520................ Proton trmt, simple w/o comp.
77523................ Proton trmt, intermediate.
80500.............. Lab pathology consultation.
80502.............. Lab pathology consultation.
85097.............. Bone marrow interpretation.
86510.............. Histoplasmosis skin test.
86850.............. RBC antibody screen.
86870.............. RBC antibody identification.
86880.............. Coombs test, direct.
86885.............. Coombs test, indirect, qual.
86886.............. Coombs test, indirect, titer.
86890.............. Autologous blood process.
86900.............. Blood typing, ABO.
86901.............. Blood typing, Rh (D).
86903.............. Blood typing, antigen screen.
86904.............. Blood typing, patient serum.
86905.............. Blood typing, RBC antigens.
86906.............. Blood typing, Rh phenotype.
86930.............. Frozen blood prep.
86970.............. RBC pretreatment.
88104.............. Cytopath fl nongyn, smears.
88106.............. Cytopath fl nongyn, filter.
88107.............. Cytopath fl nongyn, sm/fltr.
88108.............. Cytopath, concentrate tech.
88112.............. Cytopath, cell enhance tech.
88160.............. Cytopath smear, other source.
88161.............. Cytopath smear, other source.
88162.............. Cytopath smear, other source.
88172.............. Cytopathology eval of fna.
88173.............. Cytopath eval, fna, report.
88182.............. Cell marker study.
88184.............. Flowcytometry/tc, 1 marker.
88185.............. Flowcytometry/tc, add-on.
88300.............. Surgical path, gross.
88302.............. Tissue exam by pathologist.
88304.............. Tissue exam by pathologist.
88305.............. Tissue exam by pathologist.
88307.............. Tissue exam by pathologist.
88311.............. Decalcify tissue.
88312.............. Special stains.
88313.............. Special stains.
88321.............. Microslide consultation.
88323.............. Microslide consultation.
88325.............. Comprehensive review of data.
88331.............. Path consult intraop, 1 bloc.
88342.............. Immunohistochemistry.
88346.............. Immunofluorescent study.
88347.............. Immunofluorescent study.
88348.............. Electron microscopy.
88358.............. Analysis, tumor.
88360.............. Tumor immunohistochem/manual.
88365.............. Insitu hybridization (fish).
88368.............. Insitu hybridization, manual.
88399.............. Surgical pathology procedure.
89049.............. Chct for mal hyperthermia.
89230.............. Collect sweat for test.
89240.............. Pathology lab procedure.
90761............ Hydrate iv infusion, add-on.
90766............ Ther/proph/dg iv inf, add-on.
90801............ Psy dx interview.
90802............ Intac psy dx interview.
90804............ Psytx, office, 20-30 min.
90805............ Psytx, off, 20-30 min w/e&m.
90806............ Psytx, off, 45-50 min.
90807............ Psytx, off, 45-50 min w/e&m.
90808............ Psytx, office, 75-80 min.
90809............ Psytx, off, 75-80, w/e&m.
90810............ Intac psytx, off, 20-30 min.
90812............ Intac psytx, off, 45-50 min.
90816............ Psytx, hosp, 20-30 min.
90818............ Psytx, hosp, 45-50 min.
90826............ Intac psytx, hosp, 45-50 min.
90845............ Psychoanalysis.
90846............ Family psytx w/o patient.
90847............ Family psytx w/patient.
90853............ Group psychotherapy.
90857............ Intac group psytx.
90862............ Medication management.
92002............ Eye exam, new patient.
92004............ Eye exam, new patient.
92012............ Eye exam established pat.
92014............ Eye exam & treatment.
92020............ Special eye evaluation.
92081............ Visual field examination(s).
92082............ Visual field examination(s).
92083............ Visual field examination(s).
92135............ Opthalmic dx imaging.
92136............ Ophthalmic biometry.
92225............ Special eye exam, initial.
92226............ Special eye exam, subsequent.
92230............ Eye exam with photos.
92240............ Icg angiography.
92250............ Eye exam with photos.
92275............ Electroretinography.
92285............ Eye photography.
92286............ Internal eye photography.
92520............ Laryngeal function studies.
92541............ Spontaneous nystagmus test.
92546............ Sinusoidal rotational test.
92548............ Posturography.
92552............ Pure tone audiometry, air.
92553............ Audiometry, air & bone.
92555............ Speech threshold audiometry.

[[Page 42639]]

92556............ Speech audiometry, complete.
92557............ Comprehensive hearing test.
92567............ Tympanometry.
92582............ Conditioning play audiometry.
92585............ Auditor evoke potent, compre.
92603............ Cochlear implt f/up exam 7 >.
92604............ Reprogram cochlear implt 7 >.
92626............ Eval aud rehab status.
93005............ Electrocardiogram, tracing.
93225............ ECG monitor/record, 24 hrs.
93226............ ECG monitor/report, 24 hrs.
93231............................ Ecg monitor/record, 24 hrs.
93232............................ ECG monitor/report, 24 hrs.
93236............................ ECG monitor/report, 24 hrs.
93270............................ ECG recording.
93271............................ Ecg/monitoring and analysis.
93278............................ ECG/signal-averaged.
93727............................ Analyze ilr system.
93731............................ Analyze pacemaker system.
93732............................ Analyze pacemaker system.
93733............................ Telephone analy, pacemaker.
93734............................ Analyze pacemaker system.
93735............................ Analyze pacemaker system.
93736............................ Telephonic analy, pacemaker.
93741............................ Analyze ht pace device sngl.
93742............................ Analyze ht pace device sngl.
93743............................ Analyze ht pace device dual.
93744............................ Analyze ht pace device dual.
93786............................ Ambulatory BP recording.
93788............................ Ambulatory BP analysis.
93797............................ Cardiac rehab.
93798............................ Cardiac rehab/monitor.
93875............................ Extracranial study.
93880............................ Extracranial study.
93882............................ Extracranial study.
93886............................ Intracranial study.
93888............................ Intracranial study.
93922............................ Extremity study.
93923............................ Extremity study.
93924............................ Extremity study.
93925............................ Lower extremity study.
93926............................ Lower extremity study.
93930............................ Upper extremity study.
93931............................ Upper extremity study.
93965............................ Extremity study.
93970............................ Extremity study.
93971............................ Extremity study.
93975............................ Vascular study.
93976............................ Vascular study.
93978............................ Vascular study.
93979............................ Vascular study.
93990............................ Doppler flow testing.
94015............................ Patient recorded spirometry.
94690............................ Exhaled air analysis.
95115............................ Immunotherapy, one injection.
95117............................ Immunotherapy injections.
95165............................ Antigen therapy services.
95805............................ Multiple sleep latency test.
95806............................ Sleep study, unattended.
95807............................ Sleep study, attended.
95808............................ Polysomnography, 1-3.
95812............................ Eeg, 41-60 minutes.
95813............................ Eeg, over 1 hour.
95816............................ Eeg, awake and drowsy.
95819............................ Eeg, awake and asleep.
95822............................ Eeg, coma or sleep only.
95869............................ Muscle test, thor paraspinal.
95900............................ Motor nerve conduction test.
95921............................ Autonomic nerv function test.
95925............................ Somatosensory testing.
95930............................ Visual evoked potential test.
95950............................ Ambulatory eeg monitoring.
95953............................ EEG monitoring/computer.
95970............................ Analyze neurostim, no prog.
95972............................ Analyze neurostim, complex.
95974............................ Cranial neurostim, complex.
95978............................ Analyze neurostim brain/1h.
96000............................ Motion analysis, video/3d.
96101............................ Psycho testing by psych/phys.
96111............................ Developmental test, extend.
96116............................ Neurobehavioral status exam.
96118............................ Neuropsych tst by psych/phys.
96119............................ Neuropsych testing by tec.
96150............................ Assess hlth/behave, init.
96151............................ Assess hlth/behave, subseq.
96152............................ Intervene hlth/behave, indiv.
96153............................ Intervene hlth/behave, group.
96415............................ Chemo, iv infusion, addl hr.
96423............................ Chemo ia infuse each addl hr.
96900............................ Ultraviolet light therapy.
96910............................ Photochemotherapy with UV-B.
96912............................ Photochemotherapy with UV-A.
96913............................ Photochemotherapy, UV-A or B.
96920............................ Laser tx, skin < 250 sq cm.
98925............................ Osteopathic manipulation.
98926............................ Osteopathic manipulation.
98927............................ Osteopathic manipulation.
98940............................ Chiropractic manipulation.
98941............................ Chiropractic manipulation.
98942............................ Chiropractic manipulation.
99204............................ Office/outpatient visit, new.
99212............................ Office/outpatient visit, est.
99213............................ Office/outpatient visit, est.
99214............................ Office/outpatient visit, est.
99241............................ Office consultation.
99242............................ Office consultation.
99243............................ Office consultation.
99244............................ Office consultation.
99245............................ Office consultation.
0144T............................ CT heart wo dye; qual calc.
C8951............................ IV inf, tx/dx, each addl hr.
C8955............................ Chemotx adm, IV inf, addl hr.
G0008............................ Admin influenza virus vac.
G0101............................ CA screen;pelvic/breast exam.
G0127............................ Trim nail(s).
G0130............................ Single energy x-ray study.
G0166............................ Extrnl counterpulse, per tx.
G0175............................ OPPS Service,sched team conf.
G0332............................ Preadmin IV immunoglobulin.
G0340............................ Robt lin-radsurg fractx 2-5.
G0344............................ Initial preventive exam.
G0365............................ Vessel mapping hemo access.
G0367............................ EKG tracing for initial prev.
G0376............................ Smoke/tobacco counseling >10.
M0064............................ Visit for drug monitoring.
Q0091............................ Obtaining screen pap smear.
------------------------------------------------------------------------

(2) Exploration of Allocation of Packaged Costs to Separately Paid
Procedure Codes
During its August 23-24, 2006 meeting, the APC Panel recommended
that CMS provide claims analysis of the contributions of packaged costs
(including packaged revenue code charges and charges for packaged HCPCS
codes) to the median cost of each drug administration service. (We
refer readers to Recommendation 28 in the August 23-24, 2006
meeting recommendation summary on the CMS Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
) In

our continued effort to better understand the multiple claims in order
to extract single bill information from them, we examined the extent to
which the packaging in multiple procedure claims differs from the
packaging in the single procedure claims on which we base the median
costs both in general and more specifically for drug administration
services. We performed this analysis using the claims data on which we
based the CY 2007 OPPS/ASC final rule with comment period. We examined
the amount of packaging in multiple procedure versus single procedure
claims in general and in claims for drug administration services in
particular. We conducted this analysis without taking into account the
proposed packaging approach presented in this proposed rule. However,
we do not expect the services newly proposed for packaged payment to
commonly appear with a drug administration service. Therefore, we
believe that the analysis conducted on the CY 2007 final rule with
comment period data is sufficient to inform our development of this
proposed rule.
In general, we do not believe that the proportionate amount of
packaged costs in the multiple bills relative to the number of primary
services is greater than that in the single bills. The costs in uncoded
revenue codes and HCPCS codes with a packaged status indicator account
for 22 percent of observed costs in the universe of all CY 2005 claims
that we used to model the CY 2007 OPPS (including both the single and
multiple procedure bills). Similarly, the costs in uncoded revenue
codes and HCPCS codes with a packaged status indicator account for 18
percent of the total cost in the subset of CY 2005 single bills that we
used to calculate the median costs on which the relative weights are
based.
However, the bypass methodology creates a ``pseudo'' single bill
for all claims for services or items on the bypass list, and these
``pseudo'' single bills have no associated packaging, by definition of
the application of the bypass list. Excluding the total cost associated
with bypass codes, 28 percent of observed costs in the single

[[Page 42640]]

bills are attributable to packaged services, and 29 percent of observed
costs across all claims are attributable to packaged services.
Therefore, we conclude that, in general, the extent of packaging in all
bills is similar to the amount of packaging in the single procedure
bills we use to set median costs for most APCs.
We recognize that aggregate numbers do not address the packaging
associated with single and multiple procedure claims for specific
services. We have received comments stating that the amount of
packaging in the single bills for drug administration services is not
representative of the typical packaged costs of these drug
administration services, which are usually performed in combination
with one another, because the single bills represent less complex and
less resource-intensive services than the usual cases.
We published a study in the CY 2007 OPPS/ASC final rule with
comment period (71 FR 68120 through 68121) that discussed the amount of
packaging on the single bills for drug administration procedure codes,
and we promised to replicate that study for the APC Panel. We discussed
the results of this study with the APC Panel at its March 2007 meeting,
in accordance with the APC Panel's August 2006 recommendation. Table 2
below shows the drug administration HCPCS codes and their descriptors,
status indicators, deleted code status, and CY 2007 APC assignments in
columns 1, 2, 3, and 4, respectively. HCPCS codes for additional hours
of infusion services are not presented because these codes were
included on the CY 2007 bypass list and, therefore, we explicitly
associated no packaged costs with them, as discussed in the CY 2007
OPPS/ASC final rule with comment period (71 FR 68117 through 68118).
Column 6 of the table contains the number of single bills relative to
total occurrences of the code in the CY 2005 claims, and column 8 shows
the percentage of single bills used to set payment rates. Drug
administration services demonstrate reasonable single bill
representation in comparison with other OPPS services. Single bills for
drug administration constitute, roughly, 30 percent of all observed
occurrences of drug administration services, varying by code from 7 to
55 percent. Columns 10 through 13 of the table show measures of central
tendency for packaged costs as a percentage of total cost on each
single claim. Columns 10 and 11 show the mean and median of all
packaged costs as a percentage of total costs, and columns 12 and 13
break out the costs of packaged drug HCPCS codes and uncoded pharmacy
revenue code charges for revenue codes in the 0250 series (Pharmacy),
0260 series (IV Therapy), and 0630 series (Pharmacy--Extension). These
columns demonstrate that packaged costs substantially contribute to
median cost estimates for the majority of drug administration HCPCS
codes.
For all single bills for CPT code 90780 (Intravenous infusion for
therapy/diagnosis, administered by physician or under direct
supervision of physician; up to one hour), on average, packaged costs
were 31 percent of total cost (median 27 percent). For the same code,
packaged drug and pharmacy costs comprised, on average, 23 percent of
total costs (median 15 percent). Single bills make up 34 percent of all
line-item occurrences of the service, suggesting that this single bill
median cost was fairly robust and probably captured packaging
adequately. On the other hand, CPT code 90784 (Therapeutic,
prophylactic or diagnostic injection (specify material injected);
subcutaneous or intramuscular) demonstrates limited packaging (median 0
percent and mean 17 percent), and the median cost for the code is
derived from only 7 percent of all occurrences of the code. Across all
drug administration codes, over half show significant median packaged
costs largely attributable to packaged drug and pharmacy costs.

Table 2.--Packaged Cost Data for CY 2005 Single Claims for Drug Administration Services
--------------------------------------------------------------------------------------------------------------------------------------------------------
All packaged costs Packaged drug and
as a percent of pharmacy costs as a
Deleted Single Total Percent Median total cost percent of total
HCPCS code Short descriptor SI code APC bills frequency single cost ($) ---------------------- cost
bills ---------------------
Median Mean Median Mean
(1) (2)............... (3).... (4)....... (5) (6) (7) (8) (9) (10) (11) (12) (13)
--------------------------------------------------------------------------------------------------------------------------------------------------------
90780...... IV infusion S...... X......... 0440 1,008,055 2,974,785 33.9 110.43 27.1 30.8 15.3 22.6
therapy, 1 hour.
90782...... Injection, sc/im.. S...... X......... 0437 1,326,094 2,894,231 45.8 24.77 0.0 10.1 0.0 8.7
90783...... Injection, ia..... S...... X......... 0438 427 3,012 14.2 51.35 0.0 10.9 0.0 6.8
90784...... Injection, iv..... S...... X......... 0438 183,096 2,812,204 6.5 49.54 0.0 16.7 0.0 9.7
90788...... Injection of S...... X......... 0437 19,400 141,293 13.7 45.96 24.6 32.3 20.7 30.4
antibiotic.
96400...... Chemotherapy, sc/ S...... .......... 0438 57,472 81,546 70.5 51.98 0.0 6.3 0.0 4.5
im.
96405...... Chemo S...... .......... 0438 142 181 78.5 193.65 0.0 12.0 0.0 10.5
intralesional, up
to 7.
96406...... Chemo S...... .......... 0438 2 7 28.6 46.42 0.0 0.0 0.0 0.0
intralesional
over 7.
96408...... Chemotherapy, push S...... .......... 0439 21,113 134,447 15.7 96.85 10.6 21.3 2.4 13.6
technique.
96410...... Chemotherapy, S...... .......... 0441 161,872 555,170 29.2 151.55 21.4 27.0 12.4 19.6
infusion method.
96414...... Chemo, infuse S...... .......... 0441 2,370 14,561 16.3 182.89 15.4 23.0 8.6 15.6
method add-on.
96420...... Chemo, ia, push S...... .......... 0439 170 933 18.2 99.86 9.6 27.6 4.2 15.4
tecnique.
96422...... Chemo ia infusion S...... .......... 0441 556 1,814 30.7 162.94 45.9 46.5 31.0 35.1
up to 1 hr.
96425...... Chemotherapy, S...... .......... 0441 149 557 26.8 216.68 29.4 33.5 14.7 24.4
infusion method.
96440...... Chemotherapy, S...... .......... 0439 38 104 36.5 37.12 0.0 2.1 0.0 1.5
intracavitary.
96445...... Chemotherapy, S...... .......... 0439 43 137 31.4 61.98 23.8 25.0 23.7 21.1
intracavitary.
96450...... Chemotherapy, into S...... .......... 0441 394 869 45.3 160.03 25.8 28.7 2.0 8.3
CNS.
96520...... Port pump refill & S...... .......... 0440 9,771 23,928 40.8 140.66 29.0 31.5 16.8 23.6
main.
96530...... Syst pump refill & S...... .......... 0440 8,334 19,283 43.2 100.00 7.4 22.2 0.7 13.7
main.
96542...... Chemotherapy S...... .......... 0438 511 929 55.0 51.56 0.0 10.8 0.0 6.5
injection.
--------------------------------------------------------------------------------------------------------------------------------------------------------

By definition, we are unable to precisely assess the amount of
packaging associated with drug administration codes in the multiple
bills. As a proxy, we estimated packaging as a percent of total cost on

[[Page 42641]]

each claim for two subsets of claims. Both analyses suggest the
presence of moderate packaged costs, especially drug and pharmacy
costs, associated with drug administration services in the multiple
bills. Table 3 below shows measures of central tendency for packaging
percentages in the multiple bills or portions of multiple bills
remaining after ``pseudo'' singles have been created. We refer to this
group of the multiple bills as the ``hardcore'' multiple bills. For the
first subset of ``hardcore'' multiple bills with only drug
administration codes, that is, where multiple drug administration codes
are the only separately paid procedure codes on the claim (defined as
procedure codes with a status indicator of ``S,'' ``T,'' ``V,'' ``X,''
or ``P''), we estimate that packaged costs are 22 percent of total
costs (27 percent, on average), where total costs consist of costs for
all payable codes. Costs for packaged drug HCPCS codes and pharmacy
revenue codes comprise 13 percent of total cost at the median (19
percent, on average). For the second subset of ``hardcore'' multiple
bills with any drug administration code, that is, where a drug
administration code appears with other payable codes (largely radiology
services and visits), we estimate packaged costs are 13 percent of
total cost at the median (19 percent, on average). Costs for packaged
drugs and pharmacy revenue codes comprise 6 percent of total cost at
the median (10 percent, on average). The amount of packaging in both
proxy measures, but especially the first subset, closely resembles the
packaged costs as a percentage of drug administration costs observed in
the single bills for drug administration services. While finding a way
to accurately use data from the ``hardcore'' multiple bills to estimate
drug administration median costs undoubtedly would impact medians,
these comparisons suggest that the multiple bill data probably would
support current median estimates.

Table 3.--Packaged Costs on Multiple Bill Claims for Drug Administration Services
----------------------------------------------------------------------------------------------------------------
All packaged costs as a Packaged drug and pharmacy
percent of total cost costs as a percent of total
Total frequency -------------------------------- cost
-------------------------------
Median Mean Median Mean
----------------------------------------------------------------------------------------------------------------
Subset 1: ``Hardcore'' Multiple Claims with Only Drug Administration Codes
----------------------------------------------------------------------------------------------------------------
693,925......................................... 21.6 26.8 12.7 19.3
----------------------------------------------------------------------------------------------------------------
Subset 2: ``Multiple'' Claims with At Least One Drug Administration Code
----------------------------------------------------------------------------------------------------------------
4,816,338....................................... 13.2 19.4 5.8 10.0
----------------------------------------------------------------------------------------------------------------

We have received several comments over the past few years offering
algorithms for packaging the costs associated with specific revenue
codes or packaged drugs with certain drug administration codes. Because
of the complexity of even routine OPPS claims, prior research suggests
that such algorithms have limited power to generate additional single
bill claims and do little to change median cost estimates. We continue
to look for simple, but powerful, methodologies like the bypass list
and packaging of HCPCS codes for additional ancillary and supportive
services to assign packaged costs to all services within the
``hardcore'' multiple bills. Ideally, these methodologies should be
intuitive to the provider community, easily integrated into the
complexity of OPPS median cost estimation, and simple to maintain from
year to year. We solicit and will carefully consider methodologies for
creation of single bills that meet these criteria.
c. Proposed Calculation of CCRs
We calculate hospital-specific overall CCRs and hospital-specific
departmental CCRs for each hospital for which we have claims data in
the period of claims being used to calculate the median costs that we
convert to scaled relative weights for purposes of setting the OPPS
payment rates. We apply the hospital-specific CCR to the hospital's
charges at the most detailed level possible, based on a revenue code-
to-cost center crosswalk that contains a hierarchy of CCRs used to
estimate costs from charges for each revenue code. That crosswalk is
available for review and continuous comment on the CMS Web site at:
http://www.cms.hhs.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.
Comments on the proposed configuration of the

crosswalk for CY 2008 should be included with comments on this section
of this proposed rule. We calculate CCRs for the standard and
nonstandard cost centers accepted by the electronic cost report
database. In general, the most detailed level at which we calculate
CCRs is the hospital-specific departmental level.
Following the expiration of most medical devices from pass-through
status in CY 2003, prior to which devices were paid at charges reduced
to cost using the hospital's overall CCR, we received comments that our
OPPS cost estimates for device implantation procedures systematically
underestimate the cost of the devices included in the packaged payment
for the procedures. Commenters informed us that hospitals routinely
mark up charges for low cost items to a much greater extent than they
mark up high cost items, and that these items are often combined in a
single cost center on their Medicare cost report. Commenters stated
that when items with widely varying costs are combined in a single cost
center using that cost center's CCR to estimate costs from charges for
those items, this approach will overestimate the cost of low cost items
and underestimate the cost of high cost items. This is commonly known
as ``charge compression.'' They stated that, in the case of implantable
devices, the charges for both high cost devices and low cost supplies
typically are reported under the medical supply revenue code series and
that the costs of both typically are reported in the medical supply
cost center on the cost report. Commenters stated that the application
of one medical supply CCR to charges for all items reported under the
medical supply revenue code underestimates the cost of expensive
medical supplies and overestimates the cost of inexpensive supplies.
They indicated that when these costs are packaged into the costs of the
procedures in which they are used, the result is inaccurate median
costs for the HCPCS codes and APCs, and thus the standard OPPS
ratesetting methodology systematically distorts

[[Page 42642]]

relative payment weights for procedures using devices.
In CY 2006, the device industry commissioned a study to interpolate
a device-specific CCR from the medical supply CCR, using publicly
available hospital claim and Medicare cost report data rather than
proprietary data on device costs. After reviewing the device industry's
data analysis and study model, CMS contracted with RTI International
(RTI) to study the impact of charge compression on the cost-based
weight methodology adopted in the FY 2007 IPPS final rule, to evaluate
this model and to propose solutions. For more information, interested
individuals can view RTI's report on the CMS Web site at: http://www.cms.hhs.gov/reports/downloads/Dalton.pdf
.

Any study of cost estimation in general, and charge compression
specifically, has obvious importance for both the OPPS and the IPPS.
RTI's research explicitly focused on the IPPS for several reasons,
which include greater Medicare expenditure under the IPPS, a desire to
evaluate the model quickly given IPPS regulation deadlines, and a focus
on other components of the new FY 2007 IPPS cost-based weight
methodology (CMS Contract No. 500-00-0024-T012, ``A Study of Charge
Compression in Calculating DRG Relative Weights,'' page 5). The study
first addressed the possibility of cross-aggregation bias in the CCRs
used to estimate costs under the IPPS created by the IPPS methodology
of aggregating cost centers into larger departments before calculating
CCRs. The report also addressed potential bias created by estimating
costs using a CCR that reflects the combined costs and charges of
services with wide variation in the amount of hospital markup. In its
assessment of the latter, RTI targeted its attempt to identify the
presence of charge compression to those cost centers presumably
associated with revenue codes demonstrating significant IPPS
expenditures and utilization. RTI assessed the correlation between cost
report CCRs and the percent of charges in a cost center attributable to
a set of similar services represented by a group of revenue codes. RTI
did not examine the correlation between CCRs and revenue codes without
significant IPPS expenditures or a demonstrated concentration in a
specific Diagnosis Related Group (DRG). For example, RTI did not
examine revenue code groups within the pharmacy cost center with low
proportionate inpatient charges that might be important to the OPPS,
such as ``Pharmacy Incident to Radiology.'' RTI states this limitation
in its study and specifically recommends that disaggregated CCRs be
reestimated for outpatient hospital charges.
Cost report CCRs combine both inpatient and outpatient services.
Ideally, RTI would be able to examine the correlation between CCRs for
Medicare inpatient services and inpatient claim charges and the
correlation between CCRs for Medicare outpatient services and
outpatient claim charges. However, the comprehensive nature of the cost
report CCR (which combines inpatient and outpatient services) argues
for an analysis of the correlation between CCRs and combined inpatient
and outpatient claim charges. As noted, the RTI study accepted some
measurement error in its analysis by matching an ``all charges'' CCR to
inpatient estimates of charges for groups of similar services
represented by revenue codes because of short timelines and because
inpatient costs dominate outpatient costs in many ancillary cost
centers. We believe that CCR adjustments used to calculate payment
should be based on the comparison of cost report CCRs to combined
inpatient and outpatient charges. An ``all charges'' model would reduce
measurement error and estimate adjustments to disaggregated CCRs that
could be used in both hospital inpatient and outpatient payment
systems.
RTI made several short-term recommendations for improving the
accuracy of DRG weight estimates from a cost-based methodology to
address bias in combining cost centers and charge compression that
could be considered in the context of OPPS policy. We discuss each
recommendation within the context of the OPPS and provide our
assessment of its application to the OPPS. We do not discuss RTI's
recommendations to change cost report policy, which, by definition,
would not have an effect on payment weight estimates until several
years in the future.
(1) RTI recommends expansion of the number of CCRs used under the
IPPS (RTI study, pages 11 and 85). Our OPPS methodology is already more
specific than the RTI recommendation. To the extent possible, the OPPS
uses hospital-specific cost centers, both standard and nonstandard, to
reduce charges to estimated costs and, therefore, the OPPS ratesetting
methodology is already more specific than the RTI recommendation.
(2) RTI recommends disaggregation of emergency department and blood
products from the ``other services'' CCR used in the IPPS (RTI study,
pages 11 and 85). Because we use standard and nonstandard cost center
data, our OPPS methodology already comports with this RTI
recommendation. Further, we estimate a CCR for blood that is often
higher than that in the cost report based on a special methodology that
is discussed further in section X of this proposed rule. Therefore, the
OPPS is already meeting, and in several cases exceeding, the RTI
recommendation for specificity with regard to estimating the costs
associated with emergency department and blood product services.
(3) RTI recommends reclassification of intermediate care charges
from the intensive care unit to the routine cost center (RTI study,
pages 10 and 85). This recommendation is not relevant to the OPPS
because our methodology for calculating costs under the OPPS relies
solely on ancillary cost centers and does not use either cost center
included in the recommendation to estimate costs for hospital
outpatient services.
(4) RTI recommends establishment of regression-based estimates as a
temporary or permanent method for disaggregating national average CCRs
for medical supplies, drugs, and radiology services under the IPPS (RTI
study, pages 11 and 86). With regard to radiology services, RTI
estimated significantly lower CCRs for the cost centers for computed
tomography (CT) scans and magnetic resonance imaging (MRI) services.
RTI triangulated its findings with lower observed CCRs for the one-
third of providers reporting nonstandard cost centers, specifically MRI
Scan and CT Scan. However, in using CCRs for nonstandard cost centers,
including MRI Scan and CT Scan, the OPPS already has partially
implemented RTI's recommendation to use lower CCRs to estimate costs
for those OPPS services allocated to these two imaging cost centers.
For reasons discussed in more detail below, we are proposing to
develop an all-charges model that would compare variation in CCRs with
variation in combined inpatient and outpatient charges for sets of
similar services and establish disaggregated CCRs that could be applied
to both inpatient and outpatient charges. We are proposing to evaluate
the results of that methodology for purposes of determining whether the
resulting disaggregated CCRs should be proposed for use in developing
the CY 2009 OPPS payment rates. The revised all-charges model and
resulting disaggregated CCRs will not be available in time for use in
the CY 2008 OPPS/ASC final rule with comment period.
There are several reasons that we are not proposing to use the
intradepartmental CCRs that RTI estimated using IPPS charges for the CY
2008 OPPS estimation of median costs. We agree with RTI that the

[[Page 42643]]

intradepartmental CCRs it calculated for the IPPS would not always be
appropriate for application to the OPPS (RTI study, pages 34 and 35).
While RTI recommends that the model be recalibrated for outpatient
charges before it is applied to the OPPS, we believe that the combined
nature of the CCRs available from the cost report prevents an accurate
outpatient recalibration that would be appropriate for the OPPS alone.
The addition of outpatient charges could change the variability of
combined charges for some groups of services. For example, if hospitals
use a high volume of less complex devices with lower charges in the
outpatient department, the inclusion or omission of the outpatient
charges for these high volume and lower cost devices could change the
estimated disaggregated device CCR. Furthermore, RTI's analysis
excluded some revenue codes with extensive outpatient charges because
these revenue codes play a minor role in the IPPS. Therefore, we
believe that an all-charges model examining an expanded subset of
revenue codes is most appropriate, and that this model must be
developed before we could apply the resulting disaggregated CCRs to the
charges for supplies paid under the OPPS.
Moreover, to implement the disaggregated IPPS-based CCRs in the
OPPS that RTI estimated for CY 2008 could result in greater instability
in relative payment weights for CY 2008 than would otherwise occur.
Significant changes in CCRs, both increases and decreases, could prompt
the reassignment of services to different APCs due to the new estimates
of median costs and require modification of the overall APC structure.
Not only might there be significant fluctuations in payment between the
CY 2007 and CY 2008 OPPS, but a subsequent change to application of the
disaggregated CCRs resulting from development of an all-charges model
might also result in significant fluctuations in median costs and
increased instability in payments from CY 2008 to CY 2009. Therefore,
these sequential changes could result in significant increases in
median costs in one year and significant declines in median costs in
the next year.
Therefore, we are not proposing to adopt the RTI disaggregated CCRs
under the CY 2008 OPPS. We will consider whether it would be
appropriate to adopt disaggregated CCRs for the OPPS after we analyze
the results of the use of both inpatient and outpatient charges across
all payers to recalculate disaggregated CCRs.
2. Proposed Calculation of Median Costs
In this section of this proposed rule, we discuss the use of claims
to calculate the proposed OPPS payment rates for CY 2008. The hospital
OPPS page on the CMS Web site on which this proposed rule is posted
provides an accounting of claims used in the development of the
proposed rates on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.
The accounting of claims used in the development

of this proposed rule is included on the Web site under supplemental
materials for the CY 2008 proposed rule. That accounting provides
additional detail regarding the number of claims derived at each stage
of the process. In addition, below we discuss the files of claims that
comprise the data sets that are available for purchase under a CMS data
user contract. Our CMS Web site, http://www.cms.hhs.gov/HospitalOutpatientPPS
, includes information about purchasing the

following two OPPS data files: ``OPPS Limited Data Set'' and ``OPPS
Identifiable Data Set.''
We used the following methodology to establish the relative weights
we are proposing to use in calculating the OPPS payment rates for CY
2008 shown in Addenda A and B to this proposed rule. This methodology
is as follows:
We used outpatient claims for the full CY 2006, processed before
January 1, 2007, to set the proposed relative weights for CY 2008. To
begin the calculation of the relative weights for CY 2008, we pulled
all claims for outpatient services furnished in CY 2006 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, the U.S. Virgin Islands, American
Samoa, and the Northern Mariana 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 101 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 CCR calculation process, we used the same general approach
as we used in developing the final APC rates for CY 2007, using the
revised CCR calculation which excluded the costs of paramedical
education programs and weighted the outpatient charges by the volume of
outpatient services furnished by the hospital. We refer readers to the
CY 2007 OPPS/ASC final rule with comment period for more information
(71 FR 67983 through 67985). We first limited the population of cost
reports to only those for hospitals that filed outpatient claims in CY
2006 before determining whether the CCRs for such hospitals were valid.
We then calculated the CCRs for each cost center and the overall
CCR 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 2005. We used the most recently
submitted cost report to calculate the CCRs to be used to calculate
median costs for the proposed CY 2008 OPPS rates. 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 using the overall CCR, and we then adjusted the most recent
available submitted but not settled cost report using that ratio. We
calculated both an overall CCR and cost center-specific CCRs for each
hospital. We used the overall CCR calculation discussed in section
II.A.1.c. of this proposed rule for all purposes that require use of an
overall CCR.
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

[[Page 42644]]

overall 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 cost center (that is, departmental) level by
removing the CCRs for each cost center as outliers if they exceeded
3 standard deviations from the geometric mean. We used a
four-tiered hierarchy of cost center CCRs to match a cost center to
every possible revenue code appearing in the outpatient claims, with
the top tier being the most common cost center and the last tier being
the default CCR. If a hospital's cost center CCR was deleted by
trimming, we set the CCR for that cost center to ``missing,'' so that
another cost center CCR in the revenue center hierarchy could apply. If
no other cost center CCR could apply to the revenue code on the claim,
we used the hospital's overall CCR for the revenue code in question.
For example, if a visit was reported under the clinic revenue code, but
the hospital did not have a clinic cost center, we mapped the hospital-
specific overall CCR to the clinic revenue code. The hierarchy of CCRs
is available for inspection and comment on the CMS Web site: http://www.cms.hhs.gov/HospitalOutpatientPPS
.

We then converted the charges to costs on each claim by applying
the CCR that we believed was best suited to the revenue code indicated
on the line with the charge. Table 4 of this proposed rule contains a
list of the allowed revenue codes. Revenue codes not included in Table
4 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. One exception is the calculation of
median blood costs, as discussed in section X. of this proposed rule.
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, the U.S. Virgin Islands, American Samoa, and the
Northern Mariana 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 hospitals and moved them to 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 moved to another
file claims that contained nothing but influenza and pneumococcal
pneumonia (``PPV'') vaccines. Influenza and PPV vaccines are paid at
reasonable cost and, therefore, these claims are not used to set OPPS
rates. We note that the separate file containing partial
hospitalization claims is included in the files that are available for
purchase as discussed above. Unlike years past, we did not create a
separate file of claims containing observation services because we are
proposing to package all observation care for the CY 2008 OPPS.
We next copied line-item costs for drugs, blood, and devices (the
lines stay on the claim, but are copied 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 a per unit mean
and median and a per day mean and median for drugs, radiopharmaceutical
agents, blood and blood products, and devices, including, but not
limited to, brachytherapy sources, as well as other information used to
set payment rates, such as a unit-to-day ratio for drugs.
We then divided the remaining claims into the following five
groups:
1. Single Major Claims: Claims with a single separately payable
procedure (that is, status indicator ``S,'' `` T,'' ``V,'' or ``X'').
2. Multiple Major Claims: Claims with more than one separately
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or
``X''), or multiple units for one payable procedure. As discussed
below, some of these can be used in median setting. We also included in
this set claims that contain one unit of one code when the bilateral
modifier is appended to the code and the code is one that is
conditionally or independently bilateral. In these cases, these claims
represent more than one unit of the service described by the code,
notwithstanding that only one unit is billed.
3. Single Minor Claims: Claims with a single HCPCS code that is
assigned to status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' or
``N.''
4. Multiple Minor Claims: Claims with multiple HCPCS codes that are
assigned to status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' or
``N.''
5. Non-OPPS Claims: Claims that contain no services payable under
the OPPS (that is, all status indicators other than those listed for
major or minor status). 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 tests, and do not contain either a code for a separately
paid service or a code for a packaged service.
We use status indicator ``Q'' in Addendum B to this proposed rule
to identify services that receive separate HCPCS code-specific payment
when specific criteria are met, and payment for the individual service
is packaged in all other circumstances. We are proposing several
different sets of criteria to determine whether separate payment would
be made for specific services. For example, HCPCS code G0379 (Direct
admission of patient for hospital observation care) is assigned to
status indicator ``Q'' in Addendum B to this proposed rule because we
are proposing that it receive separate payment only if it is billed on
the same date of service as HCPCS code G0378 (Hospital observation
service, per hour), without any services with status indicator ``T'' or
``V,'' or Critical Care (APC 0617). Proposed payment for observation
services is discussed in section XI. of this proposed rule. The
specific services in the proposed composite APCs discussed in section
II.A.4. of this proposed rule also are assigned to status indicator
``Q'' in Addendum B to this proposed rule because we are proposing that
their payment would be bundled into a single composite payment for a
combination of major procedures under certain circumstances. These
services would only receive separate code-specific payment if certain
criteria are met. The same is true for those less intensive outpatient
mental health treatment services for which payment is limited to the
partial hospitalization per diem rate and which also are assigned to
status indicator ``Q'' in Addendum B to this proposed rule. According
to longstanding OPPS payment policy (65 FR 18455), payment for these
individual mental health services is bundled into a single payment, APC
0034 (Mental Health Services Composite), when the sum of the individual
mental health service payments for all of these mental health services
provided on the same day would exceed payment for a day of partial
hospitalization services. However, the largest number of specific HCPCS
codes identified by status indicator ``Q'' in Addendum B to this
proposed rule are those codes that we identify as ``special'' packaged
codes, where we are proposing that a service receives separate payment
when it appears on the same day on a claim without another service that
is assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X.'' We are
proposing to package payment for these HCPCS codes when the code
appears on the same date of service with any other service that is

[[Page 42645]]

assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X.''
This last and largest subset of conditionally packaged services
have to be integrated into the identification of single and multiple
bills to ensure that the costs for these services are appropriately
packaged when they appear with any other separately paid service. We
handle these conditionally packaged services in the data by assigning
the HCPCS code an APC and a data status indicator of ``N.'' When the
conditionally packaged HCPCS code appears with a HCPCS code with a
status indicator of ``S,'' ``T,'' ``V,'' or ``X'' on the same date of
service, it is treated as a packaged code. The costs that appear on the
line with the code are packaged into the cost of the HCPCS code with a
status indicator of ``S,'' ``T,'' ``V,'' or ``X.'' When the
conditionally packaged HCPCS code appears by itself, we change the
status indicator on the line to the status indicator of the APC to
which the conditionally packaged code is assigned, converting the
service from a minor to a major procedure. This creates single bills
for these conditionally packaged services that are then used to set the
median cost for the conditionally packaged code and for the APC to
which it is assigned when it is separately paid.
The claims listed in numbers 1, 2, 3, and 4 above are included in
the data files that can be purchased as described above.
In years prior to the CY 2007 OPPS, we made a determination of
whether each HCPCS code was a major code or a minor code or a code
other than a major or minor code. We used those code-specific
determinations to sort claims into the five groups identified above.
For the CY 2007 OPPS, we used status indicators to sort the claims into
these groups. We defined major procedures as any procedure having a
status indicator of ``S,'' ``T,'' ``V,'' or ``X;'' defined minor
procedures as any code having a status indicator of ``N;'' and
classified ``other'' procedures as any code having a status indicator
other than ``S,'' ``T,'' ``V,'' ``X,'' or ``N.'' For the CY 2007 OPPS
proposed rule limited data set and identifiable data set, these
definitions excluded claims on which hospitals billed drugs and devices
without also billing separately paid procedure codes and, therefore,
these public use files did not contain all claims used to calculate the
drug and device frequencies and medians. We corrected this for the CY
2007 OPPS/ASC final rule with comment period limited data set and
identifiable data set by extracting claims containing drugs and devices
from the set of ``other'' claims and adding them to the public use
files.
At its March 2007 meeting, the APC Panel recommended that CMS edit
and return for correction claims that contain a HCPCS code for a
separately paid drug or device but that also do not contain a HCPCS
code assigned to a procedural APC (that is, those not assigned status
indicator ``S,'' ``T,'' ``V,'' or ``X''). The APC Panel stated that
this edit should improve the claims data and may increase the number of
single bills available for ratesetting. We note that such an edit would
be broader than the device-to-procedure code edits we implemented for
CY 2007 for selected devices. While we encourage hospitals to code
correctly in accordance with CPT, CMS, and local contractor guidance,
in general we have historically implemented claims processing edits
under the OPPS when we believe that these edits help ensure complete
claims data for ratesetting. In the case of such Outpatient Code Editor
(OCE) edits for drugs and devices that are separately paid, it is
unclear to us that these edits would improve our claims data for median
cost calculation because the items receive separate payment and do not
result in multiple procedure claims when they are reported. We also are
uncertain about the clinical circumstances that could result in a
hospital submitting an OPPS claim that only reported a separately paid
drug or device. We are soliciting comments specifically on the impact
of establishing such edits on hospital billing processes and on related
potential improvements to claims data used for median setting.
Therefore, in view of the prior public comments and our desire to
ensure that the public data files contain all appropriate data, for the
CY 2008 OPPS, we are proposing to define major procedures as HCPCS
codes that have a status indicator of ``S,'' ``T,'' ``V,'' or ``X.'' We
are proposing to define minor procedures as HCPCS codes that have a
status indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' or ``N'' but, as
we discuss above, to make single bills out of any claims for single
procedures with a minor code that also has an APC assignment. This
ensures that the claims that contain only codes for drugs and
biologicals or devices but that do not contain codes for procedures are
included in the limited data set and the identifiable data set. It also
ensures, as discussed above, that conditionally packaged services that
receive separate payment only when they are billed without any other
separately payable OPPS services are treated appropriately for purposes
of median cost calculations. We are proposing to define ``other''
services as HCPCS codes that have a status indicator other than those
defined as major or minor procedures.
We continue to believe that using status indicators, with the
proposed changes, is an appropriate way to sort the claims into these
groups and also to make our process more transparent to the public. We
further believe that this proposed method of sorting claims would
enhance the public's ability to derive useful information for analysis
and public comment on this proposed rule.
We set aside the single minor, multiple minor, and non-OPPS claims
(numbers 3, 4, and 5 above) because we did not use these claims in
calculating median costs of procedural APCs. We then examined the
multiple major claims for dates of service to determine if we could
break them into single procedure claims using the dates of service on
all lines on the claim. If we could create claims with single major
procedures by using date of service, we created a single procedure
claim record for each separately paid procedure on a different date of
service (that is, a ``pseudo'' single).
We then used the bypass codes listed in Table 1 of this proposed
rule and discussed in section II.A.1.b. of this proposed rule to remove
separately payable procedures that we determined contain limited costs
or no packaged costs or were otherwise suitable for inclusion on the
bypass list from a multiple procedure bill. When one of the two
separately payable procedures on a multiple procedure claim was on the
bypass list, we split the claim into two ``pseudo'' 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 code charges.
We also removed lines that contained multiple units of codes on the
bypass list and treated them as ``pseudo'' single claims by dividing
the cost for the multiple units by the number of units on the line.
Where one unit of a single, separately paid procedure code remained on
the claim after removal of the multiple units of the bypass code, we
created a ``pseudo'' single claim from that residual claim record,
which retained the costs of packaged revenue codes and packaged HCPCS
codes. This enabled us to use claims that would otherwise be multiple
procedure claims and could not be used. We excluded those claims that
we were not able to

[[Page 42646]]

convert to single claims even after applying all of the techniques for
creation of ``pseudo'' singles. Among those excluded were claims that
contain codes that are viewed as independently or conditionally
bilateral and that contain the bilateral modifier (Modifier 50,
Bilateral procedure) because the line-item cost for the code represents
the cost of two units of the procedure, notwithstanding that the code
appears with a unit of one. Therefore, the charge on the line
represents the charge for two services rather than a single service and
using the line as reported would overstate the cost of a single
procedure. We then packaged the costs of packaged HCPCS codes (codes
with status indicator ``N'' listed in Addendum B to this proposed rule)
and packaged revenue codes into the cost of the single major procedure
remaining on the claim.
The list of packaged revenue codes is shown in Table 4 of this
proposed rule. At its March 2007 meeting the APC Panel recommended that
CMS review the final list of packaged revenue codes for consistency
with OPPS policy and ensure that future versions of the OCE edit
accordingly. We compared the packaged revenue codes in the OCE to the
finalized list of packaged revenue codes for the CY 2007 OPPS (71 FR
67989 through 67990) that we used for packaging costs in median
calculation. As a result of that analysis, we are accepting the APC
Panel's recommendation and we are proposing to change the list of
packaged revenue codes for the CY 2008 OPPS in the following manner.
First, we are proposing to remove revenue codes 0274 (Prosthetic/
Orthotic devices) and 0290 (Durable Medical Equipment) from the list of
packaged revenue codes because we do not permit hospitals to report
implantable devices in these revenue codes (Internet Only Manual 100-4,
Chapter 4, section 20.5.1.1). We also are proposing to add revenue code
0273 (Take Home Supplies) to the list of packaged revenue codes because
we believe that the charges under this revenue code are for the
incidental supplies that hospitals sometimes provide for patients who
are discharged at a time when it is not possible to secure the supplies
needed for a brief time at home. We are proposing to conform the list
of packaged revenue codes in the OCE to the OPPS for CY 2008.
We packaged the costs of the HCPCS codes that are shown with status
indicator ``N'' into the cost of the independent service to which the
packaged service is ancillary or supportive. We refer readers to
section II.A.4. of this proposed rule for a more complete discussion of
the packaging changes we are proposing for CY 2008.
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, approximately 54 million
claims were left. Of these 54 million claims, we were able to use some
portion of approximately 50 million whole claims (92 percent of
approximately 54 million potentially usable claims) to create
approximately 88 million single and ``pseudo'' single claims, of which
we used 87 million single bills (after trimming out just over 822,000
claims as discussed below) in the CY 2008 median development and for
ratesetting.
We also excluded (1) claims that had zero costs after summing all
costs on the claim and (2) claims containing packaging flag number 3.
Effective for services furnished on or after July 1, 2004, the OCE
assigns packaging flag number 3 to claims on which hospitals submit
token charges for a service with status indicator ``S'' or ``T'' (a
major separately paid service under the OPPS) for which the fiscal
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. We also deleted claims for which the charges equal the revenue
center payment (that is, the Medicare payment) on the assumption that
where the charge equals the payment, to apply a CCR to the charge would
not yield a valid estimate of relative provider cost.
For the remaining claims, we then standardized 60 percent of the
costs of the claim (which we have previously determined to be the
labor-related portion) for geographic differences in labor input costs.
We made this adjustment by determining the wage index that applied to
the hospital that furnished the service and dividing the cost for the
separately paid HCPCS code furnished by the hospital by that wage
index. As has been our policy since the inception of the OPPS, we are
proposing to use the pre-reclassified wage indices for standardization
because we believe that they better reflect the true costs of items and
services in the area in which the hospital is located than the post-
reclassification wage indices and, therefore, would result in the most
accurate unadjusted median costs.
We also excluded claims that were outside 3 standard deviations
from the geometric mean of units for each HCPCS code on the bypass list
(because, as discussed above, we used claims that contain multiple
units of the bypass codes).
We used the remaining claims to calculate the CY 2008 proposed
median costs for each separately payable HCPCS code and each APC. The
comparison of HCPCS and APC medians determines the applicability of the
``2 times'' rule. 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 where we believed that it was appropriate.
Section III. of this proposed rule includes a discussion of certain
proposed 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. Both the HCPCS medians
and the APC medians were weighted to account for the inclusion of
multiple units of the bypass codes in the creation of ``pseudo'' single
bills.
In our review of median costs for HCPCS codes and their assigned
APCs, we have frequently noticed that some services are consistently
rarely performed in the hospital outpatient setting for the Medicare
population. In particular, there are a number of services, such as
several procedures related to the care of pregnant women, that have
annual Medicare claims volume of 100 or fewer occurrences. By
definition, these services also have a small number of single bills
from which to estimate median costs. In addition, in some cases, these
codes have been historically assigned to clinical APCs where all the
services are low volume. Therefore, the median costs for these services
and APCs often fluctuate from year to year, in part due to the
variability created by such a small number of claims. One of the
benefits of basing payment on the median cost of many HCPCS codes with
sufficient single bill representation in an APC is that such
fluctuation is moderated by the increased number of observations for
similar services on which the APC median cost is also based. We
considered proposing a distinct methodology for calculation of the

[[Page 42647]]

median cost of low total volume APCs in order to provide more stability
in payment from year to year for these low total volume services.
However, after examination of the low total volume OPPS services and
their assigned APCs, we concluded that there were other clinical APCs
with higher volumes of total claims to which these low total volume
services could be reassigned, while ensuring the continued clinical and
resource homogeneity of the clinical APCs to which they would be newly
reassigned. Therefore, we believe that it is more appropriate to
reconfigure clinical APCs to eliminate most of the low total volume
APCs. These low volume services differ from other OPPS services only
because they are not often furnished to the Medicare population.
Therefore, we are proposing to reconfigure certain clinical APCs for CY
2008 as a way to promote stability and appropriate payment for the
services assigned to them, including low total volume services. We
believe that these proposed reconfigurations maintain APC clinical and
resource homogeneity. We are proposing these changes as an alternative
to developing specific quantitative approaches to treating low total
volume APCs differently for purposes of median calculation. As a result
of this proposal, 3 APCs proposed for CY 2008 (all of which are New
Technology APCs) have a total volume of services less than 100, and
only 17 APCs have a total volume of less than 1,000, in comparison with
CY 2007 where 9 APCs (including 3 New Technology APCs) had a total
volume of less than 100 and 36 APCs had a total volume of less than
1,000.
A detailed discussion of the medians for blood and blood products
is included in section X. of this proposed rule. 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 proposed rule. A
discussion of the median for partial hospitalization is included below
in section II.B. of this proposed rule.

Table 4.--Proposed CY 2008 Packaged Revenue Codes
------------------------------------------------------------------------
Revenue code Description
------------------------------------------------------------------------
0250.................. PHARMACY.
0251.................. GENERIC.
0252.................. NONGENERIC.
0254.................. PHARMACY INCIDENT TO OTHER DIAGNOSTIC.
0255.................. PHARMACY INCIDENT TO RADIOLOGY.
0257.................. NONPRESCRIPTION DRUGS.
0258.................. IV SOLUTIONS.
0259.................. OTHER PHARMACY.
0260.................. IV THERAPY, GENERAL CLASS.
0262.................. IV THERAPY/PHARMACY SERVICES.
0263.................. SUPPLY/DELIVERY.
0264.................. IV THERAPY/SUPPLIES.
0269.................. OTHER IV THERAPY.
0270.................. M&S SUPPLIES.
0271.................. NONSTERILE SUPPLIES.
0272.................. STERILE SUPPLIES.
0273.................. TAKE HOME SUPPLIES.
0275.................. PACEMAKER DRUG.
0276.................. INTRAOCULAR LENS SOURCE DRUG.
0278.................. OTHER IMPLANTS.
0279.................. OTHER M&S SUPPLIES.
0280.................. ONCOLOGY.
0289.................. OTHER ONCOLOGY.
0343.................. DIAGNOSTIC RADIOPHARMS.
0344.................. THERAPEUTIC RADIOPHARMS.
0370.................. ANESTHESIA.
0371.................. ANESTHESIA INCIDENT TO RADIOLOGY.
0372.................. ANESTHESIA INCIDENT TO OTHER DIAGNOSTIC.
0379.................. OTHER ANESTHESIA.
0390.................. BLOOD STORAGE AND PROCESSING.
0399.................. OTHER BLOOD STORAGE AND PROCESSING.
0560.................. MEDICAL SOCIAL SERVICES.
0569.................. OTHER MEDICAL SOCIAL SERVICES.
0621.................. SUPPLIES INCIDENT TO RADIOLOGY.
0622.................. SUPPLIES INCIDENT TO OTHER DIAGNOSTIC.
0624.................. INVESTIGATIONAL DEVICE (IDE).
0630.................. DRUGS REQUIRING SPECIFIC IDENTIFICATION, GENERAL
CLASS.
0631.................. SINGLE SOURCE.
0632.................. MULTIPLE.
0633.................. RESTRICTIVE PRESCRIPTION.
0681.................. TRAUMA RESPONSE, LEVEL I.
0682.................. TRAUMA RESPONSE, LEVEL II.
0683.................. TRAUMA RESPONSE, LEVEL III.
0684.................. TRAUMA RESPONSE, LEVEL IV.
0689.................. TRAUMA RESPONSE, OTHER.
0700.................. CAST ROOM.
0709.................. OTHER CAST ROOM.
0710.................. RECOVERY ROOM.
0719.................. OTHER RECOVERY ROOM.
0720.................. LABOR ROOM.

[[Page 42648]]

0721.................. LABOR.
0762.................. OBSERVATION ROOM.
0810.................. ORGAN ACQUISITION.
0819.................. OTHER ORGAN ACQUISITION.
0942.................. EDUCATION/TRAINING.
------------------------------------------------------------------------

3. Proposed Calculation of OPPS Scaled Payment Weights
Using the median APC costs discussed previously, we calculated the
proposed relative payment weights for each APC for CY 2008 shown in
Addenda A and B to this proposed rule. In years prior to CY 2007, we
standardized 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.
Beginning with the CY 2007 OPPS, we standardized all of the
relative payment weights to APC 0606 (Level 3 Clinic Visits) because we
deleted APC 0601 as part of the reconfiguration of the visit APCs. We
chose APC 0606 as the base because under our proposal to reconfigure
the APCs where clinic visits are assigned for CY 2007, APC 0606 is the
middle level clinic visit APC (that is, Level 3 of five levels). We
have historically used the median cost of the middle level clinic visit
APC (that is APC 0601 through CY 2006) to calculate unscaled weights
because mid-level clinic visits are among the most frequently performed
services in the hospital outpatient setting. Therefore, to maintain
consistency in using a median for calculating unscaled weights
representing the median cost of some of the most frequently provided
services, we proposed to continue to use the median cost of the mid-
level clinic APC, proposed APC 0606, to calculate unscaled weights.
Following our standard methodology, but using the CY 2007 median for
APC 0606, for CY 2007 we assigned APC 0606 a relative payment weight of
1.00 and divided the median cost of each APC by the median cost for APC
0606 to derive the unscaled relative payment weight for each APC. The
choice of the APC on which to base the relative weights for all other
APCs does not affect the payments made under the OPPS because we scale
the weights for budget neutrality. We are again proposing to use APC
0606 as the base for the CY 2008 OPPS relative weights.
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 2008 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 2007 relative weights to aggregate payments using
the CY 2008 proposed relative weights. This year, we included payments
to CMHCs in our comparison. Based on this comparison, we adjusted the
relative weights for purposes of budget neutrality. The unscaled
relative payment weights were adjusted by a weight scaler of 1.3665 for
budget neutrality. In addition to adjusting for increases and decreases
in weight due to the recalibration of APC medians, the scaler also
accounts for any change in the base, other than changes in volume,
which are not a factor in the weight scaler.
The proposed relative payment weights listed in Addenda A and B to
this proposed rule incorporate the recalibration adjustments discussed
in sections II.A.1. and 2. of this proposed rule.
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 proposed rule) is included in the budget neutrality calculations
for the CY 2008 OPPS.
4. Proposed Changes to Packaged Services
(If you choose to comment on the issues in this section, please
include the caption ``OPPS: Packaged Services'' at the beginning of
your comment.)
a. Background
When the Medicare program was first implemented, it paid for
hospital services (inpatient and outpatient) based on hospital-specific
reasonable costs attributable to furnishing services to Medicare
beneficiaries. Later the law was amended to limit payment to the lesser
of the hospital's reasonable cost or customary charges for services
furnished to Medicare beneficiaries. Specific service-based
methodologies were then developed for certain types of services, such
as clinical laboratory tests and durable medical equipment, while
payments for outpatient surgical procedures and other diagnostic tests
were based on a blend of the hospital's aggregate Medicare costs for
these services and Medicare's payment for similar services in other
ambulatory settings. While this mix of different payment methodologies
was in use, hospital outpatient services were growing rapidly following
the implementation of the IPPS in 1983. The brisk increase in hospital
outpatient services led to an interest in creating payment incentives
to promote more efficient delivery of hospital outpatient services
through a Medicare prospective payment system for hospital outpatient
services, and the final statutory requirements for the OPPS were
established by the BBA and the BBRA. During the period of time when
different approaches to prospective payment for hospital outpatient
services were being considered, a variety of reports to Congress (June
1988, September 1990, and March 1995) discussed three major issues
related to defining the unit of payment for the payment system,
specifically the extent to which clinically similar procedures should
be grouped for payment purposes and the logic that should be used for
the groupings; the extent to which payment for minor, ancillary
services associated with a significant

[[Page 42649]]

procedure should be packaged into a single payment for the procedure
(which we refer to as ``packaging''); and the extent to which payment
for multiple significant procedures related to an outpatient encounter
or to an episode of care should be bundled into a single unit of
payment (which we refer to as ``bundling''). Both packaging and
bundling were presented as approaches to creating incentives for
efficiency, with their potential policy disadvantages including
inconsistency with other ambulatory fee schedules, reduced transparency
of service-specific payment, and the potential for hospitals shifting
the delivery of packaged or bundled services to delivery settings other
than the hospital outpatient department (HOPD).
The OPPS, like other prospective payment systems, relies on the
concept of averaging, where the payment may be more or less than the
estimated costs of providing a service or package of services for a
particular patient, but with the exception of outlier cases, it is
adequate to ensure access to appropriate care. Decisions about
packaging and bundling payment involve a balance between ensuring some
separate payment for individual services and establishing incentives
for efficiency through larger units of payment. In many situations, the
final payment rate for a package of services may do a better job of
balancing variability in the relative costs of component services
compared to individual rates covering a smaller unit of service without
packaging or bundling. Packaging payments into larger payment bundles
promotes the stability of payment for services over time, a
characteristic that reportedly is very important to hospitals. Unlike
packaged services, the costs of individual services typically show
greater variation because the higher variability for some component
items and services cannot be balanced with lower variability for others
and because relative weights are typically estimated using a smaller
set of claims. When compared to service-specific payment, packaging or
bundling payment for component services may change payment at the
hospital level to the extent that there are systematic differences
across hospitals in their performance of the services included in that
unit of payment. Hospitals spending more per case than payment received
would be encouraged to review their service patterns to ensure that
they furnish services as efficiently as possible. Similarly, we believe
that unpackaging services heightens the hospital's focus on pricing
individual services, rather than the efficient delivery of those
services. Over the past several years of the OPPS, greater unpackaging
of payment has occurred simultaneously with continued tremendous growth
in OPPS expenditures as a result of increasing volumes of individual
services, as discussed in further detail below. Also discussed in
further detail below, most recently in its comments to the CY 2007
OPPS/ASC proposed rule and in the context of this rapid spending
growth, the Medicare Payment Advisory Commission (MedPAC) encouraged
CMS to broaden the payment bundles under the OPPS to encourage
providers to use resources efficiently.
As permitted under section 1833(t)(2)(B) of the Act, the OPPS
establishes groups of covered HOPD services, namely APC groups, and
uses them as the basic unit of payment. During the evolution of the
OPPS over the past 7 years, significant attention has been concentrated
on service-specific payment for services furnished to particular
patients, rather than on creating incentives for the efficient delivery
of services through encounter or episode-of-care-based payment. Overall
packaging included in the clinical APCs has decreased, and the
procedure groupings have become smaller as the focus has shifted to
refining service-level payment. Specifically, in the CY 2003 OPPS,
there were 569 APCs, but by CY 2007, the number of APCs had grown to
862, a 51-percent increase in 4 years. Similarly, the percentage of CPT
codes for procedural services that receive packaged payment declined by
over 10 percent between CY 2003 and CY 2007.
Currently, the APC groups reflect a modest degree of packaging,
including packaged payment for minor ancillary services, inexpensive
drugs, medical supplies, implantable devices, capital-related costs,
operating and recovery room use, and anesthesia services. Bundling
payment for multiple significant services provided in the same hospital
outpatient encounter or during an episode of care is not currently a
common OPPS payment practice, because the APC groups generally reflect
only the modest packaging associated with individual procedures or
services. Unconditionally packaged services with HCPCS codes are
identified by the status indicator ``N.'' Conditionally packaged
services, specifically those services whose payment is packaged unless
specific criteria for separate payment are met, are assigned to status
indicator ``Q.'' To the extent possible, hospitals may use HCPCS codes
to report any packaged services that were performed, consistent with
CPT or CMS coding guidelines, but packaged costs also may be uncoded
and included in specific revenue code charges. Hospitals include
charges for packaged services on their claims, and the costs associated
with those packaged services are then added into the costs of
separately payable procedures on the same claims in establishing
payment rates for the separately payable services.
Packaging and bundling payment for multiple interrelated services
into a single payment creates incentives for providers to furnish
services in the most efficient way by enabling hospitals to manage
their resources with maximum flexibility, thereby encouraging long-term
cost containment. For example, where there are a variety of supplies
that could be used to furnish a service, some of which are more
expensive than others, packaging encourages hospitals to use the least
expensive item that meets the patient's needs, rather than to routinely
use a more expensive item. Packaging also encourages hospitals to
negotiate carefully with manufacturers and suppliers to reduce the
costs of purchased items and services or to explore alternative group
purchasing arrangements, thereby encouraging the most economical health
care. Similarly, packaging encourages hospitals to establish protocols
that ensure that services are furnished only when they are important
and to carefully scrutinize the services ordered by practitioners to
maximize the efficient use of hospital resources. Finally, packaging
payments into larger payment bundles promotes the stability of payment
for services over time. Packaging also may reduce the importance of
refining service-specific payment because there is more opportunity for
hospitals to average payment across higher cost cases requiring many
ancillary services and lower cost cases requiring fewer ancillary
services.
b. Addressing Growth in OPPS Volume and Spending
Creating additional incentives for providing only necessary
services in the most efficient manner is of vital importance to
Medicare today, in view of the recent explosion of growth in program
expenditures for hospital outpatient services paid under the OPPS. As
illustrated in Table 5 below, total spending has been growing at a rate
of roughly 10 percent per year under the OPPS, and the Medicare
Trustees project that total spending under the OPPS will increase by
more than $3 billion from CY 2007 through CY 2008 to nearly $35
billion. Implementation of the OPPS has not

[[Page 42650]]

slowed outpatient spending growth over the past few years; in fact,
double-digit spending growth has generally been occurring. We are
greatly concerned with this rate of increase in program expenditures
under the OPPS.

Table 5.--Growth in Expenditures Under OPPS From CY 2001-CY 2008
[Projected Expenditures for CY 2006-CY 2008, in Billions]
----------------------------------------------------------------------------------------------------------------
OPPS growth CY 2001 CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008
----------------------------------------------------------------------------------------------------------------
Incurred Cost................... 17.702 19.561 21.156 23.866 26.572 29.338 31.641 34.960
Percent Increase................ ........ 10.5 8.2 12.8 11.3 10.4 7.8 10.5
----------------------------------------------------------------------------------------------------------------
Source: CY 2007 Medicare Trustees' Report.

As with the other Medicare fee-for-service payment systems that are
experiencing rapid spending growth, brisk growth in the intensity and
utilization of services is the major reason for the current rates of
growth in the OPPS, rather than general price or enrollment changes.
Table 6 below illustrates the increases in the volume and intensity of
hospital outpatient services over the past several years.

Table 6.--Percent Increase in Volume and Intensity of Hospital Outpatient Services
----------------------------------------------------------------------------------------------------------------
CY 2006 CY 2007 CY 2008
CY 2002 CY 2003 CY 2004 CY 2005 (Est.) (Est.) (Est.)
----------------------------------------------------------------------------------------------------------------
Percent Increase................................. 3.5 2.5 7.6 7.4 8.6 6.4 5.8
----------------------------------------------------------------------------------------------------------------
Source: CY 2007 Medicare Trustees' Report.

For hospital outpatient services, the volume and intensity of
services are estimated to have continued to increase significantly in
recent years, at a rate of 8.6 percent between CY 2005 and CY 2006, the
last two completed calendar years. As we discussed in the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68189 through 68190), the
rapid growth in utilization of services under the OPPS shows that
Medicare is paying mainly for more services each year, regardless of
their quality or impact on beneficiary health. In its March 2007 Report
to Congress (pages 55 and 56), MedPAC confirmed that much of the growth
in service volume from 2003 to 2005 resulted from increases in the
number of services per beneficiary who received care, rather than from
increases in the number of beneficiaries served. The MedPAC found that
while the rate of growth in service volume declined over that time
period, the complexity of services, defined as the sum of the relative
payment weights of all OPPS services divided by the volume of all
services, increased, and that most of the growth was attributable to
the insertion of devices and the provision of complex imaging services.
The MedPAC further found that regression analysis suggested that
relatively complex hospital outpatient services may be more profitable
for hospitals than less complex services. In addition, its analysis
indicated that favorable payments for complex services give hospitals
an incentive to provide more of those complex services rather than
fewer basic services, which increases overall service complexity. The
MedPAC expressed concern about this relationship and concluded that the
historically large increases in outpatient volume and service
complexity suggest a need to recalibrate the OPPS. In the future,
MedPAC plans to examine options for recalibrating the payment system to
accurately match payments to the costs of individual services (Medicare
Payment Advisory Commission Report to the Congress: Medicare Payment
Policy, March 2007, pages 55 and 56).
As proposed for the CY 2007 OPPS and finalized for the CY 2009
OPPS, we developed a plan to promote higher quality services under the
OPPS, so that Medicare spending would be directed toward those higher
quality services (71 FR 68189 through 68197). We believe that Medicare
payments should encourage physicians and other providers in their
efforts to achieve better health outcomes for Medicare beneficiaries at
a lower cost. In the CY 2007 OPPS/ASC final rule with comment period,
we discussed the concept of ``value-based purchasing'' in the OPPS as
well as in other Medicare payment systems. ``Value-based purchasing''
may use a range of incentives to achieve identified quality and
efficiency goals, as a means of promoting better quality of care and
more effective resource use in the Medicare payment systems. In
developing the concept of value-based purchasing for Medicare, we have
been working closely with stakeholder partners.
We continue to believe that the collection and submission of
performance data and the public reporting of comparative information
are strong incentives for hospital accountability in general and
quality improvement in particular, while encouraging the most efficient
and effective care. Measurement and reporting can focus the attention
of hospitals and consumers on specific goals and on hospitals'
performance relative to those goals. Development and implementation of
performance measurement and reporting by hospitals can thus produce
quality improvement in health care delivery. Hospital performance
measures may also provide a foundation for performance-based rather
than volume-based payments.
In the CY 2007 OPPS/ASC final rule with comment period, as a first
step in the OPPS toward value-based purchasing, we finalized a policy
that would employ our equitable adjustment authority under section
1833(t)(2)(E) of the Act to establish an OPPS Reporting Hospital
Quality Data for Annual Payment Update (RHQDAPU) program based on
measures specifically developed to characterize the quality of
outpatient care (71 FR 68197). We finalized implementation of the
program for CY 2009, when we would implement a 2.0 point reduction to
the OPPS conversion factor update for those hospitals that do not meet
the specific requirements of the CY 2009 OPPS RHQDAPU program. We
described the

[[Page 42651]]

CY 2009 program which would be based upon CY 2008 hospital reporting of
appropriate measures of the quality of hospital outpatient care that
have been carefully developed and evaluated, and endorsed as
appropriate, with significant input from stakeholders. We reiterated
our belief that ensuring that Medicare beneficiaries receive the care
they need and that such services are of high quality are the necessary
initial steps to incorporating value-based purchasing into the OPPS. We
explained that we are specifically seeking to encourage care that is
both efficient and of high quality in the HOPD.
Subsequent to the publication of the CY 2007 OPPS/ASC final rule
with comment period, section 109(b) of the MIEA-TRHCA specifies that in
the case of a subsection (d) hospital (defined under section
1886(d)(1)(B) of the Act as hospitals that are located in the 50 States
or the District of Columbia other than those categories of hospitals or
hospital units that are specifically excluded from the IPPS, including
psychiatric, rehabilitation, long-term care, children's, and cancer
hospitals or hospital units) that does not submit to the Secretary the
quality reporting data required for CY 2009 and each subsequent year,
the OPPS annual update factor shall be reduced by 2.0 percentage
points. The quality reporting program proposed for CY 2008 according to
this provision is referred to as the Hospital Outpatient Quality Data
Reporting Program (HOP QDRP) and is discussed in detail in section
XVII. of this proposed rule.
As the next step in our movement toward value-based purchasing
under the OPPS and to complement the HOP QDRP for CY 2009, with measure
reporting beginning in CY 2008, we believe it is important to initiate
specific payment approaches to explicitly encourage efficiency in the
hospital outpatient setting that we believe will control future growth
in the volume of OPPS services. While the HOP QDRP will encourage the
provision of higher quality hospital outpatient services that lead to
improved health outcomes for Medicare beneficiaries, we believe that
more targeted approaches are also necessary to encourage increased
hospital efficiency. Two alternatives we have considered that would be
feasible under current law include establishing a methodology to
measure the growth in volume and reduce OPPS payment rates to account
for unnecessary increases in volume or developing payment incentives
for hospitals to ensure that they provide necessary services as
efficiently as possible.
With respect to the first alternative, section 1833(t)(2)(F) of the
Act requires us to establish a methodology for controlling unnecessary
increases in the volume of covered OPPS services, and section
1833(t)(9)(C) of the Act authorizes us to adjust the update to the
conversion factor if, under section 1833(t)(2)(F) of the Act, we
determine that there is growth in volume that exceeds established
tolerances. As we indicated in the September 8, 1998 proposed rule
proposing the establishment of the OPPS (63 FR 47585), we considered
creating a system that mirrors the sustainable growth rate (SGR)
methodology applied to the MPFS update to control unnecessary growth in
service volume. However, implementing such a system could have the
potentially undesirable effect of escalating service volume as payment
rates stagnate and hospital costs rise, thus actually resulting in a
growth in volume rather than providing an incentive to control volume.
Therefore, this approach to addressing the volume growth under the OPPS
could inadvertently result in the exact opposite of our desired
outcome.
The second alternative we considered is to expand the packaging of
supportive ancillary services and ultimately bundle payment for
multiple independent services into a single OPPS payment. We believe
that this would create incentives for hospitals to monitor and adjust
the volume and efficiency of services themselves, by enabling them to
manage their resources with maximum flexibility. Instead of external
controls on volume, we believe that it is preferable for the OPPS to
create payment incentives for hospitals to carefully scrutinize their
service patterns to ensure that they furnish only those services that
are necessary for high quality care and to ensure that they provide
care as efficiently as possible. Specifically, we believe that
increased packaging and bundling are the most appropriate payment
strategies to establish such incentives in a prospective payment
system, and that this approach is clearly preferable to the
establishment of an SGR or other methodology that seeks to control
spending by addressing significant growth in volume and program
spending with lower payments.
In its October 6, 2006 letter of comment on the CY 2007 OPPS/ASC
proposed rule, MedPAC urged us to establish broader payment bundles in
both the revised ASC and hospital outpatient prospective payment
systems to promote efficient resource use and better align the two
payment systems. In particular, our proposal for the CY 2008 revised
ASC payment system proposed to package payment for all items and
services directly related to the provision of covered surgical
procedures into the ASC facility payment for the associated surgical
procedure (71 FR 49468). These other items and services included all
drugs, biologicals, contrast agents, implantable devices, and
diagnostic services such as imaging. Because a number of these items
and services are separately paid under the OPPS and the proposal
included the establishment of most ASC payment weights based on the
procedures' corresponding OPPS payment weights, MedPAC encouraged us to
align the payment bundles in the two payment systems by increasing the
size of the payment bundles under the OPPS.
Moreover, MedPAC staff indicated in testimony at the January 9,
2007 MedPAC public meeting that the growth in OPPS spending and volume
raises questions about whether the OPPS should be changed to encourage
greater efficiency (page 390 of the January 9, 2007 MedPAC meeting
transcript available at http://www.medpac.gov). MedPAC staff explained

at that time that MedPAC intends to perform a long-term assessment of
the design of the OPPS, including considering the bundling of payments
for procedures and visits furnished over a period of time into a single
payment, assessing whether there should be an expenditure target for
hospital outpatient services, evaluating whether payments for multiple
imaging services provided in the same session should be discounted, and
reviewing the methodology used by CMS to determine relative payment
weights for hospital outpatient services. We welcome MedPAC's study of
these areas, particularly with regard to how we might develop
appropriate payment rates for larger bundles of services.
Because we believe it is important that the OPPS create enhanced
incentives for hospitals to provide only necessary, high quality care
and to provide that care as efficiently as possible, we have given
considerable thought to how we could increase packaging under the OPPS
in a manner that would not place hospitals at substantial financial
risk but which would create incentives for efficiency and volume
control, while providing hospitals with flexibility to provide care in
the most appropriate way for each Medicare beneficiary. We are
considering the possibility of greater bundling of payment for major
hospital outpatient services, which could result in establishing OPPS
payments for episodes of care, and for this reason we particularly
welcome MedPAC's

[[Page 42652]]

exploration of how such an approach might be incorporated into the OPPS
payment methodology. We are particularly concerned about the potential
for shifting higher cost bundled services to other ambulatory settings,
and we welcome ideas on deterring such activity. We are currently
considering the complex policy issues related to the possible
development and implementation of a bundled payment policy for hospital
outpatient services that involves significant services provided over a
period of time which could be paid through an episode-based payment
methodology, but we consider this possible approach to be a long-term
policy objective. We encourage public comments regarding the specific
hospital outpatient services, clinical and financial issues,
ratesetting methodologies, and operational challenges we should
consider in our exploratory work in this area.
We also are examining how we might possibly establish payments for
same-day care encounters, building upon the current use of APCs for
payment through greater packaging of supportive ancillary services.
This could include conditional packaging of supportive ancillary
services into payment for the procedure that is the reason for the OPPS
encounter (for example, diagnostic tests performed on the day of a
scheduled procedure). Another approach could include creation of
composite APCs for frequently performed combinations of surgical
procedures (for example, one APC payment for multiple cardiac
electrophysiologic procedures performed on the same date). Not only
could these encounter-based payment groups create enhanced incentives
for efficiency, but they may also enable us to utilize for ratesetting
many of the multiple procedure claims that are not now used in our
establishment of OPPS rates for single procedures. (We refer readers to
section II.A.1.b. of this proposed rule for a more detailed discussion
of the treatment of multiple procedure claims in the ratesetting
process.) For CY 2008, we are proposing two new composite APCs for CY
2008 payment of combinations of services in two clinical care areas, as
discussed under section II.A.4.d. of this proposed rule. We look
forward to receiving public comment on this proposal as we explore the
possibility of moving toward basing OPPS payment on larger packages and
bundles of services provided in a single hospital outpatient encounter.
We intend to involve the APC Panel in our future exploration of how
we can develop encounter-based and episode-based payment groups, and we
look forward to the findings and recommendations of MedPAC in this
area. This is a significant change in direction for the OPPS, and we
specifically seek the recommendations of all stakeholders with regard
to which ancillary services could be packaged and those combinations of
services provided in a single encounter or over time that could be
bundled together for payment. We are hopeful that expanded packaging
and, ultimately, greater bundling under the OPPS may result in
sufficient moderation of growth in volume and spending that further
controls would not be needed. However, if spending were to continue to
escalate at the current rates, even after we have exhausted our options
for increased packaging and bundling, we are considering multiple
options under our authority to address these issues, including the
possibility of imposing external controls that could link growth in
volume to reduced payments under the OPPS in the future.
c. Proposed Packaging Approach
With the exception of the two composite APCs that we are proposing
for CY 2008 and discuss in detail in section II.A.4.d. of this proposed
rule, we are not currently prepared to propose an episode-based or
fully developed encounter-based payment methodology for CY 2008 as our
next step in value-based purchasing for the OPPS. However, in reviewing
our approach to revising payment packages and bundles, we have examined
services currently provided under the OPPS, looking for categories of
ancillary items and services for which we believe payment could be
appropriately packaged into larger payment packages for the encounter.
For this first step in creating larger payment groups, we examined the
HCPCS code definitions (including CPT code descriptors) to see whether
there were categories of codes for which packaging would be a logical
expansion of the longstanding packaging policy that has been a part of
the OPPS since its inception. In general, we have often packaged the
costs of selected HCPCS codes into payment for services reported with
other HCPCS codes where we believed that one code reported an item or
service that was integral to the provision of care that was reported by
another HCPCS code.
As an example of a previous change in the OPPS packaging status for
a HCPCS code that is ancillary and supportive, under the CY 2007 OPPS,
we note that CPT code 93641 (Electrophysiologic evaluation of single or
dual chamber pacing cardioverter defibrillator leads including
defibrillation threshold evaluation (induction of arrhythmia, evaluate
of sensing an pacing for arrhythmia termination) at the time of initial
implantation or replacement; with testing of single chamber or dual
chamber cardioverter defibrillator) went from separate to packaged
payment. This service is only performed during the course of a surgical
procedure for implantation or replacement of implantable cardioverter-
defibrillator (ICD) leads, and these surgical implantation procedures
are currently assigned to APC 0106 (Insertion/Replacement/Repair of
Pacemaker and/or Electrodes) and APC 0108 (Insertion/Replacement/Repair
of Cardioverter-Defibrillator Leads). We considered the
electrophysiologic evaluation service (CPT code 93641) to be an
ancillary supportive service that may be performed only in the same
operative session as a procedure that could otherwise be performed
independently of the electrophysiologic evaluation service. In this
particular case, the APC Panel recommended for CY 2007 that we package
payment for this diagnostic test and we adopted that recommendation for
the CY 2007 OPPS. Making this payment change in this specific case
resulted in the availability of significantly more claims data and,
therefore, establishment of more valid and representative estimated
median costs for the lead insertion and electrophysiologic evaluation
services furnished in the single hospital encounter.
In the case of much of the care furnished in the HOPD, we believe
that it is appropriate to view a complete service as potentially being
reported by a combination of two or more HCPCS codes, rather than a
single code, and to establish payment policy that supports this view.
Ideally, we would consider a complete HOPD service to be the totality
of care furnished in a hospital outpatient encounter or in an episode
of care. In general, we believe that it is particularly appropriate to
package payment for those items and services that are typically
ancillary and supportive into the payment for the primary diagnostic or
therapeutic modalities in which they are used. As a significant first
step towards creating payment units that represent larger units of
service, we examined whether there are categories of HCPCS codes that
are typically ancillary and supportive to diagnostic and therapeutic
modalities.
Specifically, as our initial substantial step toward creating
larger payment groups for hospital outpatient care, we are proposing to
package payment for

[[Page 42653]]

items and services in the seven categories listed below into the
payment for the primary diagnostic or therapeutic modality to which we
believe these items and services are typically ancillary and
supportive. We specifically chose these categories of HCPCS codes for
packaging because we believe that the items and services described by
the codes in these categories are the HCPCS codes that are typically
ancillary and supportive to a primary diagnostic or therapeutic
modality and, in those cases, are an integral part of the primary
service they support. We are proposing to assign status indicator ``N''
to those HCPCS codes that we believe are always integral to the
performance of the primary modality and to package their costs into the
costs of the separately paid primary services with which they are
billed. We are proposing to assign status indicator ``Q'' to those
HCPCS codes that we believe are typically integral to the performance
of the primary modality and to package payment for their costs into the
costs of the separately paid primary services with which they are
usually billed but to pay them separately in those uncommon cases in
which no other separately paid primary service is furnished in the
hospital outpatient encounter.
For ease of reference in our subsequent discussion in each of the
seven areas, we refer to the HCPCS codes for which we are proposing to
package (or conditionally package) payment as dependent services. We
use the term ``independent service'' to refer to the HCPCS codes that
represent the primary therapeutic or diagnostic modality into which we
are proposing to package payment for the dependent service. We note
that, in future years as we consider the development of larger payment
groups that more broadly reflect services provided in an encounter or
episode of care, it is possible that we might propose to bundle payment
for a service that we now refer to as ``independent'' in this proposed
rule.
Specifically, we are proposing to package the payment for HCPCS
codes describing the dependent items and services in the following
seven categories into the payment for the independent services with
which they are furnished:
Guidance services.
Image processing services.
Intraoperative services.
Imaging supervision and interpretation services.
Diagnostic radiopharmaceuticals.
Contrast media and.
Observation services.
We identify the HCPCS codes we are proposing to package for CY
2008, explain our rationale for proposing to package the codes in these
categories, provide examples of how HCPCS and APC median costs and
payments would change under these proposals, and discuss the impact of
these changes in the discussion below under each category.
The median costs of services at the HCPCS level for many separately
paid procedures change as a result of this proposal because we are
proposing to change the composition of the payment packages associated
with the HCPCS codes. Moreover, as a result of changes to the HCPCS
median costs, we are proposing to reassign some HCPCS codes to
different clinical APCs for CY 2008 to avoid 2 times violations and to
ensure continuing clinical and resource homogeneity of the APCs.
Therefore, the APC median costs change not only as a result of the
increased packaging itself but also as a result of the migration of
HCPCS codes into and out of APCs through APC reconfiguration. The file
of HCPCS code and APC median costs resulting from our proposal is found
under supporting documentation for this proposed rule on the CMS Web
site at http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage
.

Review of the HCPCS median costs indicates that, while the proposed
median costs rise for some HCPCS codes as a result of increased
packaging that expands the costs included in the payment packages,
there are also cases in which the proposed median costs decline as a
result of these proposed changes. While it seems intuitive to believe
that the proposed median costs of the remaining separately paid
services should rise when the costs of services previously paid
separately are packaged into larger payment groups, it is more
challenging to understand why the proposed median costs of separately
paid services would not change or would decline when the costs of
previously paid services are packaged.
Medians are generally more stable than means because they are less
sensitive to extreme observations, but medians typically do not reflect
subtle changes in cost distributions. The OPPS' use of medians rather
than means usually results in relative weight estimates being less
sensitive to packaging decisions. Specifically, the median cost for a
particular independent procedure generally will be higher as a result
of added packaging, but also could change little or be lower because
median costs typically do not reflect small distributional changes and
also because changes to the packaged HCPCS codes affect both the number
and composition of single bills and the mix of hospitals contributing
those single bills. Such a decline, no change, or an increase in the
median cost at the HCPCS code level could result from a change in the
number of single bills used to set the median cost. With greater
packaging, more ``natural'' single bills are created for some codes but
fewer ``pseudo'' single bills are created. Thus, some APCs gain single
bills and some lose single bills due to packaging changes, as well as
to the reassignment of some codes to different APCs. When more claims
from a different mix of providers are used to set the median cost for
the HCPCS code, the median cost could move higher or lower within the
array of per claim costs.
Similarly, proposed revisions to APC assignments that are necessary
to resolve 2 times violations that could arise as a result of changes
in the HCPCS median cost for one or more codes due to additional
packaging may also result in increases or decreases to APC median costs
and, therefore, to increases or decreases in the payments for HCPCS
codes that would not be otherwise affected except for the CY 2008
proposed packaging approach for the seven categories of items and
services.
We have examined the proposed aggregate impact of making these
changes on payment for CY 2008. Because the OPPS is a budget neutral
payment system in which the amount of payment weight in the system is
annually adjusted for changes in expenditures created by changes in APC
weights and codes (but is not currently adjusted based on estimated
growth in service volume), the effects of the packaging changes we are
proposing result in changes to scaled weights and, therefore, to the
payment rates for all separately paid procedures. These changes result
from both shifts in median costs as a result of increased packaging,
changes in multiple procedure discounting patterns, and a higher weight
scaler that is applied to all unscaled APC weights. (We refer readers
to section II.A.3. of this proposed rule for an explanation of the
weight scaler.) In a budget neutral system, the monies previously paid
for services that are now proposed to be packaged are not lost, but are
redistributed to all other services. A higher weight scaler would
increase payment rates relative to observed median costs for
independent services by redistributing the lost weight of packaged
items that historically have

[[Page 42654]]

been paid separately and the lost weight when the median costs of
independent services do not completely reflect the full incremental
cost of the packaged services. The impact of this proposed change on
proposed CY 2008 OPPS payments is discussed in section XXII B. of this
proposed rule, and the impact on various classifications of hospitals
is shown in Column 2B in Table 67 in that section.
We estimate that our CY 2008 proposal would redistribute
approximately 1.2 percent of the estimated CY 2007 base year
expenditures under the OPPS. The monies associated with this
redistribution would be in addition to any increase that would
otherwise occur due to a proposed higher median cost for the APC as a
result of the expanded payment package. If the relative weight for a
particular APC decreases as a result of the proposed packaging
approach, the increased weight scaler may or may not result in a
relative weight that is equal to or greater than the relative weight
that would occur without the proposed packaging approach. In general,
the packaging that we are proposing would have more effect on payment
for some services than on payment for others because the dependent
items and services that we are proposing for packaging are furnished
more often with some independent services than with others. However,
because of the amount of payment weight that would be redistributed by
this proposal, there would be some impact on payments for all OPPS
services whose rates are set based on payment weights, and the impact
on any given hospital would vary based on the mix of services furnished
by the hospital.
The following discussion separately addresses each of the seven
categories of items and services for which we are proposing to package
payment under the CY 2008 OPPS as part of our packaging proposal. Many
codes that we are proposing to package for CY 2008 could fit into more
than one of those seven categories. For example, CPT code 93325
(Doppler echocardiography color flow velocity mapping (List separately
in addition to codes for echocardiography)) could be included in both
the intraoperative and image processing categories. Therefore, for
organizational purposes, both to ensure that each code appears in only
one category and to facilitate discussion of our CY 2008 proposal, we
have created a hierarchy of categories that determines which category
each code appropriately falls into. This hierarchy is organized from
the most clinically specific to the most general type of category. The
hierarchy of categories is as follows: guidance services, image
processing services, intraoperative services, and imaging supervision
and interpretation services. Therefore, while CPT code 93325 may
logically be grouped with either imaging processing services or
intraoperative services, it is treated as an image processing service
because that group is more clinically specific and precedes
intraoperative services in the hierarchy. We did not believe it was
necessary to include diagnostic radiopharmaceuticals, contrast media,
or observation categories in this list because those services generally
map to only one of those categories. We note that there is no cost
estimation or payment implications related to the assignment of a HCPCS
code for purposes of discussion to any specific category.
(1) Guidance Services
We are proposing to package payment for HCPCS guidance codes for CY
2008, specifically those codes that are reported for supportive
guidance services, such as ultrasound, fluoroscopic, and stereotactic
navigation services, that aid the performance of an independent
procedure. We performed a broad search for such services, relying upon
the American Medical Association's (AMA's) CY 2007 book of CPT codes
and the CY 2007 book of Level II HCPCS codes, which identified specific
HCPCS codes as guidance codes. Moreover, we performed a clinical review
of all HCPCS codes to capture additional codes that are not necessarily
identified as ``guidance'' services but describe services that provide
directional information during the course of performing an independent
procedure. For example, we are proposing to package CPT code 61795
(Stereotactic computer-assisted volumetric (navigational) procedure,
intracranial, extracranial, or spinal (List separately in addition to
code for primary procedure)) because we consider it to be a guidance
service that provides three-dimensional information to direct the
performance of intracranial or other diagnostic or therapeutic
procedures. We also included HCPCS codes that existed in CY 2006 but
were deleted and were replaced in CY 2007. We included the CY 2006
HCPCS codes because we are proposing to use the CY 2006 claims data to
calculate the CY 2008 OPPS median costs on which the CY 2008 payment
rates would be based. Many, although not all, of the CPT guidance codes
we identified are designated by CPT as add-on codes that are to be
reported in addition to the CPT code for the primary procedure. We also
note that there are a number of CPT codes describing independent
surgical procedures but which the code descriptors indicate that
guidance is included in the code reported for the surgical procedure if
it is used and, therefore, packaged payment is already made for the
associated guidance service under the OPPS. For example, the
independent procedure described by CPT code 55873 (Cryosurgical
ablation of the prostate (includes ultrasonic guidance for interstitial
cryosurgical probe placement)) already includes the ultrasound guidance
that may be used. We believe packaging payment for every guidance
service under the OPPS would provide consistently packaged payment for
all these services that are used to direct independent procedures, even
if they are currently separately reported.
Because these dependent guidance procedures support the performance
of an independent procedure and they are generally provided in the same
operative session as the independent procedure, we believe that it
would be appropriate to package their payment into the OPPS payment for
the independent procedure performed. However, guidance services differ
from some of the other categories of services that we are proposing to
package for CY 2008. Hospitals sometimes may have the option of
choosing whether to perform a guidance service immediately preceding or
during the main independent procedure, or not at all, unlike many of
the imaging supervision and interpretation services, for example, which
are generally always reported when the independent procedure is
performed. Once a hospital decides that guidance is appropriate, the
hospital may have several options regarding the type of guidance
service that can be performed. For example, when inserting a central
venous access device, hospitals have the option of using no guidance,
ultrasound guidance, or fluoroscopic guidance, and the selection in any
specific case will depend upon the specific clinical circumstances of
the device insertion procedure. In fact, the historical hospital claims
data demonstrate that various guidance services for the insertion of
these devices, which have historically received packaged payment under
the OPPS, are used frequently for the insertion of vascular access
devices.
Thus, we recognize hospitals have several options regarding the
performance and types of guidance services they use. However, we
believe that hospitals utilize the most appropriate form of guidance
for the specific procedure that is performed.

[[Page 42655]]

We do not want to create payment incentives to use guidance for all
independent procedures or to provide one form of guidance instead of
another. Therefore, by proposing to package payment for all forms of
guidance, we are specifically encouraging hospitals to utilize the most
cost effective and clinically advantageous method of guidance that is
appropriate in each situation by providing them with the maximum
flexibility associated with a single payment for the independent
procedure. Similarly, hospitals may appropriately not utilize guidance
services in certain situations based on clinical indications.
Because guidance services can be appropriately reported in
association with many independent procedures, under our proposed
packaging of guidance services for CY 2008, the costs associated with
guidance services would be mapped to a larger number of independent
procedures than some other categories of codes that we are proposing to
package. For example, CPT code 76001 (Fluoroscopy, physician time more
than one hour, assisting a non-radiologic physician (e.g.,
nephrostolithotomy, ERCP, bronchoscopy, transbronchial biopsy)) can be
reported with a wide range of services. According to the CPT code
descriptor, these procedures include nephrostolithotomy, which may be
reported with CPT code 50080 (Percutaneous nephrostolithotomy or
pyelostolithotomy, with or without dilation, endoscopy, lithotripsy,
stenting, or basket extraction; up to 2 cm), and endoscopic retrograde
cholangiopancreatography, which may be reported with CPT code 43260
(Endoscopic retrograde cholangiopancreatography (ERCP); diagnostic,
with or without collection of specimen(s) by brushing or washing
(separate procedure)). Therefore, the cost of the fluoroscopic guidance
would be reflected in the payment for each of these independent
services, in addition to numerous other procedures, rather than in the
payment for only one or two independent services, as is the case for
some of the other categories of codes that we are proposing to package
for CY 2008.
In addition, because independent procedures such as CPT code 20610
(Arthrocentesis, aspiration and/or injection; major joint or bursa
(e.g., shoulder, hip, knee joint, subacromial bursa)) may be reported
with or without guidance, the cost for the guidance will be reflected
in the median cost for the independent procedure as a function of the
frequency that guidance is reported with that procedure. As we stated
previously, the median cost for a particular independent procedure
generally will be higher as a result of added packaging, but also could
change little or be lower because median costs typically do not reflect
small distributional changes and because changes to the packaged HCPCS
codes affect both the number and composition of single bills and the
mix of hospitals contributing those single bills. In fact, the CY 2007
CPT book indicates that if guidance is performed with CPT code 20610,
it may be appropriate to bill CPT code 76942 (Ultrasonic guidance for
needle placement (e.g. biopsy, aspiration, injection, localization
device), imaging supervision and interpretation); 77002 (Fluoroscopic
guidance for needle placement (e.g. biopsy, aspiration, injection,
localization device)); 77012 (Computed tomography guidance for needle
placement (e.g. biopsy, aspiration, injection, localization device),
radiological supervision and interpretation); or 77021 (Magnetic
resonance guidance for needle placement (e.g., for biopsy, needle
aspiration, injection, or placement of localization device)
radiological supervision and interpretation). The CY 2007 CPT book also
implies that it is not always clinically necessary to use guidance in
performing an arthrocentesis described by CPT code 20610.
The guidance procedures that we are proposing to package for CY
2008 vary in their resource costs. Resource cost was not a factor we
considered when proposing to package guidance procedures. Notably, most
of the guidance procedures are relatively low cost in comparison to the
independent services they frequently accompany.
The codes we are proposing to identify as guidance codes for CY
2008 that would receive packaged payment are listed in Table 8 below.
Several of these codes, including CPT code 76937 (Ultrasound
guidance for vascular access requiring ultrasound evaluation of
potential access sites, documentation of selected vessel patency,
concurrent realtime ultrasound visualization of vascular needle entry,
with permanent recording and reporting (List separately in addition to
code for primary procedure)), are already unconditionally (that is,
always) packaged under the CY 2007 OPPS, where they have been assigned
to status indicator ``N.'' Payment for these services is currently made
as part of the payment for the separately payable, independent services
with which they are billed. No separate payment is made for services
that we have assigned to status indicator ``N.'' We are not proposing
status indicator changes for the five guidance procedures that were
unconditionally packaged for CY 2007.
We are proposing to change the status indicators for 31 guidance
procedures from separately paid to unconditionally packaged (status
indicator ``N'') for the CY 2008 OPPS. We believe that these services
are always integral to and dependent upon the independent services that
they support and, therefore, their payment would be appropriately
packaged because they would generally be performed on the same date and
in the same hospital as the independent services.
We are proposing to change the status indicator for 1 guidance
procedure from separately paid to conditionally packaged (status
indicator ``Q''), and we will treat it as a ``special'' packaged code
for the CY 2008 OPPS, specifically, CPT code 76000 (Fluoroscopy
(separate procedure), up to 1 hour physician time, other than 71023 or
71034 (e.g. cardiac fluoroscopy)). This code was discussed in the past
with the Packaging Subcommittee of the APC Panel which determined that,
consistent with its code descriptor as a separate procedure, this
procedure could sometimes be provided alone, without any other services
on the claim. We believe that this procedure would usually be provided
by a hospital as guidance in conjunction with another significant
independent procedure on the same date of service but may occasionally
be provided without another independent service. As a ``special''
packaged code, if the fluoroscopy service were billed without any other
service assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X''
reported on the same date of service, under our proposal we would not
treat the fluoroscopy procedure as a dependent service for purposes of
payment. If we were to unconditionally package payment for this
procedure, treating it as a dependent service, hospitals would receive
no payment at all when providing this service alone, although the
procedure would not be functioning as a guidance service in that case.
However, according to our proposal, its conditionally packaged status
with its designation as a ``special'' packaged code would allow payment
to be provided for this ``Q'' status fluoroscopy procedure, in which
case it would be treated as an independent service under these limited
circumstances. On the other hand, when the fluoroscopy service is
furnished as a guidance procedure on the same day and in the same
hospital as independent, separately paid services that are assigned to
status indicator ``S,''

[[Page 42656]]

``T,'' ``V,'' or ``X,'' we are proposing to package payment for it as a
dependent service. In all cases, we are proposing that hospitals that
furnish independent services on the same date as dependent guidance
services must bill them all on the same claim. We believe that when
dependent guidance services and independent services are furnished on
the same date and in the same facility, they are part of a single
complete hospital outpatient service that is reported with more than
one HCPCS code, and no separate payment should be made for the guidance
service which supports the independent service.
We have calculated the median costs on which the proposed CY 2008
payment rates are based using the packaging status of each code as
provided in Table 8 below. As we discussed earlier in more detail, this
has the effect of both changing the median cost for the independent
service into which the cost of the dependent service is packaged and
also of redistributing payment that would otherwise have been made
separately for the service we are proposing to newly package for CY
2008.
For example, CPT code 76940 (Ultrasound guidance for, and
monitoring of, parenchymal tissue ablation) is assigned to APC 0268
(Level I Ultrasound Guidance Procedures) for CY 2007. We are proposing
to discontinue APC 0268 for CY 2008 and to provide packaged payment for
the HCPCS codes that were previously assigned to APC 0268. CPT code
76940 was billed with CPT code 47382 (Ablation, one or more liver
tumor(s), percutaneous, radiofrequency) 148 times in the CY 2008 OPPS
proposed rule claims data, and 42 percent of the claims for CPT code
76940 reported CPT code 47382 on the same date of service. Similarly,
we note that almost 19 percent of the claims for CPT code 47382 also
reported the ultrasound guidance service described by CPT code 76940.
Under our proposed policy for the CY 2008 OPPS, we are proposing to
expand the packaging associated with CPT code 47382 so that payment for
the ultrasound guidance, if performed, would be packaged into the
payment for the liver tumor ablation. Specifically, we would package
payment for CPT code 76940 so that under the CY 2008 OPPS, the
dependent procedure, in this case ultrasound guidance, would receive
packaged payment through the separate OPPS payment for the independent
procedure, in this case, the liver tumor ablation. The payment rates
for this example associated with our CY 2008 proposal are outlined in
Table 7 below.
In this case, the proposed CY 2008 median cost for APC 0423 (Level
II Percutaneous Abdominal and Biliary Procedures) to which CPT code
47382 is assigned is $2,775.33, while the CY 2007 median cost of APC
0423 is $2,283.08 and of APC 0268 is $72.61. However, as discussed in
section II.A.4.c. of this proposed rule concerning our general proposed
packaging approach, the added effect of the budget neutrality
adjustment that would result from the aggregate effects of the CY 2008
packaging proposal (were there no further budget neutrality adjustment
for other reasons) significantly changes the final payment rates
relative to median cost estimates. Table 7 presents a comparison of the
CY 2007 payment for CPT codes 47382 and 76940, where CPT code 76940 is
paid separately, to the CY 2008 payment we are proposing for CPT codes
47382 and 76940, where payment for CPT code 76940 would be packaged.
This example cannot demonstrate the overall impact of packaging
guidance services on payment to any given hospital because each
individual hospital's case-mix and billing patterns would be different.
The overall impact of packaging payment for CPT code 76940, as well as
all the other proposed packaging changes we are proposing for CY 2008,
can only be assessed in the aggregate for classes of hospitals. Section
XXII.B. of this proposed rule displays the overall impact of APC weight
recalibration and packaging changes we are proposing by classes of
hospitals, and the OPPS Hospital-Specific Impacts--Provider-Specific
Data file presents our estimates of CY 2008 hospital payment for those
hospitals we include in our ratesetting and payment simulation
database. The hospital-specific impacts file can be found on the CMS
Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under

supporting documentation for this proposed rule.

Table 7.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Codes 76940 and 47382
----------------------------------------------------------------------------------------------------------------
Sum of CY 2007 Sum of CY 2008
payment (76940 proposed
HCPCS code Short descriptor paid payment (76940
separately) packaged)
----------------------------------------------------------------------------------------------------------------
76940..................................... Us guide, tissue ablation spine $73.04 $0.00
(dependent service).
47382..................................... Percut ablate liver rf (independent 2,296.47 2,810.08
service).
-------------------------------
Total Payment......................... .................................... 2,369.51 2,810.08
----------------------------------------------------------------------------------------------------------------

The estimated overall impact of these changes presented in section
XXII.B. of this proposed rule is based on the assumption that hospital
behavior would not change with regard to when these dependent services
are performed on the same date and by the same hospital that performs
the independent services. To the extent that hospitals could change
their behavior and perform the guidance services more or less
frequently, on subsequent dates, or at settings outside of the
hospital, the data would show such a change in practice in future years
and that change would be reflected in future budget neutrality
adjustments. However, with respect to guidance services in particular,
we believe that hospitals are limited in the extent to which they could
change their behavior with regard to how they furnish these services.
By their definition, these guidance services generally must be
furnished on the same date and at the same operative location as the
independent procedure in order for the guidance service to meaningfully
contribute to the treatment of the patient in directing the performance
of the independent procedure. We do not believe the clinical
characteristics of the guidance services reported with the guidance
HCPCS codes listed in Table 8 below will change in the immediate
future.
As we indicated earlier, in all cases we are proposing that
hospitals that furnish the guidance service on the same date as the
independent service

[[Page 42657]]

must bill both services on the same claim. We expect to carefully
monitor any changes in billing practices on a service-specific and
hospital-specific basis to determine whether there is reason to request
that Quality Improvement Organizations (QIOs) review the quality of
care furnished or to request that Program Safeguard Contractors review
the claims against the medical record.

Table 8.--Guidance HCPCS Codes Proposed for Packaged Payment in CY 2008
----------------------------------------------------------------------------------------------------------------
Inactive HCPCS
Code effective
1/1/2008 or
Proposed Proposed earlier Short
HCPCS code Short descriptor CY 2007 CY 2007 CY 2008 CY 2008 (listed on the descriptor of
SI APC SI APC same line as the inactive
its HCPCS code
replacement
code)
----------------------------------------------------------------------------------------------------------------
19295............ Place breast S 0657 N n/a
clip, precut.
61795............ Brain surgery S 0302 N n/a
using computer.
62160............ Neuroendoscopy T 0122 N n/a
add-on.
76000............ Fluoroscope X 0272 Q 0272
examination.
76001............ Fluoroscope N n/a N n/a
exam, extensive.
76930............ Echo guide, S 0268 N n/a
cardiocentesis.
76932............ Echo guide for S 0309 N n/a
heart biopsy.
76936............ Echo guide for S 0309 N n/a
artery repair.
76937............ Us guide, N n/a N n/a
vascular access.
76940............ Us guide, tissue S 0268 N n/a
ablation.
76941............ Echo guide for S 0268 N n/a
transfusion.
76942............ Echo guide for S 0268 N n/a
biopsy.
76945............ Echo guide, S 0268 N n/a
villus sampling.
76946............ Echo guide for S 0268 N n/a
amniocentesis.
76948............ Echo guide, ova S 0309 N n/a
aspiration.
76950............ Echo guidance S 0268 N n/a
radiotherapy.
76965............ Echo guidance S 0308 N n/a
radiotherapy.
76975............ GI endoscopic S 0266 N n/a
ultrasound.
76998............ Us guide, S 0266 N n/a 76986 Ultrasound
intraop. guide
intraoper.
77001............ Fluoro guide for N n/a N n/a 75998 Fluoro guide
vein device. for vein
device.
77002............ Needle N n/a N n/a 76003 Needle
localization by localization
xray. by xray.
77003............ Fluoroguide for N n/a N n/a 76005 Fluoroguide for
spine inject. spine inject.
77011............ Ct scan for S 0283 N n/a 76355 Ct scan for
localization. localization.
77012............ Ct scan for S 0283 N n/a 76360 Ct scan for
needle biopsy. needle biopsy.
77013............ Ct guide for S 0333 N n/a 76362 Ct guide for
tissue ablation. tissue
ablation.
77014............ Ct scan for S 0282 N n/a 76370 Ct scan for
therapy guide. therapy guide.
77021............ Mr guidance for S 0335 N n/a 76393 Mr guidance for
needle place. needle place.
77022............ Mri for tissue S 0335 N n/a 76394 Mri for tissue
ablation. ablation.
77031............ Stereotact guide X 0264 N n/a 76095 Stereotactic
for brst bx. breast biopsy.
77032............ Guidance for X 0263 N n/a
needle, breast.
77417............ Radiology port X 0260 N n/a
film(s).
77421............ Stereoscopic x- S 0257 N n/a
ray guidance.
95873............ Guide nerv S 0215 N n/a
destr, elec
stim.
95874............ Guide nerv S 0215 N n/a
destr, needle
emg.
0054T............ Bone surgery S 0302 N n/a
using computer.
0055T............ Bone surgery S 0302 N n/a
using computer.
0056T............ Bone surgery S 0302 N n/a
using computer.
----------------------------------------------------------------------------------------------------------------

(2) Image Processing Services
We are proposing to package payment for ``image processing'' HCPCS
codes for CY 2008, specifically those codes that are reported as
supportive dependent services to process and integrate diagnostic test
data in the development of images, performed concurrently or after the
independent service is complete. We performed a broad search for such
services, relying upon the AMA's CY 2007 book of CPT codes and the CY
2007 book of Level II HCPCS codes, which identified specific codes as
``processing'' codes. In addition, we performed a clinical review of
all HCPCS codes to capture additional codes that we consider to be
image processing. For example, we are proposing to package payment for
CPT code 93325 (Doppler echocardiography color flow velocity mapping
(List separately in addition to codes for echocardiography)) because it
is an image processing procedure, even though the code descriptor does
not specifically indicate it as such.
An image processing service processes and integrates diagnostic
test data that were captured during another independent procedure,
usually one that is separately payable under the OPPS. The image
processing service is not necessarily provided on the same date of
service as the independent procedure. In fact, several of the image
processing services that we are proposing to package for CY 2008 do not
need to be provided face-to-face with the patient in the same encounter
as the independent service. While this approach to service delivery may
be administratively advantageous from a hospital's perspective,
providing separate payment for each image processing service whenever
it is performed is not consistent with encouraging value-based
purchasing under the OPPS. We believe it is important to package
payment for supportive dependent services that accompany independent
services but that may not need to be provided face-to-face with the
patient in the same

[[Page 42658]]

encounter because the supportive services utilize data that were
collected during the preceding independent services and packaging their
payment encourages the most efficient use of hospital resources. We are
particularly concerned with any continuance of current OPPS payment
policies that could encourage certain inefficient and more costly
service patterns. As stated above, packaging encourages hospitals to
establish protocols that ensure that services are furnished only when
they are medically necessary and to carefully scrutinize the services
ordered by practitioners to minimize unnecessary use of hospital
resources. Our standard methodology to calculate median costs packages
the costs of dependent services with the costs of independent services
on ``natural'' single claims across different dates of service, so we
are confident that we would capture the costs of the supportive image
processing services for ratesetting when they are packaged according to
our CY 2008 proposal, even if they were provided on a different date
than the independent procedure.
We list the image processing services that would be packaged for CY
2008 in Table 10 below. As these services support the performance of an
independent service, we believe it would be appropriate to package
their payment into the OPPS payment for the independent service
provided.
As many independent services may be reported with or without image
processing services, the cost of the image processing services will be
reflected in the median cost for the independent HCPCS code as a
function of the frequency that image processing services are reported
with that particular HCPCS code. Again, while the median cost for a
particular independent procedure generally will be higher as a result
of added packaging, it could also change little or be lower because
median costs typically do not reflect small distributional changes and
because changes to the packaged HCPCS codes affect both the number and
composition of single bills and the mix of hospitals contributing those
single bills. For example, CPT code 70450 (Computed tomography, head or
brain; without contrast material) may be provided alone or in
conjunction with CPT code 76376 (3D rendering with interpretation and
reporting of computed tomography, magnetic resource imaging,
ultrasound, or other tomographic modality; not requiring image
postprocessing on an independent workstation). In fact, CPT code 70450
was provided approximately 1.5 million times based on CY 2008 proposed
rule claims data. CPT code 76376 was provided with CPT code 70450 less
than 2 percent of the total instances that CPT code 70450 was billed.
Therefore, as the frequency of CPT code 76376 provided in conjunction
with CPT code 70450 increases, the median cost for CPT code 70450 would
be more likely to reflect that additional cost.
The image processing services that we are proposing to package vary
in their hospital resource costs. Resource cost was not a factor we
considered when proposing to package supportive image processing
services. Notably, the majority of image processing services that we
are proposing to package have modest median costs in relationship to
the cost of the independent service that they typically accompany.
Several of these codes, including CPT code 76350 (Subtraction in
conjunction with contrast studies), are already unconditionally (that
is, always) packaged under the CY 2007 OPPS, where they have been
assigned to status indicator ``N.'' Payment for these services is made
as part of the payment for the separately payable, independent services
with which they are billed. No separate payment is made for services
that we have assigned to status indicator ``N.'' We are not proposing
status indicator changes for the four image processing services that
were unconditionally packaged for CY 2007.
We are proposing to change the status indicator for seven image
processing services from separately paid to unconditionally packaged
(status indicator ``N'') for the CY 2008 OPPS. We believe that these
services are always integral to and dependent upon the independent
service that they support and, therefore, their payment would be
appropriately packaged. We have calculated the median costs on which
the proposed CY 2008 payment rates are based using the packaging status
of each code as provided in Table 10 below. As we discuss above in more
detail, this has the effect of both changing the median cost for the
independent service into which the cost of the dependent service is
packaged and also of redistributing payment that would otherwise have
been made separately for the service we are proposing to newly package
for CY 2008.
For example, CPT code 93325 (Doppler echocardiography color flow
velocity mapping (List separately in addition to codes for
echocardiography)) is assigned to APC 0697 (Level I Echocardiogram
Except Transesophageal) for CY 2007. The proposed CY 2008 median cost
of APC 0697 is $302.40. CPT code 93325 was billed with CPT code 93350
(Echocardiography, transthoracic, real-time with image documentation
(2D), with or without M-mode recording, during rest and cardiovascular
stress test using treadmill, bicycle exercise and/or pharmacologically
induced stress, with interpretation and report) approximately 43,000
times in the CY 2008 OPPS proposed rule data, and 5 percent of the
claims for CPT code 93325 reported CPT code 93350 on the same date of
service. Similarly, we note that almost 35 percent of the claims for
CPT code 93350 also reported the image processing service described by
CPT code 93325. Because CPT code 93350 is designated by CPT as an add-
on code to a stress test service, as would be expected, we also
observed that a CPT code for a stress test, most commonly CPT code
93017 (Cardiovascular stress test using maximal or submaximal treadmill
or bicycle exercise, continuous electrocardiographic monitoring, and/or
pharmacological stress; with physician supervision, with interpretation
and report) was also frequently reported on the same claim on the same
day as both of the other two CPT codes. CPT code 93017 is assigned to
APC 0100 (Cardiac Stress Tests) with a proposed CY 2008 median cost of
$180.10. Under our proposed policy for the CY 2008, we are proposing to
expand the packaging associated with the independent stress test and
echocardiography services so that payment for the echocardiography
color flow velocity mapping, if performed, would be packaged.
Specifically, we would package payment for CPT code 93325, the
echocardiography color flow velocity mapping, so that this dependent
procedure would receive packaged payment through the separate OPPS
payments for the independent procedures, here the stress test and
echocardiography services. The payment rates for this example
associated with our CY 2008 proposal are outlined in Table 9 below.
In this case, the proposed CY 2008 median cost for APC 0100 to
which CPT code 93017 is assigned is $180.10. The proposed CY 2008
median cost for APC 0697, to which CPT code 93350 is assigned, is
$302.40. The CY 2007 median cost for APC 0100 is $154.83 and the median
cost for APC 0697 is $97.61. However, as discussed in section II.A.4.c.
of this proposed rule concerning our general proposed packaging
approach, the added effect of the budget neutrality adjustment that
would result from the aggregate effects of the CY 2008 packaging
proposal

[[Page 42659]]

(were there no further budget neutrality adjustment for other reasons)
significantly changes the final payment rates relative to the median
cost estimates. Table 9 presents a comparison of payments for CPT codes
93017, 93350, and 93325 in CY 2007, where payment for CPT code 93325 is
made separately, to our CY 2008 proposed payments for CPT codes 93017,
93350, and 93325, where payment for CPT code 93325 would be packaged.
This example cannot demonstrate the overall impact of packaging image
processing services on payment to any given hospital because each
individual hospital's case-mix and billing patterns would be different.
The overall impact of packaging payment for CPT code 93325, as well as
the proposed packaging changes that we are proposing for CY 2008, can
only be assessed in the aggregate for classes of hospitals. Section
XXII.B. of this proposed rule displays the overall impact of APC weight
recalibration and packaging changes that we are proposing by classes of
hospitals, and the OPPS Hospital-Specific Impacts--Provider-Specific
Data file presents our estimates of CY 2008 hospital payment for those
hospitals we include in our ratesetting and payment simulation
database. The hospital-specific impacts file can be found on the CMS
Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under

supporting documentation for this proposed rule.

Table 9.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Codes 93325, 93350, and
93017
----------------------------------------------------------------------------------------------------------------
Sum of CY 2007 Sum of CY 2008
payment (93325 proposed
HCPCS code Short descriptor paid payment (93325
separately) Packaged)
----------------------------------------------------------------------------------------------------------------
93325..................................... Doppler color flow add-on (dependent $98.18 $0.00
service).
93350..................................... Echo transthoracic (independent 197.64 306.18
service).
93017..................................... Cardiovascular stress test 155.74 182.36
(independent service).
-------------------------------
Total Payment......................... .................................... 451.56 488.54
----------------------------------------------------------------------------------------------------------------

The estimated overall impact of these proposed changes presented in
section XXII.B. of this proposed rule is based on the assumption that
hospital behavior would not change with regard to how often these
dependent image processing services are performed in conjunction with
the independent services. To the extent that hospitals could change
their behavior and perform the image processing services more or less
frequently, the data would show such a change in practice in future
years and that change would be reflected in future budget neutrality
adjustments.
As we indicated earlier, in all cases we are proposing that
hospitals that furnish the image processing procedure in association
with the independent service must bill both services on the same claim.
We expect to carefully monitor any changes in billing practices on a
service-specific and hospital-specific basis to determine whether there
is reason to request that QIOs review the quality of care furnished or
to request that Program Safeguard Contractors review the claims against
the medical record.

Table 10.--Image Processing HCPCS Codes Proposed for Packaged Payment in CY 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
Inactive CPT
code effective 1/
1/08 or earlier Short descriptor of
HCPCS code Short descriptor CY 2007 SI CY 2007 APC Proposed CY 2008 SI (listed on the the inactive CPT
same line as its code
replacement code
--------------------------------------------------------------------------------------------------------------------------------------------------------
76125................ Cine/video x-rays X.................... 0260................. N ....................
add-on.
76350................ Special x-ray N.................... n/a.................. N ....................
contrast study.
76376................ 3d render w/o X.................... 0340................. N ....................
postprocess.
76377................ 3d rendering w/ S.................... 0282................. N ....................
postprocess.
93325................ Doppler color flow S.................... 0697................. N ....................
add-on.
93613................ Electrophys map 3d, T.................... 0087................. N ....................
add-on.
95957................ EEG digital analysis S.................... 0214................. N ....................
0159T................ Cad breast MRI...... N.................... n/a.................. N ....................
0174T................ Cad cxr remote...... N.................... n/a.................. N.................... 0152T Computer chest add-
on.
0175T................ Cad cxr with interp. N.................... n/a.................. N.................... 0152T Computer chest add-
on.
G0288................ Recon, CTA for surg S.................... 0417................. N ....................
plan.
--------------------------------------------------------------------------------------------------------------------------------------------------------

(3) Intraoperative Services
We are proposing to package payment for ``intraoperative'' HCPCS
codes for CY 2008, specifically those codes that are reported for
supportive dependent diagnostic testing or other minor procedures
performed during independent procedures. We performed a broad search
for possible intraoperative HCPCS codes, relying upon the AMA's CY 2007
book of CPT codes and the CY 2007 book of Level II HCPCS codes, to
identify specific codes as ``intraoperative'' codes. Furthermore, we
performed a clinical review of all HCPCS codes to capture additional
supportive diagnostic testing or other minor intraoperative or
intraprocedural codes that are not necessarily identified as
``intraoperative'' codes. For example, we are proposing to package
payment for CPT code 95955 (Electroencephalogram (EEG) during

[[Page 42660]]

nonintracranial surgery (e.g., carotid surgery)) because it is a minor
intraoperative diagnostic testing procedure even though the code
descriptor does not indicate it as such. Although we use the term
``intraoperative'' to categorize these procedures, we also have
included supportive dependent services in this group that are provided
during an independent procedure, although that procedure may not
necessarily be a surgical procedure. These dependent services clearly
fit into this category because they are provided during, and are
integral to, an independent procedure, like all the other
intraoperative codes, but the independent procedure they accompany may
not necessarily be a surgical procedure. For example, we are proposing
to package HCPCS code G0268 (Removal of impacted cerumen (one or both
ears) by physician on same date of service as audiologic function
testing). While specific audiologic function testing procedures are not
surgical procedures performed in an operating room, they are
independent procedures that are separately payable under the OPPS, and
HCPCS code G0268 is a supportive dependent service always provided in
association with one of these independent services. All references to
``intraoperative'' below refer to services that are usually or always
provided during a surgical procedure or other independent procedure.
By definition, a service that is performed intraoperatively is
provided during and, therefore, on the same date of service as another
procedure that is separately payable under the OPPS. Because these
intraoperative services support the performance of an independent
procedure and they are provided in the same operative session as the
independent procedure, we believe it would be appropriate to package
their payment into the OPPS payment for the independent procedure
performed. Therefore, we are not proposing to package payment for CY
2008 for those diagnostic services, such as CPT code 93005
(Electrocardiogram, routine ECG with at least 12 leads; tracing only,
without interpretation and report) that are sometimes or only rarely
performed and reported as supportive services in association with other
independent procedures. Instead, we are proposing to include those
HCPCS codes that are usually or always performed intraoperatively,
based upon our review of the codes described above. The intraoperative
services that we are proposing to package vary in hospital resource
costs. Resource cost was not a factor we considered when determining
which supportive intraoperative procedures to package.
The codes we are proposing to identify as intraoperative services
for CY 2008 that would receive packaged payment under the OPPS are
listed in Table 12 below.
Several of these codes, including CPT code 93640
(Electrophysiologic evaluation of single or dual chamber pacing
cardioverter-defibrillator leads including defibrillation threshold
evaluation (induction of arrhythmia, evaluation of sensing and pacing
for arrhythmia termination) at the time of initial implantation or
replacement), are already unconditionally (that is, always) packaged
under the CY 2007 OPPS, where they have been assigned to status
indicator ``N.'' Payment for these services is made through the payment
for the separately payable, independent services with which they are
billed. No separate payment is made for services that we have assigned
to status indicator ``N.'' We are not proposing status indicator
changes for the five diagnostic intraoperative services that were
unconditionally packaged for CY 2007.
We are proposing to change the status indicator for 34
intraoperative services from separately paid to unconditionally
packaged (status indicator ``N'') for the CY 2008 OPPS. We believe that
these services are always integral to and dependent upon the
independent services that they support and, therefore, their payment
would be appropriately packaged because they would generally be
performed on the same date and in the same hospital as the independent
services.
We are also proposing to change the status indicator for one
intraoperative procedure from unconditionally packaged to conditionally
packaged (status indicator ``Q'') as a ``special'' packaged code for
the CY 2008 OPPS, specifically, CPT code 0126T (Common carotid intima-
media thickness (IMT) study for evaluation of atherosclerotic burden or
coronary heart disease risk factor assessment). This code was discussed
in the past with the Packaging Subcommittee of the APC Panel which
determined that, consistent with its code descriptor as a separate
procedure, this procedure could sometimes be provided alone, without
any other OPPS services on the claim. We believe that this procedure
would usually be provided by a hospital in conjunction with another
independent procedure on the same date of service but may occasionally
be provided without another independent service. As a ``special''
packaged code, if the study were billed without any other service
assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X'' reported on
the same date of service, under our proposal we would not treat the IMT
study as a dependent service for purposes of payment. If we were to
continue to unconditionally package payment for this procedure,
treating it as a dependent service, hospitals would receive no payment
at all when providing this service alone, although the procedure would
not be functioning as an intraoperative service in that case. However,
according to our proposal, its conditionally packaged status as a
``special'' packaged code would allow payment to be provided for this
``Q'' status IMT study when provided alone, in which case it would be
treated as an independent service under these limited circumstances. On
the other hand, when this service is furnished as an intraoperative
procedure on the same day and in the same hospital as independent,
separately paid services that are assigned to status indicator ``S,''
``T,'' ``V,'' or ``X,'' we are proposing to package payment for it as a
dependent service. In all cases, we are proposing that hospitals that
furnish independent services on the same date as this IMT procedure
must bill them all on the same claim. We believe that when dependent
and independent services are furnished on the same date and in the same
facility, they are part of a single complete hospital outpatient
service that is reported with more than one HCPCS code, and no separate
payment should be made for the intraoperative procedure that supports
the independent service.
We have calculated the median costs on which the proposed CY 2008
payment rates are based using the packaging status of each code as
provided in Table 12 below. As we discuss above in more detail, this
has the effect of both changing the median cost for the independent
service into which the cost of the dependent service is packaged and
also of redistributing payment that would otherwise have been made
separately for the service we are proposing to newly package for CY
2008.
For example, CPT code 92547 (Use of vertical electrodes (List
separately in addition to code for primary procedure)) is assigned to
APC 0363 (Level I Otorhinolaryngologic Function Tests) for CY 2007. The
proposed CY 2008 median cost of APC 0363 is $53.73. CPT code 92547 was
billed with CPT code 92541 (Spontaneous nystagmus test, including gaze
and fixation nystagmus, with recording) 6,056 times in the CY 2008 OPPS
proposed rule data, and 97

[[Page 42661]]

percent of the claims for CPT code 92547 reported CPT code 92541 on the
same date of service. Similarly, we note that over half of the claims
for CPT code 92541 also reported the service described by CPT code
92547. Under our proposed policy for the CY 2008 OPPS, we are proposing
to expand the packaging associated with the independent nystagmus test
so that payment for the use of vertical electrodes, if used, would be
packaged. Specifically, we would package payment for CPT code 92547 so
that under the CY 2008 OPPS the commonly billed dependent procedure,
the use of vertical electrodes, would receive packaged payment through
the separate OPPS payment for the independent procedure, in this case
the nystagmus test. The payment rates for this example associated with
our CY 2008 proposal are outlined in Table 11 below.
In this case, the proposed CY 2008 median cost for APC 0363, to
which CPT code 92541 is assigned, is $53.73, while the CY 2007 median
cost of this APC with status indicator ``S'' and to which both CPT
codes 92547 and 02541 are assigned is $52.09. However, as discussed in
the section II.A.4. of this proposed rule concerning our general
proposed packaging approach, the added effect of the budget neutrality
adjustment that would result from the aggregate effects of the complete
CY 2008 packaging proposal (were there no further budget neutrality
adjustment for other reasons) significantly changes the final payment
rates relative to median cost estimates. Table 11 presents a comparison
of payment for CPT codes 92541 and 92547 in CY 2007, where CPT code
92547 is paid separately, to our CY 2008 proposed payment for CPT codes
92541 and 92547, where payment for CPT code 92547 would be packaged.
This example cannot demonstrate the overall impact of packaging
intraoperative services on payment to any given hospital because each
individual hospital's case-mix and billing patterns would be different.
The overall impact of packaging payment for CPT code 92547, as well as
all other packaging changes we are proposing for CY 2008, can only be
assessed in the aggregate for classes of hospitals. Section XXII.B. of
this proposed rule displays the overall impact of APC weight
recalibration and packaging changes we are proposing by classes of
hospitals, and the OPPS Hospital-Specific Impacts--Provider-Specific
Data file presents our estimates of CY 2008 hospital payment for those
hospitals we include in our ratesetting and payment simulation
database. The hospital-specific impacts file can be found on the CMS
Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under

supporting documentation for this proposed rule.

Table 11.-- Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Codes 92541 and 92547
----------------------------------------------------------------------------------------------------------------
Sum of CY 2007 Sum of CY 2008
payment (92547 proposed
HCPCS Code Short descriptor paid payment (92547
separately) packaged)
----------------------------------------------------------------------------------------------------------------
92541..................................... Spontaneous nystagmus study $52.40 $54.41
(independent service).
92547..................................... Supplemental electrical test 52.40 0.00
(dependent service).
---------------------------------------------------------------------
Total Payment............................................................... 104.80 54.41
----------------------------------------------------------------------------------------------------------------

The estimated overall impact of these proposed changes is based on
the assumption that hospital behavior would not change with regard to
when these dependent intraoperative services are performed on the same
date and by the same hospital that performs the independent services.
To the extent that hospitals could change their behavior and perform
the intraoperative services more or less frequently, on subsequent
dates, or at settings outside of the hospital, the data would show such
a change in practice in future years and that change would be reflected
in future budget neutrality adjustments. However, with respect to
intraoperative services in particular, we believe that hospitals are
limited in the extent to which they could change their behavior with
regard to how they furnish these services. By their definition, these
intraoperative services generally must be furnished on the same date
and at the same operative location as the independent procedure in
order to be considered intraoperative. For these codes, we assume that
both the dependent and independent services would be furnished on the
same date in the same hospital, and hospitals should bill them on the
same claim with the same date of service.
As we indicated earlier, in all cases we are proposing that
hospitals that furnish the intraoperative procedure on the same date as
the independent service must bill both services on the same claim. We
expect to carefully monitor any changes in billing practices on a
service-specific and hospital-specific basis to determine whether there
is reason to request that QIOs review the quality of care furnished or
to request that Program Safeguard Contractors review the claims against
the medical record.

Table 12.--Intraoperative HCPCS Codes Proposed for Packaged Payment in CY 2008
----------------------------------------------------------------------------------------------------------------
HCPCS Code Short descriptor CY 2007 SI CY 2007 APC Proposed CY 2008 SI
----------------------------------------------------------------------------------------------------------------
20975.................. Electrical bone X...................... 0340 N
stimulation.
31620.................. Endobronchial us add- S...................... 0670 N
on.
37250.................. Iv us first vessel add- S...................... 0416 N
on.
37251.................. Iv us each add vessel S...................... 0416 N
add-on.
58110.................. Bx done w/colposcopy T...................... 0188 N
add-on.
67299.................. Eye surgery procedure. T...................... 0235 N
73530.................. X-ray exam of hip..... X...................... 0261 N
74300.................. X-ray bile ducts/ X...................... 0263 N
pancreas.

[[Page 42662]]

74301.................. X-rays at surgery add- X...................... 0263 N
on.
75898.................. Follow-up angiography. X...................... 0263 N
78020.................. Thyroid met uptake.... S...................... 0399 N
78478.................. Heart wall motion add- S...................... 0399 N
on.
78480.................. Heart function add-on. S...................... 0399 N
78496.................. Heart first pass add- S...................... 0399 N
on.
92547.................. Supplemental X...................... 0363 N
electrical test.
92978.................. Intravasc us, heart S...................... 0670 N
add-on.
92979.................. Intravasc us, heart S...................... 0416 N
add-on.
93320.................. Doppler echo exam, S...................... 0697 N
heart.
93321.................. Doppler echo exam, S...................... 0697 N
heart.
93571.................. Heart flow reserve S...................... 0670 N
measure.
93572.................. Heart flow reserve S...................... 0416 N
measure.
93609.................. Map tachycardia, add- T...................... 0087 N
on.
93613.................. Electrophys map 3d, T...................... 0087 N
add-on.
93621.................. Electrophysiology T...................... 0085 N
evaluation.
93622.................. Electrophysiology T...................... 0085 N
evaluation.
93623.................. Stimulation, pacing T...................... 0087 N
heart.
93631.................. Heart pacing, mapping. T...................... 0087 N
93640.................. Evaluation heart N...................... n/a N
device.
93641.................. Electrophysiology N...................... n/a N
evaluation.
93662.................. Intracardiac ecg (ice) S...................... 0670 N
95829.................. Surgery S...................... 0214 N
electrocorticogram.
95920.................. Intraop nerve test add- S...................... 0216 N
on.
95955.................. EEG during surgery.... S...................... 0213 N
95999.................. Neurological procedure S...................... 0215 N
96020.................. Functional brain X...................... 0373 N
mapping.
0126T.................. Chd risk imt study.... N...................... n/a Q
0173T.................. Iop monit io pressure. N...................... n/a N
G0268.................. Removal of impacted X...................... 0340 N
wax md.
G0275.................. Renal angio, cardiac N...................... n/a N
cath.
G0278.................. Iliac art angio, N...................... n/a N
cardiac cath.
----------------------------------------------------------------------------------------------------------------

(4) Imaging Supervision and Interpretation Services
We are proposing to change the packaging status of many imaging
supervision and interpretation codes for CY 2008. We define ``imaging
supervision and interpretation codes'' as HCPCS codes for services that
are defined as ``radiological supervision and interpretation'' in the
radiology series, 70000 through 79999, of the AMA's CY 2007 book of CPT
codes, with the addition of some services in other code ranges of CPT,
Category III CPT tracking codes, or Level II HCPCS codes that are
clinically similar or directly crosswalk to codes defined as
radiological supervision and interpretation services in the CPT
radiology range. We also included HCPCS codes that existed in CY 2006
but were deleted and were replaced in CY 2007. We included the CY 2006
HCPCS codes because we are proposing to use the CY 2006 claims data to
calculate the CY 2008 OPPS median costs on which the CY 2008 payment
rates would be based.
In its discussion of ``radiological supervision and
interpretation,'' CPT indicates that ``when a procedure is performed by
two physicians, the radiologic portion of the procedure is designated
as `radiological supervision and interpretation'.'' In addition, CPT
guidance notes that, ``When a physician performs both the procedure and
provides imaging supervision and interpretation, a combination of
procedure codes outside the 70000 series and imaging supervision and
interpretation codes are to be used.'' In the hospital outpatient
setting, the concept of one or more than one physician performing
related procedures does not apply to the reporting of these codes, but
the radiological supervision and interpretation codes clearly are
established for reporting in association with other procedural services
outside the CPT 70000 series. Because these imaging supervision and
interpretation codes are always reported for imaging services that
support the performance of an independent procedure and they are, by
definition, always provided in the same operative session as the
independent procedure, we believe that it would be appropriate to
package their payment into the OPPS payment for the independent
procedure performed.
In addition to radiological supervision and interpretation codes in
the radiology range of CPT codes, there are CPT codes in other series
that describe similar procedures that we are proposing to include in
the group of imaging supervision and interpretation codes proposed for
packaging under the CY 2008 OPPS. For example, CPT code 93555 (Imaging
supervision, interpretation and report for injection procedure(s)
during cardiac catheterization; ventricular and/or atrial angiography)
whose payment under the OPPS is currently packaged, is commonly
reported with an injection procedure code, such as CPT code 93543
(Injection procedure during cardiac catheterization; for selective left
ventricular or left atrial angiography), whose payment is also
currently packaged under the OPPS, and a cardiac catheterization
procedure code, such as CPT code 93526 (Combined right heart
catheterization and retrograde left heart catheterization), that is
separately paid. In the case of cardiac catheterization, CPT code 93555
describes an imaging supervision and interpretation service in support
of the cardiac catheterization procedure, and this dependent service is
clinically quite similar to radiological supervision and interpretation
codes in the radiology range of CPT. Payment for the cardiac
catheterization imaging

[[Page 42663]]

supervision and interpretation services has been packaged since the
beginning of the OPPS. Therefore, in developing this proposal for the
CY 2008 proposed rule, we conducted a comprehensive clinical review of
all Category I and Category III CPT codes and Level II HCPCS codes to
identify all codes that describe imaging supervision and interpretation
services. The codes we are proposing to identify as imaging supervision
and interpretation codes for CY 2008 that would receive packaged
payment are listed in Table 14 below.
Several of these codes, including CPT code 93555 discussed above,
are already unconditionally (that is, always) packaged under the CY
2007 OPPS, where they have been assigned to status indicator ``N.''
Payment for these services is made as part of the payment for the
separately payable, independent services with which they are billed. No
separate payment is made for services that we have assigned to status
indicator ``N.'' We are not proposing status indicator changes for the
six imaging supervision and interpretation services that were
unconditionally packaged for CY 2007.
We are proposing to change the status indicator for 33 imaging
supervision and interpretation services from separately paid to
unconditionally packaged (status indicator ``N'') for the CY 2008 OPPS.
We believe that these services are always integral to and dependent
upon the independent services that they support and, therefore, their
payment would be appropriately packaged because they would generally be
performed on the same date and in the same hospital as the independent
services.
We are proposing to change the status indicator for 93 imaging
supervision and interpretation services from separately paid to
conditionally packaged (status indicator ``Q'') as ``special'' packaged
codes for the CY 2008 OPPS. These services may occasionally be provided
at the same time and at the same hospital with one or more other
procedures for which payment is currently packaged under the OPPS, most
commonly injection procedures, and in these cases we would not treat
the imaging supervision and interpretation services as dependent
services for purposes of payment. If we were to unconditionally package
payment for these imaging supervision and interpretation services as
dependent services, hospitals would receive no payment at all for
providing the imaging supervision and interpretation service and the
other minor procedure(s). However, according to our proposal, their
conditional packaging status as ``special'' packaged codes would allow
payment to be provided for these ``Q'' status imaging supervision and
interpretation services as independent services in these limited
circumstances, and for which payment for the accompanying minor
procedure would be packaged. However, when these imaging supervision
and interpretation dependent services are furnished on the same day and
in the same hospital as independent separately paid services,
specifically, any service assigned to status indicator ``S,'' ``T,''
``V,'' or ``X,'' we are proposing to package payment for them as
dependent services. In all cases, we are proposing that hospitals that
furnish the independent services on the same date as the dependent
services must bill them all on the same claim. We believe that when the
dependent and independent services are furnished on the same date and
in the same hospital, they are part of a single complete hospital
outpatient service that is reported with more than one HCPCS code, and
no separate payment should be made for the imaging supervision and
interpretation service that supports the independent service.
In the case of services for which we are proposing conditional
packaging, we would expect that, although these services would always
be performed in the same session as another procedure, in some cases
that other procedure's payment would also be packaged. For example, CPT
code 73525 (Radiological examination, hip, arthrography, radiological
supervision and interpretation) and CPT code 27093 (Injection procedure
for hip arthrography; without anesthesia) could be provided in a single
hospital outpatient encounter and reported as the only two services on
a claim. In the case where only these two services were performed, the
conditionally packaged status of CPT code 73525 would appropriately
allow for its separate payment as an independent imaging supervision
and interpretation arthrography service, into which payment for the
dependent injection procedure would be packaged.
We have calculated the median costs on which the proposed CY 2008
payment rates are based using the packaging status of each code as
provided in Table 14 below. As we discuss above in more detail, this
has the effect of both changing the median cost for the independent
service into which the cost of the dependent service is packaged and
also of redistributing payment that would otherwise have been made
separately for the service we are proposing to newly package for CY
2008.
For example, CPT code 72265 (Myelography, lumbosacral, radiological
supervision and interpretation) is assigned to APC 0274 (Myelography)
for CY 2007. The proposed CY 2008 median cost of APC 0274 is $245.38.
CPT code 72265 was billed with CPT code 72132 (Computed tomography,
lumbar spine; with contrast material) 20,233 times in the CY 2008 OPPS
proposed rule data, and 62 percent of the claims for CPT code 72265
reported CPT code 72132 on the same date of service. Similarly, we note
that over half of the claims for CPT code 72132 also reported the
myelography service described by CPT code 72265. As would be expected,
we also observed that a CPT code for the clinically necessary
intrathecal injection, specifically CPT code 62284 (Injection procedure
for myelography and/or computed tomography, spinal (other than C1-C2
and posterior fossa)) was also frequently reported on the same claim on
the same day as both of the other two CPT codes. Payment for CPT code
62284 is already packaged under the OPPS for CY 2007, as is payment for
most HCPCS codes that describe dependent injection procedures that
accompany independent procedures. Under our proposed policy for the CY
2008 OPPS, we are proposing to expand the packaging associated with the
independent spinal computed tomography (CT) scan so that payment for
both the associated injection procedure and the related myelography
service, if performed, would be packaged. Specifically, we would
package payment for CPT code 72265 when it appears on the same claim
with a separately paid service such as CPT code 72132, so that, under
the CY 2008 OPPS, both commonly billed dependent procedures, the
injection procedure and the myelography service, would receive packaged
payment through the separate OPPS payment for the independent
procedure, the CT scan. The payment rates for this example associated
with our CY 2008 proposal are outlined in Table 13 below. The proposed
conditionally packaged status for CPT code 72265 would ensure that if
lumbosacral myelography was performed alone, separate payment for the
myelography service would be made under the OPPS as the myelography
service would not be a dependent service in that situation.
The proposed policy would result in no separate payment for CPT
code 72265 when it is billed on the same day and by the same hospital
as any separately paid service, such as CPT code 72132. Moreover, as
discussed

[[Page 42664]]

later in this section, the proposed policy would provide packaged
payment for the contrast agent that is required to perform the
independent computed tomography service. For purposes of the example in
Table 13 below, we include the payment for HCPCS code Q9947 (Low
osmolar contrast material 200-249 mg/ml iodine concentration, per ml)
which was reported on about one-third of the CY 2008 proposed rule
claims for CPT code 72132. To calculate the CY 2007 payment for the
contrast agent, we multiplied the mean number of units per day from our
CY 2008 proposed rule data (48.3) by the April 2007 per unit payment
rate for HCPCS code Q9947 ($1.33).
In this case, the proposed CY 2008 median cost for APC 0316 (Level
II Computed Tomography with Contrast) to which CPT code 72132 is
assigned is $741.80. The CY 2007 median cost for APC 0283 to which CPT
code 72132 is assigned is $249.48 and the median cost of APC 0274 to
which CPT code 72265 is assigned is $156.10. However, as discussed in
section II.A.4.c. of this proposed rule concerning our general proposed
packaging approach, the added effect of the budget neutrality
adjustment that would result from the aggregate effects of the CY 2008
packaging proposal (were there no further budget neutrality adjustment
for other reasons) significantly changes the final payment rates
relative to median cost estimates. Table 13 presents a comparison of
payment for CPT codes 72132 and 72265 and HCPCS code Q9947 in CY 2007,
where CPT code 72265 and HCPCS code Q9947 are paid separately, to our
CY 2008 proposed payment for CPT codes 72132 and 77265 and HCPCS code
Q9947, where payment for CPT code 72265 and HCPCS code Q9947 would be
packaged. This example cannot demonstrate the overall impact of
packaging imaging supervision and interpretation services on payment to
any given hospital because each individual hospital's case-mix and
billing patterns would be different. The overall impact of packaging
payment CPT code 77265 when it appears with any other separately paid
service, as well as all other packaging changes that we are proposing
for CY 2008, can only be assessed in aggregate for classes of
hospitals. Section XXII.B. of this proposed rule displays the overall
impact of APC weight recalibration and packaging changes we are
proposing by classes of hospitals, and the OPPS Hospital-Specific
Impacts--Provider-Specific Data file presents our estimates of CY 2008
hospital payment for those hospitals we include in our ratesetting and
payment simulation database. The hospital-specific impacts file can be
found on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/
under supporting documentation for this proposed

rule.

Table 13.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Codes 72265 and 72132 and
HCPCS Code Q9947
----------------------------------------------------------------------------------------------------------------
Sum of CY 2007 Sum of CY 2008
payment (72265 proposed
HCPCS code Short descriptor paid payment (72265
separately) packaged)
----------------------------------------------------------------------------------------------------------------
62284...................................... Injection for myelogram (dependent $0.00 $0.00
service).
Q9947*..................................... LOCM 200-249mg/ml iodine, 1ml 64.24 0.00
(dependent service).
72265...................................... Contrast x-ray lower spine 157.01 0.00
(dependent service).
72132...................................... CT lumbar spine w/dye (independent 250.94 751.09
service).
-------------------------------
Total Payment.......................... ................................... 472.14 751.09
----------------------------------------------------------------------------------------------------------------
* Based on the mean number of units per day from our CY 2008 proposed rule data (48.3) and the April 2007 per
unit payment rate for Q9947 ($1.33).

The estimated overall impact of these changes presented in XXII.B.
of this proposed rule is based on the assumption that hospital behavior
would not change with regard to when these dependent services are
performed on the same date and by the same hospital that performs the
independent services. To the extent that hospitals could change their
behavior and perform the imaging supervision and interpretation
services more or less frequently, on subsequent dates, or at settings
outside of the hospital, the data would show such a change in practice
in future years and that change would be reflected in future budget
neutrality adjustments. However, with respect to the imaging
supervision and interpretation services in particular, we believe that
hospitals are limited in the extent to which they could change their
behavior with regard to how they furnish these services. By their
definition, these imaging and supervision services generally must be
furnished on the same date and at the same operative location as the
independent procedure in order for the imaging service to meaningfully
contribute to the diagnosis or treatment of the patient. For those
radiological supervision and interpretation codes in the radiology
range of CPT in particular, if the same physician is able to perform
both the procedure and the supervision and interpretation as stated by
CPT, we assume that both the dependent and independent services would
be furnished on the same date in the same hospital, and hospitals
should bill them on the same claim with the same date of service.
As we indicated earlier in this section, in all cases we are
proposing that hospitals that furnish the imaging supervision and
interpretation service on the same date as the independent service must
bill both services on the same claim. We expect to carefully monitor
any changes in billing practices on a service-specific and hospital-
specific basis to determine whether there is reason to request that
QIOs review the quality of care furnished or to request that Program
Safeguard Contractors review the claims against the medical record.

[[Page 42665]]

Table 14.--Imaging Supervision and Interpretation HCPCS Codes Proposed for Packaged Payment in CY 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
Inactive
CPT code
effective 1/
1/2008 or
Proposed CY 2008 Proposed CY earlier Short descriptor of the
HCPCS code Short descriptor CY 2007 SI CY 2007 APC SI 2008 APC (listed on inactive CPT code
the same
line as its
replacement
code)
--------------------------------------------------------------------------------------------------------------------------------------------------------
70010............ Contrast x-ray of brain. S................ 0274 Q................ 0274
70015............ Contrast x-ray of brain. S................ 0274 Q................ 0274
70170............ X-ray exam of tear duct. X................ 0264 Q................ 0264
70332............ X-ray exam of jaw joint. S................ 0275 Q................ 0275
70373............ Contrast x-ray of larynx X................ 0263 Q................ 0263
70390............ X-ray exam of salivary X................ 0263 Q................ 0263
duct.
71040............ Contrast x-ray of X................ 0263 Q................ 0263
bronchi.
71060............ Contrast x-ray of X................ 0263 Q................ 0263
bronchi.
71090............ X-ray & pacemaker X................ 0272 N................ n/a
insertion.
72240............ Contrast x-ray of neck S................ 0274 Q................ 0274
spine.
72255............ Contrast x-ray, thorax S................ 0274 Q................ 0274
spine.
72265............ Contrast x-ray, lower S................ 0274 Q................ 0274
spine.
72270............ Contrast x-ray, spine... S................ 0274 Q................ 0274
72275............ Epidurography........... S................ 0274 N................ n/a
72285............ X-ray c/t spine disk.... S................ 0388 Q................ 0388
72291............ Perq vertebroplasty, S................ 0274 N................ n/a 76012 Perq vertebroplasty, fluor.
fluor.
72292............ Perq vertebroplasty, ct. S................ 0274 N................ n/a 76013 Perq vertebroplasty, ct.
72295............ X-ray of lower spine S................ 0388 Q................ 0388
disk.
73040............ Contrast x-ray of S................ 0275 Q................ 0275
shoulder.
73085............ Contrast x-ray of elbow. S................ 0275 Q................ 0275
73115............ Contrast x-ray of wrist. S................ 0275 Q................ 0275
73525............ Contrast x-ray of hip... S................ 0275 Q................ 0275
73542............ X-ray exam, sacroiliac S................ 0275 Q................ 0275
joint.
73580............ Contrast x-ray of knee S................ 0275 Q................ 0275
joint.
73615............ Contrast x-ray of ankle. S................ 0275 Q................ 0275
74190............ X-ray exam of peritoneum S................ 0264 Q................ 0264
74235............ Remove esophagus S................ 0257 N................ n/a
obstruction.
74305............ X-ray bile ducts/ X................ 0263 N................ n/a
pancreas.
74320............ Contrast x-ray of bile X................ 0264 Q................ 0264
ducts.
74327............ X-ray bile stone removal S................ 0296 N................ n/a
74328............ X-ray bile duct N................ n/a N................ n/a
endoscopy.
74329............ X-ray for pancreas N................ n/a N................ ma
endoscopy.
74330............ X-ray bile/panc N................ n/a N................ n/a
endoscopy.
74340............ X-ray guide for GI tube. X................ 0272 N................ n/a
74350............ X-ray guide, stomach X................ 0263 N................ n/a
tube.
74355............ X-ray guide, intestinal X................ 0263 N................ n/a
tube.
74360............ X-ray guide, GI dilation S................ 0257 N................ n/a
74363............ X-ray, bile duct S................ 0297 N................ n/a
dilation.
74425............ Contrast x-ray, urinary S................ 0278 Q................ 0278
tract.
74430............ Contrast x-ray, bladder. S................ 0278 Q................ 0278
74440............ X-ray, male genital S................ 0278 Q................ 0278
tract.
74445............ X-ray exam of penis..... S................ 0278 Q................ 0278
74450............ X-ray, urethra/bladder.. S................ 0278 Q................ 0278
74455............ X-ray, urethra/bladder.. S................ 0278 Q................ 0278
74470............ X-ray exam of kidney X................ 0263 Q................ 0263
lesion.
74475............ X-ray control, cath S................ 0297 Q................ 0297
insert.
74480............ X-ray control, cath S................ 0296 Q................ 0296
insert.
74485............ X-ray guide, GU dilation S................ 0296 Q................ 0296
74740............ X-ray, female genital X................ 0264 Q................ 0264
tract.
74742............ X-ray, fallopian tube... X................ 0264 N................
75600............ Contrast x-ray exam of S................ 0280 Q................ 0280
aorta.
75605............ Contrast x-ray exam of S................ 0280 Q................ 0280
aorta.
75625............ Contrast x-ray exam of S................ 0280 Q................ 0280
aorta.
75630............ X-ray aorta, leg S................ 0280 Q................ 0280
arteries.
75635............ Ct angio abdominal S................ 0662 Q................ 0662
arteries.
75650............ Artery x-rays, head & S................ 0280 Q................ 0280
neck.
75658............ Artery x-rays, arm...... S................ 0279 Q................ 0279
75660............ Artery x-rays, head & S................ 0668 Q................ 0668
neck.
75662............ Artery x-rays, head & S................ 0280 Q................ 0280
neck.
75665............ Artery x-rays, head & S................ 0280 Q................ 0280
neck.
75671............ Artery x-rays, head & S................ 0280 Q................ 0280
neck.

[[Page 42666]]

75676............ Artery x-rays, neck..... S................ 0280 Q................ 0280
75680............ Artery x-rays, neck..... S................ 0280 Q................ 0280
75685............ Artery x-rays, spine.... S................ 0280 Q................ 0280
75705............ Artery x-rays, spine.... S................ 0668 Q................ 0668
75710............ Artery x-rays, arm/leg.. S................ 0280 Q................ 0280
75716............ Artery x-rays, arms/legs S................ 0280 Q................ 0280
75722............ Artery x-rays, kidney... S................ 0280 Q................ 0280
75724............ Artery x-rays, kidneys.. S................ 0280 Q................ 0280
75726............ Artery x-rays, abdomen.. S................ 0280 Q................ 0280
75731............ Artery x-rays, adrenal S................ 0280 Q................ 0280
gland.
75733............ Artery x-rays, adrenals. S................ 0668 Q................ 0668
75736............ Artery x-rays, pelvis... S................ 0280 Q................ 0280
75741............ Artery x-rays, lung..... S................ 0279 Q................ 0279
75743............ Artery x-rays, lungs.... S................ 0280 Q................ 0280
75746............ Artery x-rays, lung..... S................ 0279 Q................ 0279
75756............ Artery x-rays, chest.... S................ 0279 Q................ 0279
75774............ Artery x-ray, each S................ 0279 N................ n/a
vessel.
75790............ Visualize A-V shunt..... S................ 0279 Q................ 0279
75801............ Lymph vessel x-ray, arm/ X................ 0264 Q................ 0264
leg.
75803............ Lymph vessel x-ray,arms/ X................ 0264 Q................ 0264
legs.
75805............ Lymph vessel x-ray, X................ 0264 Q................ 0264
trunk.
75807............ Lymph vessel x-ray, X................ 0264 Q................ 0264
trunk.
75809............ Nonvascular shunt, x-ray X................ 0263 Q................ 0263
75810............ Vein x-ray, spleen/liver S................ 0279 Q................ 0279
75820............ Vein x-ray, arm/leg..... S................ 0668 Q................ 0668
75822............ Vein x-ray, arms/legs... S................ 0668 Q................ 0668
75825............ Vein x-ray, trunk....... S................ 0279 Q................ 0279
75827............ Vein x-ray, chest....... S................ 0279 Q................ 0279
75831............ Vein x-ray, kidney...... S................ 0279 Q................ 0279
75833............ Vein x-ray, kidneys..... S................ 0279 Q................ 0279
75840............ Vein x-ray, adrenal S................ 0280 Q................ 0280
gland.
75842............ Vein x-ray, adrenal S................ 0280 Q................ 0280
glands.
75860............ Vein x-ray, neck........ S................ 0668 Q................ 0668
75870............ Vein x-ray, skull....... S................ 0668 Q................ 0668
75872............ Vein x-ray, skull....... S................ 0279 Q................ 0279
75880............ Vein x-ray, eye socket.. S................ 0668 Q................ 0668
75885............ Vein x-ray, liver....... S................ 0280 Q................ 0280
75887............ Vein x-ray, liver....... S................ 0279 Q................ 0279
75889............ Vein x-ray, liver....... S................ 0280 Q................ 0280
75891............ Vein x-ray, liver....... S................ 0279 Q................ 0279
75893............ Venous sampling by Q................ 0668 Q................ 0668
catheter.
75894............ X-rays, transcath S................ 0298 N................ n/a
therapy.
75896............ X-rays, transcath S................ 0263 N................ n/a
therapy.
75901............ Remove cva device X................ 0263 N................ n/a
obstruct.
75902............ Remove cva lumen X................ 0263 N................ n/a
obstruct.
75940............ X-ray placement, vein S................ 0298 N................ n/a
filter.
75945............ Intravascular us........ S................ 0267 Q................ 0267
75946............ Intravascular us add-on. S................ 0266 N................ n/a
75960............ Transcath iv stent rs&i. S................ 0668 N................ n/a
75961............ Retrieval, broken S................ 0668 N................ n/a
catheter.
75962............ Repair arterial blockage S................ 0668 Q................ 0668
75964............ Repair Artery blockage, S................ 0668 N................ n/a
each.
75966............ Repair arterial blockage S................ 0668 Q................ 0668
75968............ Repair Artery blockage, S................ 0668 N................ n/a
each.
75970............ Vascular biopsy......... S................ 0668 N................ n/a
75978............ Repair venous blockage.. S................ 0668 Q................ 0668
75980............ Contrast xray exam bile S................ 0297 N................ n/a
duct.
75982............ Contrast xray exam bile S................ 0297 N................ n/a
duct.
75984............ Xray control catheter X................ 0263 N................ n/a
change.
75989............ Abscess drainage under x- N................ ........... N................ n/a
ray.
75992............ Atherectomy, x-ray exam. S................ 0668 N................ n/a
75993............ Atherectomy, x-ray exam. S................ 0668 N................ n/a
75994............ Atherectomy, x-ray exam. S................ 0668 N................ n/a

[[Page 42667]]

75995............ Atherectomy, x-ray exam. S................ 0668 N................ n/a
75996............ Atherectomy, x-ray exam. S................ 0668 N................ n/a
76080............ X-ray exam of fistula... X................ 0263 Q................ 0263
76975............ GI endoscopic ultrasound S................ 0266 Q................ 0266
77053............ X-ray of mammary duct... X................ 0263 Q................ 0263 76086 X-ray of mammary duct.
77054............ X-ray of mammary ducts.. X................ 0263 Q................ 0263 76088 X-ray of mammary ducts.
93555............ Imaging, cardiac cath... N................ n/a N................ n/a
93556............ Imaging, cardiac cath... N................ n/a N................ n/a
--------------------------------------------------------------------------------------------------------------------------------------------------------

(5) Diagnostic Radiopharmaceuticals
For CY 2008, we are proposing to change the packaging status of
diagnostic radiopharmaceuticals as part of our overall enhanced
packaging approach for the CY 2008 OPPS. Packaging costs into a single
aggregate payment for a service, encounter, or episode of care is a
fundamental principle that distinguishes a prospective payment system
from a fee schedule. In general, packaging the costs of supportive
items and services into the payment for the independent procedure or
service with which they are associated encourages hospital efficiencies
and also enables hospitals to manage their resources with maximum
flexibility. As we stated in the CY 2007 OPPS/ASC final rule with
comment period, we believe that a policy to package payment for
additional radiopharmaceuticals (other than those already packaged when
their per day costs are below the packaging threshold for OPPS drugs,
biologicals, and radiopharmaceuticals based on data for the update
year) is consistent with OPPS packaging principles and would provide
greater administrative simplicity for hospitals (71 FR 68094).
All nuclear medicine procedures require the use of at least one
radiopharmaceutical, and there are only a small number of
radiopharmaceuticals that may be appropriately billed with each
diagnostic nuclear medicine procedure. While examining the CY 2005
hospital claims data in preparation for the CY 2007 OPPS/ASC proposed
rule, we identified a significant number of diagnostic nuclear medicine
procedure claims that were missing HCPCS codes for the associated
radiopharmaceutical. At that time, we believed that there could be two
reasons for the presence of these claims in the data. One reason could
be that the radiopharmaceutical used for the procedure was packaged
under the OPPS and, therefore, some hospitals may have decided not to
include the specific radiopharmaceutical HCPCS code and an associated
charge on the claim. A second reason could be that the hospitals may
have incorporated the cost of the radiopharmaceutical into the charges
for the associated nuclear medicine procedures. A third possibility not
offered in the CY 2007 OPPS/ASC proposed rule is that hospitals may
have included the charges for radiopharmaceuticals on an uncoded
revenue code line.
In the CY 2007 OPPS/ASC proposed rule, we did not propose packaging
payment for radiopharmaceuticals with per day costs above the $55 CY
2007 packaging threshold because we indicated that we were concerned
that payments for certain nuclear medicine procedures could potentially
be less than the costs of some of the packaged radiopharmaceuticals,
especially those that are relatively expensive. At the same time, we
also noted the GAO's comment in reference to the CY 2006 OPPS proposed
rule that stated a methodology that includes packaging all
radiopharmaceutical costs into the payments for the nuclear medicine
procedures may result in payments that exceed hospitals' acquisition
costs for certain radiopharmaceuticals because there may be more than
one radiopharmaceutical that may be used for a particular procedure. We
also expressed concern that packaging payment for additional
radiopharmaceuticals could provoke treatment decisions that may not
reflect use of the most clinically appropriate radiopharmaceutical for
a particular nuclear medicine procedure in any specific case (71 FR
68094).
After considering this issue further and examining our CY 2006
claims data for the CY 2008 OPPS update, we believe that it is most
appropriate to package payment for some radiopharmaceuticals,
specifically diagnostic radiopharmaceuticals, into the payment for
diagnostic nuclear medicine procedures for CY 2008. We expect that
packaging would encourage hospitals to use the most cost efficient
diagnostic radiopharmaceutical products that are clinically
appropriate. We anticipate that hospitals would continue to provide
care that is aligned with the best interests of the patient.
Furthermore, we believe that it would be the intent of most hospitals
to provide both the diagnostic radiopharmaceutical and the associated
diagnostic nuclear medicine procedure at the time the diagnostic
radiopharmaceutical is administered and not to send patients to a
different provider for administration of the radiopharmaceutical. We do
not believe that our packaging proposal would limit beneficiaries'
ability to receive clinically appropriate diagnostic procedures. Again,
the OPPS is a system of averages, and payment in the aggregate is
intended to be adequate, although payment for any one service may be
higher or lower than a hospital's actual costs in that case.
For CY 2008, we have separated radiopharmaceuticals into two
groupings. The first group includes diagnostic radiopharmaceuticals,
while

[[Page 42668]]

the second group includes therapeutic radiopharmaceuticals. We
identified all diagnostic radiopharmaceuticals as those Level II HCPCS
codes that include the term ``diagnostic'' along with a
radiopharmaceutical in their long code descriptors. Therefore, we were
able to distinguish therapeutic radiopharmaceuticals from diagnostic
radiopharmaceuticals as those Level II HCPCS codes that have the term
``therapeutic'' along with a radiopharmaceutical in their long code
descriptors. There currently are no HCPCS C-codes used to report
radiopharmaceuticals under the OPPS. For CY 2008, we are proposing to
package payment for all diagnostic radiopharmaceuticals that are not
otherwise packaged according to the proposed CY 2008 packaging
threshold for drugs, biologicals, and radiopharmaceuticals. We are
proposing this packaging approach for diagnostic radiopharmaceuticals,
while we are proposing to continue to pay separately for therapeutic
radiopharmaceuticals with an average per day cost of more than $60 as
discussed in section V.B.3. of this proposed rule. In that section, we
review our reasons for treating diagnostic radiopharmaceuticals (as
well as contrast media) differently from other types of specified
covered outpatient drugs identified in section 1833(t)(B) of the Act.
Diagnostic radiopharmaceuticals are always intended to be used with
a diagnostic nuclear medicine procedure. In examining our CY 2006
claims data, we were able to match most diagnostic radiopharmaceuticals
to their associated diagnostic procedures and most diagnostic nuclear
medicine procedures to their associated diagnostic radiopharmaceuticals
in the vast majority of single bills used for ratesetting. We estimate
that less than 5 percent of all claims with a diagnostic
radiopharmaceutical had no corresponding diagnostic nuclear medicine
procedure. In addition, we found that only about 13 percent of all
single bills with a diagnostic nuclear medicine procedure code had no
corresponding diagnostic radiopharmaceutical billed. These statistics
indicate that, in a majority of our single bills for diagnostic nuclear
medicine procedures, a diagnostic radiopharmaceutical HCPCS code is
included on the single bill. Table 15 presents the top 20 diagnostic
nuclear medicine procedures in terms of the overall frequency with
which they are reported in the OPPS claims data. Among these high
volume diagnostic nuclear medicine procedures, their single bills
include a HCPCS code for a diagnostic radiopharmaceutical at least 84
percent of the time for 19 out of the top 20 procedures. More
specifically, 84 to 86 percent of the single bills for 4 diagnostic
nuclear medicine procedures include a diagnostic radiopharmaceutical,
87 to 89 percent of the single bills for 8 diagnostic nuclear medicine
procedures include a diagnostic radiopharmaceutical, and 90 percent or
more of the single bills for 7 diagnostic nuclear medicine procedures
include a diagnostic radiopharmaceutical.

Table 15.--Top 20 Diagnostic Nuclear Medicine Procedures Sorted by CY 2006 OPPS Total Volume
--------------------------------------------------------------------------------------------------------------------------------------------------------
Single bills with a Single bills
Total line- radiopharmaceutical as a percent
HCPCS code Short descriptor SI APC item frequency as a percent of all of total line-
single bills item frequency
--------------------------------------------------------------------------------------------------------------------------------------------------------
78465................... Heart image (3d), multiple..... S....................... 0377 566,252 88 9
78306................... Bone imaging, whole body....... S....................... 0396 368,452 90 76
78815................... Tumorimage pet/ct skul-thigh... S....................... 0308 122,126 100 84
78223................... Hepatobiliary imaging.......... S....................... 0394 69,066 85 90
78315................... Bone imaging, 3 phase.......... S....................... 0396 56,524 89 88
78464................... Heart image (3d), single....... S....................... 0398 35,866 93 29
78472................... Gated heart, planar, single.... S....................... 0398 32,154 89 80
78264................... Gastric emptying study......... S....................... 0395 31,190 88 94
78812................... Tumor image (pet)/skul-thigh... S....................... 0308 27,345 100 86
78007................... Thyroid image, mult uptakes.... S....................... 0391 23,703 84 96
78195................... Lymph system imaging........... S....................... 0400 20,187 89 18
78585................... Lung V/Q imaging............... S....................... 0378 20,036 91 48
78070................... Parathyroid nuclear imaging.... S....................... 0391 18,752 94 84
78006................... Thyroid imaging with uptake.... S....................... 0390 18,613 86 95
78300................... Bone imaging, limited area..... S....................... 0396 18,333 89 90
78320................... Bone imaging (3D).............. S....................... 0396 16,710 84 35
78588................... Perfusion lung image........... S....................... 0378 14,323 88 48
78707................... K flow/funct image w/o drug.... S....................... 0404 13,820 89 90
78580................... Lung perfusion imaging......... S....................... 0401 13,011 66 19
78816................... Tumor image pet/ct full body... S....................... 0308 12,349 100 86
--------------------------------------------------------------------------------------------------------------------------------------------------------

Among the lower volume diagnostic nuclear medicine procedures
(which are outside the top 20 in terms of volume), there is still good
representation of diagnostic radiopharmaceutical HCPCS codes on the
single bills for most procedures. About 40 percent of the low volume
diagnostic nuclear medicine procedures have at least 80 percent of the
single bills for that diagnostic procedure that include a diagnostic
radiopharmaceutical HCPCS code; about 37 percent of the low volume
diagnostic procedures have between 50 to 79 percent of the single bills
that include a diagnostic radiopharmaceutical HCPCS code; and about 23
percent of the low volume diagnostic procedures have less than 50
percent of the single bills that include a diagnostic
radiopharmaceutical HCPCS code. For the few diagnostic nuclear medicine
procedures where less than 50 percent of the single bills include a
diagnostic radiopharmaceutical HCPCS code, we believe there could be
several reasons why the percentage of single bills for the diagnostic
nuclear medicine procedure with a diagnostic radiopharmaceutical HCPCS
code is low.
As noted earlier, it is possible that hospitals may be including
the charge for the radiopharmaceutical in the

[[Page 42669]]

charge for the diagnostic nuclear medicine procedure itself or on an
uncoded revenue code line instead of reporting charges for a specific
diagnostic radiopharmaceutical HCPCS code. We found that 24 percent of
all single bills for a diagnostic nuclear medicine procedure but
without a coded diagnostic radiopharmaceutical had uncoded costs in a
revenue code that might contain diagnostic radiopharmaceutical costs,
specifically, revenue codes 0254 (Drugs Incident to Other Diagnostic
Services), 0255 (Drugs Incident to Radiology), 0343 (Diagnostic
Radiopharmaceuticals), 0621 (Supplies Incident to Radiology), and 0622
(Supplies Incident to Other Diagnostic Services). In comparison, we
found that only 2 percent of diagnostic nuclear medicine single bills
with a nuclear medicine procedure and a coded diagnostic
radiopharmaceutical had uncoded costs in these revenue codes. It is
also possible that some of these procedures typically use a diagnostic
radiopharmaceutical subject to packaged payment under the CY 2006 OPPS,
and hospitals may have chosen not to report a separate charge for the
diagnostic radiopharmaceutical. Payment for diagnostic
radiopharmaceuticals commonly used with some diagnostic nuclear
medicine procedures would already be packaged because these diagnostic
radiopharmaceuticals' average per day cost were less than $50 in CY
2006. The CY 2008 proposal to package additional diagnostic
radiopharmaceuticals would have little impact on the payment for those
diagnostic procedures that typically use inexpensive diagnostic
radiopharmaceuticals that would be packaged under our proposed CY 2008
packaging threshold of $60, except to the extent that the budget
neutrality adjustment due to the broader packaging proposal leads to an
increase in the scaler and an increase in the payment for procedures in
general.
At its March 2007 meeting, the APC Panel recommended that CMS work
with stakeholders on issues related to payment for
radiopharmaceuticals, including evaluating claims data for different
classes of radiopharmaceuticals and ensuring that a nuclear medicine
procedure claim always includes at least one reported
radiopharmaceutical agent. We are accepting the APC Panel's
recommendation, and we specifically welcome public comment on the
hospitals' burden involved should we require such precise reporting. We
also are seeking comment on the importance of such a requirement in
light of our above discussion on the representation of diagnostic
radiopharmaceuticals in the single bills for diagnostic nuclear
medicine procedures, the presence of uncoded revenue code charges
specific to diagnostic radiopharmaceuticals on claims without a coded
diagnostic radiopharmaceutical, and our proposal to package payment for
all diagnostic radiopharmaceuticals.
It has come to our attention that several diagnostic
radiopharmaceuticals may be used for multiple day studies; that is, a
particular diagnostic radiopharmaceutical may be administered on one
day and a related diagnostic nuclear medicine procedure may be
performed on a subsequent day. While we understand that multiple day
episodes for diagnostic radiopharmaceuticals and the related diagnostic
nuclear medicine procedures occur, we expect that this would be a small
proportion of all diagnostic nuclear medicine imaging procedures. We
estimate that, roughly, 15 diagnostic radiopharmaceuticals have a half-
life longer than one day such that they could support diagnostic
nuclear medicine scans on different days. We believe these diagnostic
radiopharmaceuticals would be concentrated in a specific set of
diagnostic procedures. Excluding the 5 percent of diagnostic
radiopharmaceutical claims with no matching diagnostic nuclear medicine
scan for the same beneficiary, we found that a diagnostic nuclear
medicine scan was reported on the same day as a coded diagnostic
radiopharmaceutical 90 percent or more of the time for 10 of these 15
diagnostic radiopharmaceuticals. Further, between 80 and 90 percent
single bills for each of the remaining 5 diagnostic
radiopharmaceuticals had a diagnostic nuclear medicine scan on the same
day. In the ``natural'' single bills we use for ratesetting, we package
payment across dates of service. In light of such high percentages of
extended half-life diagnostic radiopharmaceuticals with same day
diagnostic nuclear medicine scans and the ability of ``natural''
singles to package costs across days, we believe that our standard OPPS
ratesetting methodology of using median costs calculated from claims
data adequately captures the costs of diagnostic radiopharmaceuticals
associated with diagnostic nuclear medicine procedures that are not
provided on the same date of service.
This packaging proposal reduces the overall frequency of single
bills for diagnostic nuclear medicine procedures, but the percent of
single bills out of total claims remains robust for the majority of
diagnostic nuclear medicine procedures. Typically, packaging more
procedures should improve the number of single bill claims from which
to derive median cost estimates because packaging reduces the number of
separately paid procedures on a claim, thereby creating more single
procedure bills. In the case of diagnostic nuclear medicine procedures,
packaging diagnostic radiopharmaceuticals reduces the overall number of
single bills available to calculate median costs by increasing packaged
costs that previously were ignored in the bypass process. In prior
years, we did not consider the costs of radiopharmaceuticals when we
used our bypass methodology to extract ``pseudo'' single claims because
we assumed that the cost of radiopharmaceutical overhead and handling
would be included in the line-item charge for the radiopharmaceutical,
and the diagnostic radiopharmaceuticals were subject to potential
separate payment if their mean per day cost fell above the packaging
threshold. The bypass process sets empirical and clinical criteria for
minimal packaging for a specific list of procedures and services in
order to assign packaged costs to other procedures on a claim and is
discussed at length in section II.A.1. of this proposed rule.
Generally, changing the status of diagnostic radiopharmaceuticals to
packaged increases packaging on each claim. This could make it both
harder for nuclear medicine procedures to qualify for the bypass list
and more difficult to assign packaging to individual diagnostic nuclear
medicine procedures, resulting in a possible reduction of the number of
``pseudo'' singles that are produced by the bypass process.
Notwithstanding this potentiality, diagnostic nuclear medicine
procedures continue to have good representation in the single bills. On
average, single bills as a percent of total occurrences remains
substantial at 55 percent for individual procedures. We discuss our
process for ratesetting, including the construction and use of single
and multiple bills, in greater detail in section II.A.1. of this
proposed rule.
We believe our CY 2006 claims data support our CY 2008 proposal to
package payment for all diagnostic radiopharmaceuticals and lead to
proposed payment rates for diagnostic nuclear medicine procedures that
appropriately reflect payment for the costs of the diagnostic
radiopharmaceuticals that are administered to carry out those
diagnostic nuclear medicine procedures. Among the top 20 high volume

[[Page 42670]]

diagnostic nuclear medicine procedures, at least 84 percent of the
single bills for almost every diagnostic nuclear medicine procedure
included a diagnostic radiopharmaceutical HCPCS code. While a
diagnostic radiopharmaceutical, by definition, would be anticipated to
accompany 100 percent of the diagnostic nuclear medicine procedures, it
is not unexpected that while percentages in our claims data are high,
they are less than 100 percent. As noted previously, we have heard
anecdotal reports that some hospitals may include the charges for
diagnostic radiopharmaceuticals in their charge for the diagnostic
nuclear medicine procedure or on an uncoded revenue code line, rather
than reporting a HCPCS code for the diagnostic radiopharmaceutical.
Thus, it is likely that the frequency of diagnostic radiopharmaceutical
costs reflected in our claims data are even higher than the percentages
indicate. Furthermore, we note that the OPPS ratesetting methodology is
based on medians, which are less sensitive to extremes than means and
typically do not reflect subtle changes in cost distributions.
Therefore, to the extent that the vast majority of single bills for a
particular diagnostic nuclear medicine procedure include a diagnostic
radiopharmaceutical HCPCS code, the fact that the percentage is
somewhat less than 100 percent is likely to have minimal impact on the
median cost of the procedure in most cases. Even in those few instances
where we have a low total number of single bills, largely because of
low overall volume, we have ample representation of diagnostic
radiopharmaceutical HCPCS codes on the single bills for the majority of
lower volume nuclear medicine procedures. We also continue to have
reasonable representation of single bills out of total claims in
general. Finally, as noted previously, to the extent that the
diagnostic radiopharmaceuticals commonly used with a particular
diagnostic nuclear medicine procedure are already packaged, the
proposal to package additional diagnostic radiopharmaceuticals would
have little impact on the payment for these procedures.
We have calculated the median costs on which we are proposing to
base the CY 2008 payment rates using the packaging status of each
diagnostic radiopharmaceutical HCPCS code as provided in Table 17
below. As we discussed earlier in more detail, this has the effect of
both changing the median cost for the independent service (the
diagnostic nuclear medicine procedure) into which the cost of the
dependent service (the diagnostic radiopharmaceutical) is packaged and
also of redistributing payment that would otherwise have been made
separately for the service we are proposing to newly package for CY
2008.
For example, HCPCS code A9552 (Fluorodeoxyglucose F-18 FDG,
Diagnostic, per study dose, up to 45 millicuries) that describes the
diagnostic radiopharmaceutical commonly called FDG is frequently billed
with CPT code 78815 (Tumor imaging, positron emission tomography (PET)
with concurrently acquired computed tomography (CT) for attenuation
correction and anatomical localization; skull base to mid-thigh). HCPCS
code A9552 is assigned to APC 1651 (F18 fdg) for CY 2007. HCPCS code
A9552 was billed with CPT code 78815 101,242 times in the single bills
available for this CY 2008 proposed rule, and 97 percent of the single
bills for CPT code 78815 also reported HCPCS code A9552. Under our
proposed policy for CY 2008, we are proposing to package payment for
HCPCS code A9552 into the payment for separately payable procedures
that are provided in conjunction with HCPCS code A9552. In this
example, HCPCS code A9552 would receive packaged payment through the
separate OPPS payment for CPT code 78815. CPT code 78815 is assigned to
APC 1511 (New Technology--Level XI ($900-$1000)) for CY 2007 with a CY
2007 median cost for PET/CT procedures of $850.36 and to APC 0308 (Non-
Myocardial Positron Emission Tomography (PET) Imaging) for CY 2008 with
a proposed CY 2008 APC median cost of $1,093.52.
The proposed CY 2008 payment rates associated with this example are
outlined in Table 16 below. The table indicates that the proposed CY
2008 payment rate for the skull base to mid-thigh PET/CT scan would be
substantially higher than the CY 2007 payment amount for that code. The
proposed increase for the PET/CT scan is slightly more than the
estimated average CY 2007 payment for the separately payable FDG (paid
in CY 2007 at charges reduced to cost).
This example cannot demonstrate the overall impact of packaging
diagnostic radiopharmaceuticals on payment to any given hospital
because each individual hospital's case mix and billing patterns would
be different. The overall impact of packaging diagnostic
radiopharmaceuticals, as well as all other packaging changes proposed
for CY 2008, can only be assessed in the aggregate for each hospital.
Section XXII.B. of this proposed rule displays the overall impact of
APC weight recalibration and packaging changes that we are proposing by
classes of hospitals, and the OPPS Hospital-Specific Impacts--Provider-
Specific Data file presents our estimates of CY 2008 hospital payment
for those hospitals we include in our ratesetting and payment
simulation database. The hospital-specific impacts file can be found on
the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/ under

supporting documentation for this proposed rule.

Table 16.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for HCPCS Code A9552 and CPT Code
78815
----------------------------------------------------------------------------------------------------------------
Sum of CY 2007
payment (A9552 Sum of CY 2008
HCPCS code Short descriptor paid proposed
separately at payment (A9552
cost) packaged)
----------------------------------------------------------------------------------------------------------------
A9552..................................... F18 fdg (dependent service)......... *$279.29 0.00
78815..................................... Tumor image pet/ct skul-thigh 950.00 1,107.22
(independent service).
-------------------------------
Total Payment............................................................... 1,229.29 1,107.22
----------------------------------------------------------------------------------------------------------------
*Estimated average CY 2007 payment at charges reduced to cost.

[[Page 42671]]

The estimated overall impact of these changes that we are proposing
for CY 2008 is based on the assumption that hospital behavior would not
change with regard to when the dependent diagnostic
radiopharmaceuticals are provided by the same hospital that performs
the independent services. In order to provide diagnostic nuclear
medicine procedures under this proposal, hospitals would either need to
administer the necessary diagnostic radiopharmaceuticals themselves or
refer patients elsewhere for the administration of the diagnostic
radiopharmaceuticals. In the latter case, claims data would show such a
change in practice in future years and that change would be reflected
in future ratesetting. However, with respect to diagnostic
radiopharmaceuticals, we believe that hospitals are limited in the
extent to which they could change their behavior with regard to how
they furnish these items because diagnostic radiopharmaceuticals are
typically provided on the same day as a diagnostic nuclear medicine
procedure. It would be difficult for Hospital A to send patients to
receive diagnostic radiopharmaceuticals from Hospital B and then have
the patients return to Hospital A for the diagnostic nuclear medicine
procedure in the appropriate timeframe (given the radiopharmaceutical's
half life) to perform a high quality study. We would expect that
hospitals would always bill the diagnostic radiopharmaceutical on the
same claim as the other independent services for which the
radiopharmaceutical was administered.
As we indicate above, in all cases, we are proposing that hospitals
that furnish diagnostic radiopharmaceuticals in association with
diagnostic nuclear medicine procedures bill both the item and the
procedure on the same claim so that the costs of the diagnostic
radiopharmaceuticals can be appropriately packaged into payment for the
diagnostic nuclear medicine procedure. We expect to carefully monitor
any changes in billing practices on a service-specific and hospital-
specific basis to determine whether there is reason to request that
QIOs review the quality of care furnished or to request that Program
Safeguard Contractors review the claims against the medical record.

Table 17.--Diagnostic Radiopharmaceutical HCPCS Codes Proposed for Packaged Payment in CY 2008
----------------------------------------------------------------------------------------------------------------
HCPCS code Short descriptor CY 2007 SI CY 2007 APC CY 2008 proposed SI
----------------------------------------------------------------------------------------------------------------
A4641.................. Radiopharm dx agent N...................... n/a N
noc.
A4642.................. In111 satumomab....... H...................... 0704 N
A9500.................. Tc99m sestamibi....... H...................... 1600 N
A9502.................. Tc99m tetrofosmin..... H...................... 0705 N
A9503.................. Tc99m medronate....... N...................... n/a N*
A9504.................. Tc99m apcitide........ N...................... n/a N*
A9505.................. TL201 thallium........ H...................... 1603 N
A9507.................. In111 capromab........ H...................... 1604 N
A9508.................. I131 iodobenguate, dx. H...................... 1045 N
A9510.................. Tc99m disofenin....... N...................... n/a N*
A9512.................. Tc99m pertechnetate... N...................... n/a N*
A9516.................. I123 iodide cap, dx... H...................... 9148 N
A9521.................. Tc99m exametazime..... H...................... 1096 N
A9524.................. I131 serum albumin, dx H...................... 9100 N
A9526.................. Nitrogen N-13 ammonia. H...................... 0737 N
A9528.................. Iodine I-131 iodide H...................... 1088 N
cap, dx.
A9529.................. I131 iodide sol, dx... N...................... n/a N
A9531.................. I131 max 100uCi....... N...................... n/a N*
A9532.................. I125 serum albumin, dx N...................... n/a N
A9536.................. Tc99m depreotide...... H...................... 0739 N
A9537.................. Tc99m mebrofenin...... N...................... n/a N*
A9538.................. Tc99m pyrophosphate... N...................... n/a N*
A9539.................. Tc99m pentetate....... H...................... 0722 N*
A9540.................. Tc99m MAA............. N...................... n/a N*
A9541.................. Tc99m sulfur colloid.. N...................... n/a N*
A9542.................. In111 ibritumomab, dx. H...................... 1642 N
A9544.................. I131 tositumomab, dx.. H...................... 1644 N
A9546.................. Co57/58............... H...................... 0723 N
A9547.................. In111 oxyquinoline.... H...................... 1646 N
A9548.................. In111 pentetate....... H...................... 1647 N
A9550.................. Tc99m gluceptate...... H...................... 0740 N
A9551.................. Tc99m succimer........ H...................... 1650 N
A9552.................. F18 fdg............... H...................... 1651 N
A9553.................. Cr51 chromate......... H...................... 0741 N
A9554.................. I125 iothalamate, dx.. N...................... n/a N
A9555.................. Rb82 rubidium......... H...................... 1654 N
A9556.................. Ga67 gallium.......... H...................... 1671 N
A9557.................. Tc99m bicisate........ H...................... 1672 N
A9558.................. Xe133 xenon 10mci..... N...................... n/a N*
A9559.................. Co57 cyano............ H...................... 0724 N
A9560.................. Tc99m labeled rbc..... H...................... 0742 N
A9561.................. Tc99m oxidronate...... N...................... n/a N*
A9562.................. Tc99m mertiatide...... H...................... 0743 N
A9565.................. In111 pentetreotide... H...................... 1677 N
A9566.................. Tc99m fanolesomab..... H...................... 1678 N
A9567.................. Technetium TC-99m H...................... 0829 N*
aerosol.

[[Page 42672]]

A9568.................. Tc99m arcitumomab..... H...................... 1648 N
----------------------------------------------------------------------------------------------------------------
* Indicates that the radiopharmaceutical would have been packaged under the $60 packaging threshold methodology
in CY 2008, even in the absence of the broader packaging proposal for radiopharmaceuticals.

(6) Contrast Agents
For CY 2008, we are proposing to package payment for all contrast
media into their associated independent diagnostic and therapeutic
procedures as part of our proposed packaging approach for the CY 2008
OPPS. As noted in section II.A.4.c. of this proposed rule, packaging
the costs of supportive items and services into the payment for the
independent procedure or service with which they are associated
encourages hospital efficiencies and also enables hospitals to manage
their resources with maximum flexibility. We believe that contrast
agents are particularly well suited for packaging because they are
always provided in support of an independent diagnostic or therapeutic
procedure that involves imaging, and thus payment for contrast agents
can be packaged into the payment for the associated separately payable
procedures.
Contrast agents are generally considered to be those substances
introduced into or around a structure that, because of the differential
absorption of x-rays, alteration of magnetic fields, or other effects
of the contrast medium in comparison with surrounding tissues, permit
visualization of the structure through an imaging modality. The use of
certain contrast agents is generally associated with specific imaging
modalities, including x-ray, computed tomography (CT), ultrasound, and
magnetic resonance imaging (MRI), for purposes of diagnostic testing or
treatment. They are most commonly administered through an oral or
intravascular route in association with the performance of the
independent procedures involving imaging that are the basis for their
administration. Even in the absence of this proposal to package payment
for all contrast agents, we would propose to package the majority of
HCPCS codes for contrast agents recognized under the OPPS in CY 2008.
We consider contrast agents to be drugs under the OPPS, and as a result
they are packaged if their estimated mean per day cost is equal to or
less than $60 for CY 2008. (For more discussion of our drug packaging
criteria, we refer readers to section V.B.2 of this proposed rule.)
Seventy-five percent of contrast agents HCPCS codes have an estimated
mean per day cost equal to or less than $60 based on our CY 2006 claims
data.
Contrast agents are described by those Level II HCPCS codes in the
range from Q9945 through Q9964. There currently are no HCPCS C-codes or
other Level II HCPCS codes outside the range specified above used to
report contrast agents under the OPPS. As shown in Table 19, in CY
2007, we packaged 7 out of 20 of these contrast agent HCPCS codes based
on the $55 packaging threshold. For CY 2008, we are proposing to
package all drugs with a per day mean cost of $60 or less. For CY 2008,
the vast majority of contrast agents would be packaged under the
traditional OPPS packaging methodology using the $60 packaging
threshold, based on the CY 2006 claims data available for this proposed
rule. In fact, of the 20 contrast agent HCPCS codes we are including in
our proposed packaging approach, 15 would have been proposed to be
packaged for CY 2008 under our drug packaging methodology. These 15
codes represent 94 percent of all occurrences of contrast agents billed
under the OPPS. We believe that this shift in the packaging status for
several of these agents between CYs 2007 and 2008 may be because, in CY
2007, a number of the contrast agents exceeded the $55 threshold by
only a small amount and, based on our latest claims data for CY 2008, a
number of these products have now fallen below the proposed $60
threshold. Given that the vast majority of contrast agents billed would
already be packaged under the OPPS in CY 2008, we believe it would be
desirable to package payment for the remaining contrast agents as it
promotes efficiency and results in a consistent payment policy across
products that may be used in many of the same independent procedures.
We also note that the significant costs associated with these 15
contrast agents would already be reflected in the proposed median costs
for those independent procedures and, if we were to pay for the 5
remaining agents separately, we would be treating these 5 agents
differently than the others. If the 5 agents remained separately
payable, there would effectively be two payments for contrast agents
when these 5 agents were billed--a separate payment and a payment for
packaged contrast agents that was part of the procedure payment. This
could potentially provide a payment incentive to administer certain
contrast agents that might not be the most clinically appropriate or
cost effective. Moreover, as noted previously, contrast agents are
always provided with independent procedures and, under a consistent
approach to packaging in keeping with our enhanced efforts to encourage
hospital efficiency and promote value-based purchasing under the OPPS,
their payment would be appropriately packaged for CY 2008.
We have calculated the median costs on which the proposed CY 2008
payment rates are based using the packaging status of each contrast
agent HCPCS code as provided in Table 19 below. As we discussed earlier
in more detail, this has the effect of both changing the median cost
for the independent service (the diagnostic or therapeutic procedure
requiring imaging) into which the cost of the dependent service (the
contrast agent) is packaged and also of redistributing payment that
would otherwise have been made separately for the service we are
proposing to newly package for CY 2008.
For example, HCPCS code Q9947 (Low osmolar contrast material, 200-
249 mg/ml iodine concentration, per ml) is one of the contrast agents
that we are proposing to package that would not otherwise be packaged
in CY 2008 under the proposed $60 packaging threshold. HCPCS code Q9947
is sometimes billed with CPT code 71260 (Computed tomography, thorax;
with contrast material(s)). HCPCS code Q9947 is assigned to APC 9159
(LOCM 200-249 mg/ml iodine, 1ml) for CY 2007. HCPCS code Q9947 was
billed with CPT code 71260 8,172 times in the single bills available
for this CY 2008 proposed rule, and 2 percent of the single bills for
CPT code 71260 also reported HCPCS code Q9947. Under our proposed
policy for CY 2008, we are proposing to package payment for

[[Page 42673]]

HCPCS code Q9947 into the payment for separately payable procedures
that are provided in conjunction with the contrast agent. Specifically,
we would package payment for HCPCS code Q9947 so that, in this example,
HCPCS code Q9947 would receive packaged payment through the separate
OPPS payment for CPT code 71260. CPT code 71260 is assigned to APC 0283
(Computed Tomography with Contrast) for CY 2007 with a CY 2007 median
cost of $249.48. The procedure is assigned to APC 0283, with a proposed
APC name change to ``Level I Computed Tomography with Contrast'' for CY
2008 and a proposed CY 2008 median cost of $286.13.
The proposed CY 2008 payment rates associated with this example are
outlined in Table 18 below. The table indicates that the CY 2008
payment that we are proposing for CPT code 71260 is higher than the CY
2007 payment amount for that code. The proposed increase in the payment
rate for CPT code 71260 in CY 2008 is slightly greater than the
estimated CY 2007 payment for the separately payable HCPCS code Q9947.
Notably, a number of low osmolar contrast agents other than HCPCS code
Q9947 that were separately paid in CY 2007 also are proposed for
packaged payment in CY 2008 because their mean per day cost falls below
the $60 packaging threshold for drugs, biologicals, and
radiopharmaceuticals for CY 2008. Packaging the costs of these contrast
media also affects the proposed payment rate for CPT code 71260. For
another example of packaging contrast agents, we refer readers to the
example included in Table 13 of section II.A.4.c.(4) of this proposed
rule on packaging imaging supervision and interpretation services. That
example illustrates the effect of packaging both a supervision and
interpretation service (CPT code 72265 (Myelography, lumbosacral,
radiological supervision and interpretation)) and a contrast agent
(HCPCS code Q9947 (low osmolar contrast material, 200-249 mg/ml iodine,
per ml)) into the payment for an imaging procedure (CPT code 72132
(Computed tomography, lumbar spine; with contrast material)).
This example cannot demonstrate the overall impact of packaging
contrast agents on any given hospital because each individual
hospital's case mix and billing pattern differs. The overall impact of
packaging contrast agents, as well as all the other proposed packaging
changes, can only be assessed in the aggregate for classes of
hospitals. Section XXII.B. of this proposed rule displays the overall
impact of APC weight recalibration and packaging changes we are
proposing by classes of hospitals, and the OPPS Hospital-Specific
Impacts--Provider-Specific Data file presents our estimates of CY 2008
hospital payment for those hospitals we include in our ratesetting and
payment simulation database. The hospital-specific impact file can be
found on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/
under supporting documentation for this proposed

rule.

Table 18.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for CPT Code 72160 and HCPCS Code
Q9947
----------------------------------------------------------------------------------------------------------------
Sum of CY 2007 Sum of CY 2008
payment (Q9947 proposed
HCPCS code Short descriptor paid payment (Q9947
separately) packaged)
----------------------------------------------------------------------------------------------------------------
Q9947..................................... LOCM 200-249 mg/ml iodine, 1 ml *$64.24 $0.00
(dependent service).
71260..................................... Ct thorax w/dye (independent 250.94 289.71
service).
-------------------------------
Total Payment............................................................... 315.18 289.71
----------------------------------------------------------------------------------------------------------------
*Based on the mean number of units per day from our CY 2008 proposed rule data (48.3) and the April 2007 per
unit payment rate for Q9947 ($1.33).

The estimated overall impact of these changes that we are proposing
for CY 2008 is based on the assumption that hospital behavior would not
change with regard to when the contrast agents are provided by the same
hospital that performs the imaging procedure. Under this proposal, in
order to provide imaging procedures requiring contrast agents,
hospitals would either need to administer the necessary contrast agent
themselves or refer patients elsewhere for the administration of the
contrast agent. In the latter case, claims data would show such a
change in practice in future years and that change would be reflected
in future ratesetting. However, with respect to contrast agents, we
believe that hospitals are limited in the extent to which they could
change their behavior with regard to how they furnish these services
because contrast agents are typically provided on the same day
immediately prior to an imaging procedure being performed. We would
expect that hospitals would always bill the contrast agent on the same
claim as the other independent services for which the contrast agent
was administered.
As we indicated earlier, in all cases we are proposing that
hospitals that furnish the supportive contrast agent in association
with independent procedures involving imaging must bill both services
on the same claim so that the cost of the contrast agent can be
appropriately packaged into payment for the significant independent
procedure. We expect to carefully monitor any changes in billing
practices on a service-specific and hospital specific basis to
determine whether there is reason to request that QIOs review the
quality of care furnished or to request that Program Safeguard
Contractors review the claims against the medical record.

Table 19.--Contrast Media HCPCS Codes Proposed for Packaged Payment in CY 2008
----------------------------------------------------------------------------------------------------------------
HCPCS code Short descriptor CY 2007 SI CY 2007 APC Proposed CY 2008 SI
----------------------------------------------------------------------------------------------------------------
Q9945.................. LOCM < =149 mg/ml K...................... 9157 N*
iodine, 1 ml.
Q9946.................. LOCM 150-199 mg/ml K...................... 9158 N*
iodine, 1 ml.
Q9947.................. LOCM 200-249 mg/ml K...................... 9159 N
iodine, 1 ml.

[[Page 42674]]

Q9948.................. LOCM 250-299 mg/ml K...................... 9160 N*
iodine, 1 ml.
Q9949.................. LOCM 300-349 mg/ml K...................... 9161 N*
iodine, 1 ml.
Q9950.................. LOCM 350-399 mg/ml K...................... 9162 N*
iodine, 1 ml.
Q9951.................. LOCM >= 400 mg/ml K...................... 9163 N*
iodine, 1 ml.
Q9952.................. Inj Gad-base MR K...................... 9164 N*
contrast, 1 ml.
Q9953.................. Inj Fe-based MR K...................... 1713 N
contrast, 1 ml.
Q9954.................. Oral MR contrast, 100 K...................... 9165 N*
ml.
Q9955.................. Inj perflexane lip K...................... 9203 N*
micros, ml.
Q9956.................. Inj octafluoropropane K...................... 9202 N
mic, ml.
Q9957.................. Inj perflutren lip K...................... 9112 N
micros, ml.
Q9958.................. HOCM < =149 mg/ml N...................... n/a N*
iodine, 1 ml.
Q9959.................. HOCM 150-199 mg/ml N...................... n/a N
iodine, 1 ml.
Q9960.................. HOCM 200-249 mg/ml N...................... n/a N*
iodine, 1 ml.
Q9961.................. HOCM 250-299 mg/ml N...................... n/a N*
iodine, 1 ml.
Q9962.................. HOCM 300-349 mg/ml N...................... n/a N*
iodine, 1 ml.
Q9963.................. HOCM 350-399 mg/ml N...................... n/a N*
iodine, 1 ml.
Q9964.................. HOCM>= 400 mg/ml N...................... n/a N*
iodine, 1 ml.
----------------------------------------------------------------------------------------------------------------
*Indicates that the contrast agent would have been packaged under the $60 packaging threshold methodology in CY
2008, even in the absence the broader packaging proposal for contrast agents.

(7) Observation Services
We are proposing to package payment for all observation care,
reported under HCPCS code G0378 (Hospital observation services, per
hour) for CY 2008. Payment for observation would be packaged as part of
the payment for the separately payable services with which it is
billed. We have defined observation care as a well-defined set of
specific, clinically appropriate services that include ongoing short-
term treatment, assessment, and reassessment before a decision can be
made regarding whether patients will require further treatment as
hospital inpatients or if they are able to be discharged from the
hospital. Observation status is commonly assigned to patients who
present to the emergency department and who then require a significant
period of treatment or monitoring before a decision is made concerning
their next placement or to patients with unexpectedly prolonged
recovery after surgery. Throughout this proposed rule, as well as in
our manuals and guidance documents, we use both of the terms
``observation services'' and ``observation care'' in reference to the
services defined above.
Payment for all observation care under the OPPS was packaged prior
to CY 2002. Since CY 2002, separate payment of a single unit of an
observation APC for an episode of observation care has been provided in
limited circumstances. Effective for services furnished on or after
April 1, 2002, separate payment for observation was made if the
beneficiary had chest pain, asthma, or congestive heart failure and met
additional criteria for diagnostic testing, minimum and maximum limits
to observation care time, physician care, and documentation in the
medical record (66 FR 59856, 59879). Payment for observation care that
did not meet these specified criteria was packaged. Between CY 2003 and
CY 2006, several more changes were made to the OPPS policy regarding
separate payment for observation services, such as: Clarification that
observation is not separately payable when billed with ``T'' status
procedures on the day of or day before observation care; development of
specific Level II HCPCS codes for hospital observation services and
direct admission to observation care; and removal of the initially
established diagnostic testing requirements for separately payable
observation (67 FR 66794, 69 FR 65828, and 70 FR 68688). Throughout
this time period, we maintained separate payment for observation care
only for the three specified medical conditions, and OPPS payment for
observation for all other clinical conditions remained packaged.
Since January 1, 2006, hospitals have reported observation services
based on an hourly unit of care using HCPCS code G0378. This code has a
status indicator of ``Q'' under the CY 2007 OPPS, meaning that the OPPS
claims processing logic determines whether the observation is packaged
or separately payable. The OCE's current logic determines whether
observation services billed under HCPCS code G0378 are separately
payable through APC 0339 (Observation) or whether payment for
observation services will be packaged into the payment for other
separately payable services provided by the hospital in the same
encounter based on criteria discussed subsequently. (We note that if an
HOPD directly admits a patient to observation, Medicare currently pays
separately for that direct admission reported under HCPCS code G0379
(Direct admission of patient for hospital observation care) in
situations where payment for the actual observation care reported under
HCPCS code G0378 is packaged.) For CY 2008, as discussed in more detail
later in this proposed rule (section XI.), we are proposing to continue
the coding and payment methodology for direct admission to observation
status, with the exception of the requirement that HCPCS code G0379 is
only eligible for separate payment if observation care reported under
HCPCS code G0378 does not qualify for separate payment. This
requirement would no longer be applicable under our proposal to package
all observation services reported under HCPCS code G0378.
Currently, separate OPPS payment may be made for observation
services reported under HCPCS code G0378 provided to a patient when all
of the following requirements are met. The hospital would receive a
single separate payment for an episode of observation care (APC 0339)
when:
1. Diagnosis Requirements
a. The beneficiary must have one of three medical conditions:
congestive heart failure, chest pain, or asthma.
b. Qualifying ICD-9-CM diagnosis codes must be reported in Form
Locator (FL) 76, Patient Reason for Visit, or FL 67, principal
diagnosis, or both in order for the hospital to receive separate
payment for APC 0339. If a qualifying ICD-9-CM diagnosis code(s) is
reported in the secondary diagnosis field, but is

[[Page 42675]]

not reported in either the Patient Reason for Visit field (FL 76) or in
the principal diagnosis field (FL 67), separate payment for APC 0339 is
not allowed.
2. Observation Time
a. Observation time must be documented in the medical record.
b. A beneficiary's time in observation (and hospital billing)
begins with the beneficiary's admission to an observation bed.
c. A beneficiary's time in observation (and hospital billing) ends
when all clinical or medical interventions have been completed,
including followup care furnished by hospital staff and physicians that
may take place after a physician has ordered the patient be released or
admitted as an inpatient.
d. The number of units reported with HCPCS code G0378 must equal or
exceed 8 hours.
3. Additional Hospital Services
a. The claim for observation services must include one of the
following services in addition to the reported observation services.
The additional services listed below must have a line-item date of
service on the same day or the day before the date reported for
observation:
An emergency department visit (APC 0609, 0613, 0614, 0615,
or 0616); or
A clinic visit (APC 0604, 0605, 0606, 0607, or 0608); or
Critical care (APC 0617); or
Direct admission to observation reported with HCPCS code
G0379 (APC 0604).
b. No procedure with a ``T'' status indicator can be reported on
the same day or day before observation care is provided.
4. Physician Evaluation
a. The beneficiary must be in the care of a physician during the
period of observation, as documented in the medical record by
admission, discharge, and other appropriate progress notes that are
timed, written, and signed by the physician.
b. The medical record must include documentation that the physician
explicitly assessed patient risk to determine that the beneficiary
would benefit from observation care.
In the context of our proposed CY 2008 packaging approach, for
several reasons we believe that it is appropriate to package payment
for all observation services reported with HCPCS code G0378 under the
CY 2008 OPPS. Primarily, observation services are ideal for packaging
because they are always provided as a supportive service in conjunction
with other independent separately payable hospital outpatient services
such as an emergency department visit, surgical procedure, or another
separately payable service, and thus observation costs can logically be
packaged into OPPS payment for independent services. As discussed
extensively earlier in this section, packaging payment into larger
payment bundles creates incentives for providers to furnish services in
the most efficient way that meets the needs of the patient, encouraging
long-term cost containment.
As we discussed in the general overview of the CY 2008 packaging
approach earlier in this section (section II.A.4.b. of this proposed
rule), there has been substantial growth in program expenditures for
hospital outpatient services under the OPPS in recent years. The
primary reason for this upsurge is growth in the intensity and
utilization of services rather than the general price of services or
enrollment changes. This observed trend is notably reflected in the
frequency and costs of separately payable observation care for the last
few years. While median costs for an episode of observation care that
would meet the criteria for separate payment have remained relatively
stable between CY 2003 and CY 2006, the frequency of claims for
separately payable observation services has rapidly increased.
Comparing claims data for separately payable observation care available
for proposed rules spanning from CY 2005 to CY 2008 (that is, claims
data reflecting services furnished from CY 2003 to CY 2006), we see
substantial growth in separately payable observation care billed under
the OPPS over that time. In CY 2003, the full first year when
observation care was separately payable, there were approximately
56,000 claims for separately payable observation care. In CY 2004,
there were approximately 77,000 claims for separately payable
observation care. In CY 2005, that number increased to approximately
124,300 claims, representing about a 61 percent increase in one year.
In addition, in the CY 2006 data available for this proposed rule, the
frequency of claims for separately payable observation services
increased again, to more than 271,200 claims, about a 118-percent
increase over CY 2005 and more than triple the number of claims from 2
years earlier. While it is not possible to discern the specific factors
responsible for the growth in claims for separately payable observation
services, as there have been minor changes in both the process and
criteria for separate payment for these services over this time period,
the substantial growth by itself is noteworthy.
We are also concerned that the current criteria for separate
payment for observation services may provide disincentives for
efficiency. In order for observation services to be separately payable,
they must last at least 8 hours. While this criterion was put in place
to ensure that separate payment is made only for observation services
of a substantial duration, it may create a financial disincentive for
an HOPD to make a timely determination regarding a patient's safe
disposition after observation care ends. By packaging payment for all
observation services, regardless of their duration, we would provide
incentives for more efficient delivery of services and timely decision-
making. The current criterion also prohibits separate payment for
observation services when a ``T'' status procedure (generally a
surgical procedure) is provided on the same day or the previous day by
the HOPD to the same Medicare beneficiary. Again, this may create a
financial disincentive for hospitals to provide minor surgical
procedures during a patient's observation stay, unless those procedures
are essential to the patient's care during that time period, even if
the most efficient and effective performance of those procedures could
be during the single HOPD encounter.
Currently, the OPPS pays separately for observation care for only
the three original medical conditions designated in CY 2002,
specifically chest pain, asthma, and congestive heart failure. As
discussed in more detail in the observation section (section XI.) of
this proposed rule, the APC Panel recommended at its March 2007 meeting
that we consider expanding separate payment for observation services to
include two additional diagnoses, syncope and dehydration. As mentioned
previously, we have defined observation care as a well-defined set of
specific, clinically appropriate services, which include ongoing,
short-term treatment, assessment, and reassessment, that are furnished
while a decision is being made regarding whether a patient will require
further treatment as a hospital inpatient or if the individual is able
to be discharged from the hospital. Given the definition of observation
services, it is clear that, in certain circumstances, observation care
could be appropriate for patients with a range of diagnoses. Both the
APC Panel and numerous commenters to prior OPPS proposed rules have
confirmed their agreement with this perspective. In addition, the June
2006

[[Page 42676]]

Institute of Medicine (IOM) Report entitled, ``Hospital-Based Emergency
Care: At the Breaking Point,'' encourages hospitals to apply tools to
improve the flow of patients through emergency departments, including
developing clinical decisions units where observation care is provided.
The IOM's Committee on the Future of Emergency Care in the United
States Health System recommended that CMS remove the current
limitations on the medical conditions that are eligible for separate
observation care payment in order to encourage the development of such
observation units.
As packaging payment provides desirable incentives for greater
efficiency in the delivery of health care and provides hospitals with
significant flexibility to manage their resources, we believe it is
most appropriate to treat observation care for all diagnoses similarly
by packaging its costs into payment for the separately payable
independent services with which the observation is associated. This
consistent payment methodology would provide hospitals with the
flexibility to assess their approaches to patient care and patient flow
and provide observation care for patients with a variety of clinical
conditions when hospitals conclude that observation services would
improve their treatment of those patients. Approximately 70 percent of
the occurrences of observation care billed under the OPPS are currently
packaged, and this proposal would extend the incentives for efficiency
already present for the vast majority of observation services that are
already packaged under the OPPS to the remaining 30 percent of
observation services for which we currently make separate payment.
We have calculated the median costs on which the proposed CY 2008
payment rates are based according to our proposed packaging approach
under which payment for HCPCS code G0378 would always be packaged
(status indicator ``N''). As we discussed previously in more detail, in
this section, this has the effect of both changing the median costs for
the independent services into which the costs of the dependent and
supportive observation services are packaged and also of redistributing
payment that would otherwise have been made separately for the
observation services we are proposing to newly package for CY 2008.
For example, separately payable observation care is frequently
billed with CPT code 99285 (Emergency department visit for the
evaluation and management of a patient (Level 5)). In the CY 2008 OPPS
proposed rule claims data, CPT code 99285 was billed 157,668 times on
claims with HCPCS code G0378 that meet our current criteria for
separate payment for observation care. In addition, about 57 percent of
the claims for HCPCS code G0378 that meet our current criteria for
separate payment also reported CPT code 99285. Under our proposed
policy for CY 2008, we are proposing to package payment for HCPCS code
G0378 into the payment for separately payable procedures that are
provided in conjunction with HCPCS code G0378. Specifically, we would
package payment for HCPCS code G0378 when it is provided with a
separately paid service such as CPT code 99285, so that in this example
observation would receive packaged payment through the separate OPPS
payment for the Level 5 emergency department visit. CPT code 99285 is
assigned to APC 0616 (Level 5 Emergency Visits), with a CY 2007 APC
median cost of $323.36 and a proposed CY 2008 median cost of $344.50.
The CY 2007 median cost of APC 0339 for separately payable observation
is $440.22.
The proposed CY 2008 payment rates associated with this example are
outlined in Table 20 below. The table indicates that the proposed CY
2008 payment for a Level 5 emergency department visit is higher than
the CY 2007 payment amount for that code. However, the proposed
increase in the Level 5 emergency department visit payment rate for CY
2008 is significantly less than the CY 2007 payment for separately
payable observation. This is due to the fact that, although observation
services are commonly billed with a Level 5 emergency department visit,
the proportion of all Level 5 emergency department visits that include
observation (12 percent) is relatively small. Thus, when observation
care that would have met the CY 2007 criteria for separate payment is
packaged into payment for separately payable services such as a Level 5
emergency department visit, it raises the payment rate for that
separately payable service for all occurrences of the service, even
those occurrences where observation care is not provided. As a result,
the payment rate for the separately payable service, the Level 5
emergency department visit, does not increase by the full amount of the
former payment rate for separately payable observation care as that
amount is spread over many more occurrences of Level 5 emergency
department visits. In addition, OPPS' use of medians leads relative
weight estimates to be less sensitive to packaging decisions.

Table 20.--Example of the Effects of the CY 2008 Packaging Proposal on Payment for Observation Care (HCPCS Code
G0378) and CPT Code 99295
----------------------------------------------------------------------------------------------------------------
Sum of CY 2007 Sum of CY 2008
payment (some proposed
HCPCS code Short descriptor G0378 paid payment (G0378
separately) packaged)
----------------------------------------------------------------------------------------------------------------
G0378 (under criteria for separately paid Hospital observation per hr $442.81 $0.00
observation care). (dependent service).
99285......................................... Emergency dept visit 325.26 348.81
(independent service).
-------------------------------
Total Payment............................. ................................ 768.07 348.81
----------------------------------------------------------------------------------------------------------------

This example cannot demonstrate the overall impact of packaging
observation services on any given hospital because each individual
hospital's case-mix and billing pattern would be different. The overall
impact of packaging HCPCS code G0378, as well as all other packaging
changes that we are proposing for CY 2008, can only be assessed in the
aggregate for classes of hospitals. Section XXII.B. of this proposed
rule displays the overall impact of APC weight recalibration and
packaging changes that we are proposing by classes of hospitals, and
the OPPS Hospital-Specific Impacts--Provider-Specific Data file
presents our estimates of CY 2008 hospital payment

[[Continued on page 42677]]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]

[[pp. 42677-42726]] Medicare Program: Proposed Changes to the Hospital Outpatient
Prospective Payment System and CY 2008 Payment Rates; Proposed Changes
to the Ambulatory Surgical Center Payment System and CY 2008 Payment
Rates; Medicare and Medicaid Programs: Proposed Changes to [[Page 42677]]

[[Continued from page 42676]]

[[Page 42677]]

for those hospitals we include in our ratesetting and payment
simulation database. The hospital-specific impact file can be found at
http://www.cms.hhs.gov/HospitalOutpatientPPS/ under supporting

documentation for this proposed rule.
The estimated overall impact of these changes that we are proposing
for CY 2008 presented in section XXII.B. of this proposed rule is based
on the assumption that hospital behavior would not change with regard
to when the dependent observation care is provided in the same
encounter and by the same hospital that performs the independent
services. To the extent that hospitals could change their behavior and
cease providing observation services, refer patients elsewhere for that
care, or increase the frequency of observation services, the data would
show such a change in practice in future years and that change would be
reflected in future budget neutrality adjustments. However, with
respect to observation care, we believe that hospitals are limited in
the extent to which they could change their behavior with regard to how
they furnish these services because observation care, by definition, is
short-term treatment, assessment, and reassessment before a decision
can be made regarding whether patients will require further treatment
as hospital inpatients or if they are able to be discharged from the
hospital after receiving the independent services. We believe it is
unlikely that hospitals would cease providing medically necessary
observation care or refer patients elsewhere for that care if they were
unable to reach a decision that the patient could be safely discharged
from the outpatient department. We would expect that hospitals would
always bill the supportive observation care on the same claim as the
other independent services provided in the single hospital encounter.
As we indicated earlier, in all cases we are proposing that
hospitals that furnish the observation care in association with
independent services must bill those services on the same claim so that
the costs of the observation care can be appropriately packaged into
payment for the independent services. We expect to carefully monitor
any changes in billing practices on a service-specific and hospital-
specific basis to determine whether there is reason to request that
QIOs review the quality of care furnished or to request that Program
Safeguard Contractors review the claims against the medical record.
In summary, we are proposing to package payment for all observation
services reported with HCPCS code G0378 for CY 2008. Payment for
observation services would be made as part of the payment for the
separately payable independent services with which they are billed. As
part of this proposal, we would change the status indicator for HCPCS
code G0378 from ``Q'' to ``N.'' In addition, we would no longer require
the current criteria for separate payment related to hospital visits
and ``T'' status procedures, minimum number of hours, and qualifying
diagnoses. However, we would retain as general reporting requirements
those criteria related to physician evaluation, documentation, and
observation beginning and ending time as listed in sections II.A.2.a.,
b., and c., and 4.a. and b. of this proposed rule. Those are more
general requirements that encourage hospitals to provide medically
reasonable and necessary care and help to ensure the proper reporting
of observation services on correctly coded hospital claims that reflect
the full charges associated with all hospital resources utilized to
provide the reported services.
d. Proposed Development of Composite APCs
(1) Background
As we discuss above in regard to our reasons for our proposed
packaging approach for the CY 2008 OPPS, we believe that it is crucial
that the payment approach of the OPPS create incentives for hospitals
to seek ways to provide services more efficiently than exist under the
current OPPS structure and allow hospitals maximum flexibility to
manage their resources. The current OPPS structure usually provides
payment for individual services which are generally defined by
individual HCPCS codes. We currently package the costs of some items
and services (such as drugs and biologicals with an average per day
cost of less than $55) into the payment for separately payable
individual services. However, because the extent of packaging in the
OPPS is currently modest, furnishing many individual separately payable
services increases total payment to the hospital. We believe that this
aspect of the current OPPS structure is a significant factor in the
growth in volume and spending that we discuss in our general overview
and provides a primary rationale for our proposed packaging approach
for services in the CY 2008 OPPS. While packaging payment for
supportive dependent services into the payment for the independent
services which they accompany promotes greater efficiency and gives
hospitals some flexibility to manage their resources, we believe that
payment for larger bundles of major separately paid services that are
commonly performed in the same hospital outpatient encounter or as part
of a multi-day episode of care would create even more incentives for
efficiency, as discussed earlier. Moreover, defining the ``service''
paid under the OPPS by combinations of HCPCS codes for component
services that are commonly performed in the same encounter and that
result in the provision of a complete service would enable us to use
more claims data and to establish payment rates that we believe more
appropriately capture the costs of services paid under the OPPS.
Section 1833(t)(1)(B) of the Act permits us to define what
constitutes a ``service'' for purposes of payment under the OPPS and is
not restricted to defining a ``service'' as a single HCPCS code. For
example, the OPPS currently packages payment for certain items and
services reported with HCPCS codes into the payment for other
separately payable services on the claim. Consistent with our statutory
flexibility to define what constitutes a service under the OPPS, we are
proposing to view a service, in some cases, as not just the diagnostic
or treatment modality identified by one individual HCPCS code but as
the totality of care provided in a hospital outpatient encounter that
would be reported with two or more HCPCS codes for component services.
In view of this statutory flexibility to define what constitutes a
``service'' for purposes of OPPS payment, our desire to encourage
efficiency in HOPD care, our focus on value-based purchasing, and our
desire to use as much claims data as possible to set payment rates
under the OPPS, we examined our claims data to determine how we could
best use the multiple procedure claims (``hardcore'' multiples) that
are otherwise not available for ratesetting because they include
multiple separately payable procedures furnished on the same date of
service. As discussed in more detail in our discussion of single and
multiple procedure claims in section II.A.1.b. of this proposed rule,
we have focused in recent years on ways to convert multiple procedure
claims to single procedure claims to maximize our use of the claims
data in setting median costs for separately payable procedures. We have
been successful in using the bypass list to generate ``pseudo'' single
procedure claims for use in median setting, but this approach generally
does not enable us to use the hardcore multiple claims that contain
multiple separately payable

[[Page 42678]]

procedures, all with associated packaging that cannot be split among
them. We believe that we could use the data from many more multiple
procedure claims by creating APCs for payment of those services defined
as frequently occurring common combinations of HCPCS codes for
component services that we see in correctly coded multiple procedure
claims.
Our examination of data for multiple procedure claims identified
two specific sets of services that we believe are good candidates for
payment based on the naturally occurring common combinations of
component codes that we see on the multiple procedure claims. These are
low dose rate (LDR) prostate brachytherapy and cardiac
electrophysiologic evaluation and ablation services.
Specifically, we have been told (and our data support) that claims
for LDR prostate brachytherapy, when correctly coded, report at least
two major separately payable procedure codes the majority of the time.
For reasons discussed below, we are proposing to use these correctly
coded claims that would otherwise be unusable hardcore multiples as the
basis for an encounter-based composite APC that would make a single
payment when both codes are reported with the same date of service. We
also are proposing to pay separately for these procedure codes in cases
where only one of the two procedures is provided in a hospital
encounter, through the APC associated with that component procedure
code that is furnished.
Similarly, we have been told (and our data support) that multiple
cardiac electrophysiologic evaluation, mapping, and ablation services
are typically furnished on the same date of service and that the
correctly coded claims are typically the multiple procedure claims that
include several component services and that we are unable to use in our
current claims process. The CY 2007 CPT book introductory discussion in
the section entitled ``Intracardiac Electrophysiological Procedures/
Studies'' notes that, in many circumstances, patients with arrhythmias
are evaluated and treated at the same encounter. Therefore, as
discussed in detail below, we are also proposing to establish an
encounter based composite APC for these services that would provide a
single payment for certain common combinations of component cardiac
electrophysiologic services that are reported on the same date of
service.
These composite APCs reflect an evolution in our approach to
payment under the OPPS. Where the claims data show that combinations of
services are commonly furnished together, in the future we will
actively examine whether it would be more appropriate to establish a
composite APC under which we would pay a single rate for the service
reported with a combination of HCPCS codes on the same date of service
(or different dates of service) than to continue to pay for these
individual services under service-specific APCs. We are proposing these
specific encounter-based composite APCs for CY 2008 because we believe
that this approach could move the OPPS toward possible payment based on
an encounter or episode-of-care basis, enable us to use more valid and
complete claims data, create hospital incentives for efficiency, and
provide hospitals with significant flexibility to manage their
resources that do not exist when we pay for services on a per service
basis. As such, these proposed composite APCs may serve as a prototype
for future creation of more composite APCs, through which we could
provide OPPS payment for other types of services in the future. We note
that while these proposed composite APCs for CY 2008 are based on
observed combinations of component HCPCS codes reported on the same
date of service for a single encounter, we also will be exploring in
the future how we could set payments based on episodes of care
involving services that extend beyond the same date but which are all
supportive of a single, related course of treatment. While we are not
proposing to implement multi-day episode-of-care APCs in CY 2008, we
welcome comments on the concept of developing these APCs to provide
payment for such episodes in order to inform our future analyses in
this area.
While we have never previously used the term ``composite'' APC
under the OPPS, we do have one historical payment policy that resembles
the CY 2008 proposed composite APC policy. Since the inception of the
OPPS, CMS has limited the aggregate payment for specified less
intensive mental health services furnished on the same date to the
payment for a day of partial hospitalization, which we considered to be
the most resource intensive of all outpatient mental health treatment
(65 FR 18455). The costs associated with administering a partial
hospitalization program represent the most resource intensive of all
outpatient mental health treatment, and we do not believe that we
should pay more for a day of individual mental health services under
the OPPS. Through the OCE, when the payment for specified mental health
services provided by one hospital to a single beneficiary on one date
of service based on the payment rates associated with the APCs for the
individual services would exceed the per diem partial hospitalization
payment (listed as APC 0033 (Partial Hospitalization)), those specified
mental health services are assigned to APC 0034, which has the same
payment rate as APC 0033, and the hospital is paid one unit of APC
0034. This longstanding policy regarding payment of APC 0034 for
combinations of independent services provided in a single hospital
encounter resembles the payment policy for composite APCs that we are
proposing for LDR prostate brachytherapy and cardiac electrophysiologic
evaluation and ablation services for CY 2008. Similar to the logic for
the proposed composite APCs, the OCE determines whether to pay these
specified mental health services individually or to make a single
payment at the same rate as the per diem rate for partial
hospitalization for all of the specified mental health services
furnished on that date of service. However, we note this established
policy for payment of APC 0034 differs from the proposed policies for
the new CY 2008 composite APCs because APC 0034 is only paid if the sum
of the individual payment rates for the specified mental health
services provided on one date of service exceeds the APC 0034 payment
rate, which equals the per diem rate of APC 0033 for partial
hospitalization.
We are not proposing to change this mental health services payment
policy for CY 2008. However, we are proposing to change the status
indicator from ``S'' to ``Q'' for the HCPCS codes for the specified
mental health services to which APC 0034 applies because those codes
are conditionally packaged when the sum of the payment rates for the
single code APCs to which they are assigned exceeds the per diem
payment rate for partial hospitalization. While we have not published
APC 0034 in Addendum A in the past, we are including it in Addendum A
to this proposed rule entitled ``Mental Health Composite,'' consistent
with our naming taxonomy and publication of the two other proposed
composite APCs. We are also including the mental health composite APC
0034 and its member HCPCS codes in Addendum M to this proposed rule in
the same way that we show the HCPCS codes to which the LDR Prostate
Brachytherapy Composite APC and Cardiac Electrophysiologic Evaluation
and Ablation Composite APC apply.

[[Page 42679]]

In summary, we are not proposing a change to the longstanding
payment policy under which the OPPS pays one unit of APC 0034 in cases
in which the total payments for specified mental health services
provided on the same date of service would otherwise exceed the payment
rate for APC 0033. However, we are proposing to change the status
indicator to ``Q'' for the HCPCS codes for mental health services to
which this policy applies and which comprise this existing composite
APC, because payment for these services would be packaged unless the
sum of the individual payments assigned to the codes would be less than
the payment for APC 0034.
We look forward to public comments on the concept of composite APCs
in general and, specifically, the two new proposed encounter-based
composite APCs for CY 2008, and we hope to involve the public and the
APC Panel in the creation of additional composite APCs. Our goal would
be to use the many naturally occurring multiple procedure claims that
cannot currently be incorporated under the existing APC structure,
regardless of whether the naturally occurring pattern of multiple
procedure claims prevents the development of single bills.
(2) Proposed Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
(a) Background
LDR prostate brachytherapy is a treatment for prostate cancer in
which needles or catheters are inserted into the prostate, and then
radioactive sources are permanently implanted into the prostate through
the hollow needles or catheters. The needles or catheters are then
removed from the body, leaving the radioactive sources in the prostate
forever, where they slowly give off radiation to destroy the cancer
cells until the sources are no longer radioactive. At least two CPT
codes are used to report the composite treatment service because there
are separate codes that describe placement of the needles or catheters
and application of the brachytherapy sources. LDR prostate
brachytherapy cannot be furnished without the services described by
both of these codes. Generally, the component services represented by
both codes occur in the same operative session in the same hospital on
the same date of service. However, we have been told of uncommon cases
in which they are furnished in different locations, with the patient
being transported from one location to another for application of the
sources. In addition, other services, commonly CPT code 76965
(Ultrasonic guidance for interstitial radioelement application) and CPT
code 77290 (Therapeutic radiology simulation-aided field setting;
complex) are often provided in the same hospital encounter.
CPT code 55875 (Transperineal placement of needles or catheters
into prostate for interstitial radioelement application, with or
without cystoscopy) reports the placement of the needles or catheters
for services furnished on or after January 1, 2007. Before this date,
including in the claims for services furnished in CY 2006 that were
used to develop this proposed rule, CPT code 55859 (Transperineal
placement of needles or catheters into prostate for interstitial
radioelement application, with or without cystoscopy) reported this
service. All of the claims for CPT code 55859 (as reported in the CY
2006 claims data) are for the placement of needles or catheters for
prostate brachytherapy, although not all are related to permanent
brachytherapy source application.
CPT code 77778 (Interstitial radiation source application; complex)
reports the application of brachytherapy sources and, when billed with
CPT code 55859 (or CPT code 55875 after January 1, 2007) for the same
encounter, reports placement of the sources in the prostate. We have
been told that application of brachytherapy sources to the prostate is
estimated to be about 85 percent of all occurrences of CPT code 77778
under the OPPS, consistent with our CY 2006 claims data used for CY
2008 ratesetting. CPT code 77778 is also used to report the application
of sources of brachytherapy to body sites other than the prostate.
Historical coding, APC assignments, and payment rates for CPT codes
55859 (CPT code 55875 beginning in CY 2007) and 77778 are shown below
in Table 21.

Table 21.--Historical Payment Rates for Complex Interstitial Application of Brachytherapy Sources
--------------------------------------------------------------------------------------------------------------------------------------------------------
Payment
rate for APC for Payment rate APC for
OPPS CY Combination APC CPT code HCPCS code for CPT codes HCPCS code Brachytherapy source
77778 77778 55859/55875 55859
--------------------------------------------------------------------------------------------------------------------------------------------------------
2000.................................... N/A........................ $198.31 APC 0312 $848.04 APC 0162 Pass-through.
2001.................................... N/A........................ 205.49 APC 0312 878.72 APC 0162 Pass-through.
2002.................................... N/A........................ 6,344.67 APC 0312 2,068.23 APC 0163 Pass-through with pro rata
reduction.
2003 (prostate brachytherapy with iodine G0261, APC 648, $5,154.34.. n/a n/a n/a n/a Packaged.
sources).
2003 (prostate brachytherapy with G0256, APC 649, $5,998.24.. n/a n/a n/a n/a Packaged.
palladium sources).
2003 (not prostate brachytherapy, not N/A........................ 2,853.58 APC 0651 1,479.60 APC 0163 Separate payment based on
including sources). scaled median cost per
source.
2004.................................... N/A........................ 558.24 APC 0651 1,848.55 APC 0163 Cost.
2005.................................... N/A........................ 1,248.93 APC 0651 2,055.63 APC 0163 Cost.
2006.................................... N/A........................ 666.21 APC 0651 1,993.35 APC 0163 Cost.
2007.................................... N/A........................ 1,035.50 APC 0651 2,146.84 APC 0163 Cost.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Payment rates for CPT code 77778, in particular, have fluctuated
over the years. We have frequently been informed by the public that
reliance on single procedure claims to set the median costs for these
services results in use of only incorrectly coded claims for LDR
prostate brachytherapy because, for application of brachytherapy
sources to the prostate, a correctly coded claim is a multiple
procedure claim. Specifically, we have been informed that a correctly
coded claim for LDR prostate brachytherapy should include, for the same
date of service, both CPT

[[Page 42680]]

codes 55859 and 77778, brachytherapy sources reported with Level II
HCPCS codes, and typically separately coded imaging and radiation
therapy planning services, and that we should use correctly coded
claims to set the median for APC 0651 (Complex Interstitial Radiation
Source Application) in particular (where CPT code 77778 is assigned).
In presentations to the APC Panel in its March 2006 meeting, and in
response to the CY 2006 and CY 2007 OPPS proposed rules, commenters
urged us to set the payment rate for LDR prostate brachytherapy
services using only multiple procedure claims. Specifically for CY
2007, they urged us to sum the costs on multiple procedure claims
containing CPT codes 77778 and 55859 (and no other separately payable
services not on the bypass list) and, excluding the costs of sources,
split the resulting aggregate median cost on the multiple procedure
claim according to a preestablished attribution ratio between CPT codes
77778 and 55859. They indicated that any claim for a brachytherapy
service that did not also report a brachytherapy source should be
considered to be incorrectly coded and thus not reflective of the
hospital's resources required for the interstitial source application
procedure. The presenters to the APC Panel believed that claims that
did not contain both brachytherapy source and source application codes
should be excluded from use in establishing the median cost for APC
0651. They believed that hospitals that reported the brachytherapy
sources on their claims were more likely to report complete charges for
the associated brachytherapy source application procedure than
hospitals that did not report the separately payable brachytherapy
sources.
As a result of those comments, for both CY 2006 and CY 2007, we
used multiple procedure claims containing both CPT codes 55859 and
77778 to determine a median cost for the totality of both services
(with both packaging and bypassing of the other commonly furnished
services). We compared the median calculated from this subset of claims
reflecting the most common clinical scenario to the single bill median
costs for CPT codes 55859 and 77778 as a method of determining whether
the total payment to the hospital for both services furnished to
provide LDR prostate brachytherapy would be reasonable. In both years,
we found that the sum of the single bill medians was reasonably close
to the median cost of both services from multiple claims when they were
treated as a single procedure and the supporting services were either
packaged or bypassed for purposes of calculating the median for the
combined pair of codes. (We refer readers to the CY 2006 final rule
with comment period (70 FR 68596) and the CY 2007 final rule with
comment period (71 FR 68043) for specific discussion of these
findings.) Hence, we concluded that the single bill median costs were
reasonable and, for both the CY 2006 OPPS and CY 2007 OPPS, we based
payment for CPT codes 55859 and 77778 on single procedure claims.
(b) Proposed Payment for LDR Prostate Brachytherapy
For the CY 2008 OPPS, we are proposing to create a composite APC
8001, titled ``LDR Prostate Brachytherapy Composite,'' that would
provide one bundled payment for LDR prostate brachytherapy when the
hospital bills both CPT codes 55875 and 77778 as component services
provided during the same hospital encounter. It is shown in Addendum A
to this proposed rule as APC 8001 (LDR Prostate Brachytherapy
Composite). As discussed in detail in section VII. of this proposed
rule, we are proposing to continue to pay sources of brachytherapy
separately in accordance with the requirements of the statute.
In the CY 2006 claims used to calculate the proposed CY 2008 median
costs, CPT code 55859 was reported 14,083 times. The proposed rule
median cost for CPT code 55859, calculated from 2,232 single and
``pseudo'' single bills, is $2,328.56. The CY 2008 proposed rule median
cost for APC 0163 (Level IV Cystourethroscopy and other Genitourinary
Procedures) to which CPT code 55859 was assigned for CY 2006 and to
which CPT code 55875 is assigned for CY 2007 is $2,322.30. In the set
of claims used to calculate the median cost for APC 0651, to which CPT
code 77778 is the only assigned service, CPT code 77778 was reported
11,850 times. The CY 2008 proposed rule median cost for APC 0651 (and,
therefore, for CPT code 77778) based on 339 single and ``pseudo''
single procedure bills is $969.73.
In examining the claims data used to calculate the median costs for
this proposed rule, we found 9,807 claims on which both CPT code 55859
and CPT code 77778 were billed on the same date of service. These data
suggest that LDR prostate brachytherapy constituted at least 70 percent
of CY 2006 claims for CPT code 55859, with the remainder of claims
representing the insertion of needles or catheters for high dose rate
prostate brachytherapy or unusual clinical situations where the LDR
sources were not applied in the same operative session as the insertion
of the needles or catheters. These data are consistent with our
understanding of current clinical practice for prostate brachytherapy,
and we believe that those multiple claims are correctly coded claims
for this common clinical scenario. Similarly, 83 percent of the claims
for complex interstitial brachytherapy source application CPT code
77778 also included the CPT code for inserting needles or catheters
into the prostate, consistent with our understanding that the vast
majority of cases of complex interstitial brachytherapy source
application procedures are specifically for the treatment of prostate
cancer, rather than other types of cancer.
Using the proposed packaging approach for imaging supervision and
interpretation services and guidance services for CY 2008, we were able
to identify 1,343 claims, 14 percent of all OPPS claims that reported
these two procedures on the same date, that contain both CPT codes
55859 and 77778 on the same date of service and no other separately
paid procedure code. We were not able to use more claims to develop
this composite APC median cost because there are several radiation
therapy planning codes that are commonly reported with CPT codes 55859
and 77778 and that are both separately paid and not on the bypass list
because the amount of their associated packaging exceeds the threshold
for inclusion on the bypass list. A complete discussion of the bypass
list under our CY 2008 packaging proposal is provided in section II.A.
of this proposed rule.
We packaged the costs of packaged revenue codes and packaged HCPCS
codes into the sum of the costs for CPT codes 55859 and 77778 to derive
a total proposed median cost of $3,127.35 for the composite LDR
prostate brachytherapy service based upon the 1,343 claims that
contained both CPT codes and no other separately paid procedure codes.
This is reasonably comparable to $3,298.29, the sum of the CPT median
costs we calculated using the single procedure bills for CPT codes
55859 and 77778 (($2,328.56 plus $969.73). We believe that the
difference between the composite APC median cost based upon those
claims that contain both codes and the sum of the median costs for the
APCs to which the two individual CPT codes map is minimal and may be
attributable to efficiencies in furnishing the services together during
a single encounter.

[[Page 42681]]

We believe that creation of the composite APC for the payment of
LDR prostate brachytherapy is consistent with the statute and with our
desire to use more claims data for ratesetting, particularly data from
correctly coded claims that reflect typical clinical practice, and to
make payment for larger packages and bundles of services to provide
enhanced incentives for efficiency and cost containment under the OPPS
and to maximize hospital flexibility in managing resources.
Under our proposal, hospitals that furnish LDR prostate
brachytherapy would report CPT codes 55875 and 77778 and the codes for
the applicable brachytherapy sources in the same manner that they
currently report these items and services (in addition to reporting any
other services provided), using the same HCPCS codes and reporting the
same charges. We would require that hospitals report both CPT codes
resulting in the composite APC payment on the same claim when they are
furnished to a single Medicare beneficiary in the same facility on the
same date of service, and we would make any necessary conforming
changes to the billing instructions to ensure that they do not present
an obstacle to correct reporting. We may implement edits to ensure that
hospitals do not submit two separate claims for these two procedures
when furnished on the same date in the same facility. When this
combination of codes is reported, the OCE would assign the composite
APC 8001 and the Pricer would pay based on the payment rate for the
composite APC. The OCE would assign APC 0163 or APC 0651 only when both
codes are not reported on the same claim with the same date of service,
and we would expect this to be the atypical case. The composite APC
would have a status indicator of ``T'' so that payment for other
procedures also assigned to status indicator ``T'' with lower payment
rates would be reduced by 50 percent when furnished on the same date of
service as the composite service, in order to reflect the efficiency
that occurs when multiple procedures are furnished to a Medicare
beneficiary in a single operative session. We would not expect that the
composite APC payment would be commonly reduced because we believe that
it is unlikely that a higher paid procedure would be performed on the
same date.
We are proposing to continue to establish separate payment rates
for APC 0651 (to which only CPT code 77778 is assigned) and for APC
0163 (to which we are proposing to continue to assign CPT code 55875).
In some cases, CPT 55875 may be reported for the insertion of needles
or catheters for high dose rate prostate brachytherapy, and the low
dose rate brachytherapy source application procedure (CPT code 77778)
would not be reported. In high dose rate prostate brachytherapy, the
sources are applied temporarily several times over a few days while the
needles or catheters remain in the prostate, and the needles or
catheters are removed only after all the treatment fractions have been
completed. We have also been told by hospitals that, even when LDR
prostate brachytherapy is planned, there are occasions in which the
needles or catheters are inserted in one facility and the patient is
moved to another facility for the application of the sources. In those
cases, we would need to be able to appropriately pay the hospital that
inserted the needles or catheters before the patient was discharged
prior to source application. Moreover, there are cases in which the
needles or catheters are inserted but it is not possible to proceed to
the application of the sources and, therefore, the hospital would
correctly report only CPT code 55875. Similarly, more than 10
brachytherapy sources can be applied interstitially (as described by
CPT code 77778) to sites other than the prostate and it is, therefore,
necessary to have a separate payment rate for CPT code 77778. Hence,
for CY 2008 we are proposing to continue to pay for CPT code 55875 (the
successor to CPT code 55859) through APC 0163 and to pay for CPT code
77778 through APC 0651 when the services are individually furnished
other than on the same date of service in the same facility.
In summary, we are proposing to establish a composite APC, shown in
Addendum A as APC 8001, to provide payment for LDR prostate
brachytherapy when the composite service, billed as CPT codes 55875 and
77778, is furnished in a single hospital encounter and to base the
payment for the composite APC on the median cost derived from claims
that contain both codes. These two CPT codes are assigned to status
indicator ``Q'' in Addendum B to this proposed rule to signify their
conditionally packaged status, and their composite APC assignments are
noted in Addendum M. This proposal would permit us to base payment on
claims for the most common clinical scenario for interstitial radiation
source application to the prostate. We note that this payment bundle
would also include payment for the commonly associated imaging guidance
services, which would be newly packaged under our proposed CY 2008
packaging approach. Most importantly, this composite APC payment
methodology that we are proposing would contribute to our goal of
providing payment under the OPPS for a larger bundle of component
services provided in a single hospital outpatient encounter, creating
additional hospital incentives for efficiency and cost containment,
while providing hospitals with the most flexibility to manage their
resources.
(3) Proposed Cardiac Electrophysiologic Evaluation and Ablation
Composite APC
(a) Background
During its March 2007 meeting, members of the APC Panel indicated
that the reason we found so few single bills for procedures assigned to
APC 0087 (Cardiac Electrophysiologic Recording/Mapping), specifically
72 of 11,834 or 0.61 percent of all proposed rule CY 2006 claims, is
that most of the services assigned to APCs 0085 (Level II
Electrophysiologic Evaluation), 0086 (Ablate Heart Dysrhythm Focus),
and 0087 are performed in varying combinations with one another.
Therefore, correctly coded claims would most often include multiple
codes for component services that are reported with different CPT codes
and that are now paid separately through different APCs. There would
never be many single bills and those that are reported as single bills
would likely represent atypical cases or incorrectly coded claims.
We examined the combinations of services observed in our claims
data across these three APCs to see whether there was the potential for
handling the data differently so that we could use more claims data to
set the payment rates for these procedures, particularly those services
assigned to APC 0087 where we have had a persistent concern regarding
the limited and reportedly unrepresentative single bills available for
use in calculating the median cost according to our standard OPPS
methodology. We initially developed and examined frequency
distributions of unique combinations of codes on claims which contained
at least one unit of any code assigned to APC 0085, 0086, or 0087 and
then broadened these analysis to any combination of an
electrophysiologic evaluation and ablation code.
Our initial frequency distributions supported the APC Panel
members' description of their experiences. We identified and enumerated
the most commonly appearing unique occurrences (either single
procedures or combinations) of codes for services

[[Page 42682]]

assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X'' that
contained at least one code assigned to APC 0085, 0086, or 0087. There
were 7,379 claims in the top 100 occurrence types. Table 22 shows the
10 most common unique occurrences from CY 2006 claims available for
this proposed rule.

Table 22.--Ten Most Frequently Occurring Unique Occurrences of Cardiac Electrophysiologic Evaluation, Mapping,
and Ablation Procedures and Other Separately Payable Services
----------------------------------------------------------------------------------------------------------------
CY 2007 CY 2007
Combination number Frequency HCPCS code Short descriptor APC SI
----------------------------------------------------------------------------------------------------------------
1................................... 763 93620 Electrophysiology 0085 T
evaluation.
2................................... 509 93609 Map tachycardia, add-on.... 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93623 Stimulation, pacing heart.. 0087 T
93651 Ablate heart dysrhythm 0086 T
focus.
3................................... 398 93609 Map tachycardia, add-on.... 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93651 Ablate heart dysrhythm 0086 T
focus.
4................................... 381 93650 Ablate heart dysrhythm 0086 T
focus.
5................................... 376 93620 Electrophysiology 0085 T
evaluation.
93623 Stimulation, pacing heart.. 0087 T
6................................... 248 93005 Electrocardiogram, tracing. 0099 S
93609 Map tachycardia, add-on.... 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93623 Stimulation, pacing heart.. 0087 T
93651 Ablate heart dysrhythm 0086 T
focus.
7................................... 225 93005 Electrocardiogram, tracing. 0099 S
93609 Map tachycardia, add-on.... 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93651 Ablate heart dysrhythm 0086 T
focus.
8................................... 225 93613 Electrophys map 3d, add-on. 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93651 Ablate heart dysrhythm 0086 T
focus.
9................................... 217 93005 Electrocardiogram, tracing. 0099 S
93620 Electrophysiology 0085 T
evaluation.
10.................................. 185 93613 Electrophys map 3d, add-on. 0087 T
93620 Electrophysiology 0085 T
evaluation.
93621 Electrophysiology 0085 T
evaluation.
93623 Stimulation, pacing heart.. 0087 T
93651 Ablate heart dysrhythm 0086 T
focus.
----------------------------------------------------------------------------------------------------------------

Although the number of claims for each unique occurrence was
modest, we were able to determine that there were certain combinations
of codes that occurred most often together. Based on our review of the
most frequently occurring combinations of codes on claims that also
contained at least one code assigned to APC 0085, 0086 or 0087 and our
clinical review of the codes, we proceeded to study combination claims
that contained at least one code from group A for evaluation services
and at least one code from group B for ablation services reported on
the same date of service on an individual claim, as specified in Table
23 below.

Table 23.--Groups of Cardiac Electrophysiologic Evaluation and Ablation
Procedures for Further Analysis
------------------------------------------------------------------------
Codes used in combinations: at
least one in Group A and one in HCPCS code CY 2007 APC CY 2007
Group B SI
------------------------------------------------------------------------
Group A:
Electrophysiology evaluation... 93619 0085 T
Electrophysiology evaluation... 93620 0085 T
Group B:
Ablate heart dysrhythm focus... 93650 0086 T
Ablate heart dysrhythm focus... 93651 0086 T
Ablate heart dysrhythm focus... 93652 0086 T
------------------------------------------------------------------------

When we studied claims that contained a code in group A and also a
code in group B, we found that there were 5,118 claims that met these
criteria, and that of these 5,118 claims, 4,552 (89 percent) contained
both CPT code 93620 (Comprehensive electrophysiologic evaluation
including insertion and repositioning of multiple

[[Page 42683]]

electrode catheters with induction or attempted induction of
arrhythmia; with right atrial pacing and recording, right ventricular
pacing and recording, His bundle recording) from APC 0085 and CPT code
93651 (Intracardiac catheter ablation of arrhythmogenic focus; for
treatment of supraventricular tachycardia by ablation of fast or slow
atrioventricular pathways, accessory atrioventricular connections or
other atrial foci, singly or in combination) from APC 0086 with the
same date of service. Given that CPT code 93651 had a total frequency
of 8,091, this means that more than 55 percent of the claims for CPT
code 93651 also contained CPT code 93620. CPT code 93620 had a total
frequency of 12,624, approximately 50 percent higher than the total
frequency for CPT code 93651, which is consistent with our expectations
because CPT code 93620 describes a diagnostic service and CPT code
93651 is a treatment service that may be provided based upon the
findings of the evaluation described by CPT code 93620. In addition to
the codes for group A and group B services, the combination claims also
contained costs for packaged services that were reported under revenue
codes without HCPCS codes and under packaged HCPCS codes. As we discuss
in considerable detail above, we lack a methodology that could be used
to allocate these packaged costs to major separately paid procedures in
a manner which gives us confidence that the costs would be attributed
correctly. We have explored and will continue to explore an alternative
strategy that would enable us to use these correctly coded multiple
procedure claims for ratesetting.
In our review of these claims, not only did we find a high number
of claims on which there was one code from group A and one code from
group B, but we also found that claims for procedures assigned to APC
0087 for CY 2007 usually appeared on claims that contained a code from
APC 0085 or APC 0086, or both. The most frequently appearing CPT codes
that were assigned to APC 0087 for CY 2007 were, as shown above, 93609
(Intraventricular and/or intra-atrial mapping of tachycardia site(s),
with catheter manipulation to record from multiple sites to identify
origin of tachycardia (List separately in addition to code for primary
procedure)), 93613 (Intracardiac electrophysiologic 3-dimensional
mapping (List separately in addition to code for primary procedure)),
93621 (Comprehensive electrophysiologic evaluation including insertion
and repositioning of multiple electrode catheters with induction or
attempted induction of arrhythmia; with left atrial pacing and
recording from coronary sinus or left atrium (List separately in
addition to code for primary procedure)), 93622 (Comprehensive
electrophysiologic evaluation including insertion and repositioning of
multiple electrode catheters with induction or attempted induction of
arrhythmia; with left ventricular pacing and recording (List separately
in addition to code for primary procedure)), and 93623 (Programmed
simulation and pacing after intravenous drug infusion (List separately
in addition to code for primary procedure)). These codes are all CPT
add-on codes that CPT indicates are to be reported in addition to the
code for the primary procedure. Our clinical review of the services
described by these five CPT codes determined that they are supportive
dependent services that are provided most often as supplemental to
procedures assigned to APCs 0085 and 0086. The procedures in APCs 0085
and 0086 can be performed without these supportive add-on procedures,
but these dependent services cannot be done except as a supplement to
another electrophysiologic procedure. Therefore, we are proposing to
unconditionally package all of these five CPT codes under the grouping
of intraoperative services for the CY 2008 OPPS. We discuss the
packaging of intraoperative services in general, including these
services, above.
However, packaging these supportive ancillary services that are so
often reported with the cardiac electrophysiologic evaluation and
ablation services does not enable us to use many more claims because,
as we noted previously, the claims on which these codes most commonly
appeared typically also contained at least one separately paid code
from APC 0085 and one code from APC 0086. Although the most common
combination of codes from APCs 0085 and 0086 is the pair of CPT codes
93620 and 93651, there are numerous other combinations of services from
APCs 0085 and 0086 that are performed and, while not as frequent, these
combinations are also reflected in the multiple claims.
In order to use more claims and adequately reflect the varied,
common combinations of electrophysiologic evaluation and ablation CPT
codes, we calculated a composite median cost from all claims containing
at least one code from group A and at least one code from group B as if
they were a single service. We selected multiple procedure claims that
contained at least one code in group A and one code in group B on the
same date of service and calculated a median cost from the total costs
on these claims. Some claims had more than one code from each group.
Although the claim was required to contain at least one code from each
group to be included, the claim could also contain any number of codes
from either group and any number of units of those codes. In addition,
the costs of the five supportive intraoperative services previously
assigned to APC 0087 that we identify above were packaged, as well as
the costs of the other items and services proposed to be packaged for
the CY 2008 OPPS. This selection process yielded 5,118 claims to use
for the calculation. The proposed composite median cost for these
claims using the CY 2008 proposed rule data is $8,528.83. We believe
that this cost is attributable largely to the 4,552 claims that contain
one unit each of CPT code 93620 and CPT code 93651 (and some unknown
numbers and combinations of packaged services). In comparison, the sum
of the CY 2008 proposed rule CPT code median costs for CPT code 93620
(which is $3,111.76) and CPT code 93651 (which is $5,643.95) is
$8,755.71. If the 50 percent multiple procedure discount is applied to
the CPT code median cost for the lower cost procedure based on its
assignment to an APC with a ``T'' status, the adjusted sum of the
median costs is $7,199.83 ($5,643.95 + $1,555.88). These medians were
calculated using only claims that contain correct devices and do not
contain token charges or the ``FB'' modifier. We believe the
significant positive difference between the composite and discounted
costs still reflects efficiencies, as the sum of the discounted median
costs does not take into account the cost of other procedures also
provided that are assigned to APCs 0085 and 0086, while the composite
median cost of $8,528.83 does, to some extent, reflect the cost of
other multiple procedures in APCs 0085 and 0086 that were also reported
on the claims used to develop the composite median cost. In addition,
these two calculations are based upon two different sets of claims,
single procedure claims in one case (which do not represent the way the
service is typically furnished) and the specified subset of clinically
common combination claims in the second case. Moreover, while the 50
percent multiple procedure reduction is our best aggregate estimate of
the overall degree of efficiency applicable to multiple surgeries, it
may or may not be specifically appropriate to this particular
combination of procedures.

[[Page 42684]]

By selecting the multiple procedure claims that contained at least
one code in each group, we were able to use many more claims than were
available to establish the individual APC medians. The percents by CPT
code for the composite configuration below in Table 24 represent the
sum of the frequency of single bills used to set the medians for APCs
0085 and 0086 with packaging of the five intraoperative services and
the frequency of multiple bills used to set the medians for the
composite claims containing at least one code from each group and with
packaging of the costs of the five intraoperative services, divided by
the total frequency of each CPT code.

Table 24.--Percentage of Claims Used To Calculate Median Costs for Cardiac Electrophysiologic Evaluation and
Ablation Procedures
----------------------------------------------------------------------------------------------------------------
Standard configuration Composite
(with packaging of configuration
intraoperative services) (with
-------------------------- packaging of
intra-
operative
Codes used in combinations: at least HCPCS code Proposed CY SI services)
one in group A and one in Group B 2008 APC CPT Overall APC --------------
percentage percentage CPT
of single of single percentage of
claims claims single and
combination
claims
----------------------------------------------------------------------------------------------------------------
Group A:
Electrophysiology evaluation..... 93619 0085 T..... 38.99 25.47 63.96
Electrophysiology evaluation..... 93620 0085 T..... 22.30 25.47 61.77
Group B:
Ablate heart dysrhythm focus..... 93650 0085 T..... 39.58 25.47 52.50
Ablate heart dysrhythm focus..... 93651 0086 T..... 4.59 4.68 63.30
Ablate heart dysrhythm focus..... 93652 0086 T..... 7.53 4.68 58.78
----------------------------------------------------------------------------------------------------------------

Moreover, by packaging CPT codes 93609, 93613, 93621, 93622, and 93623,
we use many more of the claims for these codes from the most common
clinical scenarios than would otherwise be possible if the supportive
intraoperative services were separately paid. Wherever any of these
codes appears on a claim that can be used for median setting, the cost
data for these codes are packaged in the calculation of the median cost
for the separately paid services on the claim.
(b) Proposed Payment for Cardiac Electrophysiologic Evaluation and
Ablation
In view of our findings with regard to how often the codes in
groups A and B appear together on the same claim, we are proposing to
establish one composite APC, shown in Addendum A as APC 8000 (Cardiac
Electrophysiologic Evaluation and Ablation Composite), for CY 2008 that
would pay for a composite service made up of any number of services in
groups A and B when at least one code from group A and at least one
code from group B appear on the same claim with the same date of
service. The five CPT codes involved in this composite APC are assigned
to status indicator ``Q'' in Addendum B to this proposed rule to
identify their conditionally packaged status, and their composite APC
assignments are identified in Addendum M. We are proposing to use the
composite median cost of $8,528.83 as the basis for establishing the
relative weight for this newly created APC for the composite
electrophysiologic evaluation and ablation service. Under this
composite APC, unlike most other APCs, we would make a single payment
for all services reported in groups A and B. We are proposing that
hospitals would continue to code using CPT codes to report these
services and that the OCE would recognize when the criteria for payment
of the composite APC are met and would assign the composite APC instead
of the single procedure APCs as currently occurs. The Pricer would make
a single payment for the composite APC that would encompass the program
payment for the code in group A, the code in group B, and any other
codes reported in groups A or B, as well as the packaged services
furnished on the same date of service. The proposed composite APC would
have a status indicator of ``T'' so that payment for other procedures
also assigned to status indicator ``T'' with lower payment rates would
be reduced by 50 percent when furnished on the same date of service as
the composite service, in order to reflect the efficiency that occurs
when multiple procedures are furnished to a Medicare beneficiary in a
single operative session. We would not expect that the proposed
composite APC payment would be commonly reduced because we believe that
it is unlikely that a higher paid procedure would be performed on the
same date. We are proposing to continue to pay separately for other
separately paid services that are not reported under the codes in
groups A and B (such as chest x-rays and electrocardiograms).
Moreover, where a service in group A is furnished on a date of
service that is different from the date of service for a code in group
B for the same beneficiary, we are proposing that payments would be
made under the single procedure APCs and the composite APC would not
apply. Given our CY 2008 proposal to unconditionally package payment
for five cardiac electrophysiologic CPT codes as members of the
category of intraoperative services that were previously assigned to
APCs 0085 and 0087, we are also proposing to reconfigure APCs 0084
through 0087, where many of the cardiac electrophysiologic procedures
that will be separately paid when they are not paid according to the
composite APC are assigned. Specifically, we are proposing to
discontinue APC 0087, and reconfigure APCs 0084, 0085, and 0086, with
proposed titles and median costs of Level I Electrophysiologic
Procedures (APC 0084) at $647.41; Level II Electrophysiologic
Procedures (APC 0085) at $3,059.46; and Level III Electrophysiologic
Procedures (APC 0086) at $5,709.52, respectively. We refer readers to
section IV.A.2. of this proposed rule for a discussion of

[[Page 42685]]

calculation of median costs for device-dependent APCs. We believe this
reconfiguration improves the clinical and resource homogeneity of these
APCs which would provide payment for cardiac electrophysiologic
procedures that would be individually paid when they do not meet the
criteria for payment of the composite APC.
We believe that creation of the proposed composite APC for cardiac
electrophysiologic evaluation and ablation services is the most
efficient and effective way to use the claims data for the majority of
these services and best represents the hospital resources associated
with performing the common combinations of these services that are
clinically typical. We believe that this proposed ratesetting
methodology results in an appropriate median cost for the composite
service when at least one evaluation service in group A is furnished on
the same date as at least one ablation service in group B. This
approach creates incentives for efficiency by providing a single
payment for a larger bundle of major procedures when they are performed
together, in contrast to continued separate payment for each of the
individual procedures. We expect to develop additional composite APCs
in the future as we learn more about major currently separately paid
services that are commonly furnished together during the same hospital
outpatient encounter.
e. Service-Specific Packaging Issues
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.'' Commenters to past rules have
suggested that certain 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.'' In
deciding whether to package a service or pay for a code separately, we
have historically considered a variety of factors, including whether
the service is normally provided separately or in conjunction with
other services; how likely it is for the costs of the packaged code to
be appropriately mapped to the separately payable codes with which it
was performed; and whether the expected cost of the service is
relatively low. As discussed above regarding our proposed packaging
approach for CY 2008, we have modified the historical considerations
outlined above in developing our proposal for the CY 2008 OPPS. The
Packaging Subcommittee discussed many HCPCS codes during the March 2007
APC Panel meeting, prior to development of the proposed packaging
approach discussed above, and we have summarized and responded to the
APC Panel's packaging-related recommendations below. Three of the codes
reviewed by the Packaging Subcommittee at the March 2007 APC Panel
meeting are included in the seven categories of services identified for
packaging under the CY 2008 OPPS. For those three codes, we
specifically applied the proposed CY 2008 criteria for determining
whether a code should be proposed as packaged or separately payable for
CY 2008. Specifically, we determined whether the service is a dependent
service falling into one of the seven specified categories that is
always or almost always provided integral to an independent service.
For those four codes that were reviewed during the March 2007 APC Panel
meeting but that do not fit into any of the seven categories of codes
that are part of our CY 2008 proposed packaging approach, we applied
the packaging criteria described above that were historically used
under the OPPS. Moreover, we took into consideration our interest in
expanding the size of payment groups for component services to provide
encounter-based and episode-of-care-based payment in the future in
order to encourage hospital efficiency and provide hospitals with
maximal flexibility to manage their resources.
In accordance with a recommendation of the APC Panel, for the CY
2007 OPPS, we implemented a new policy that designates certain codes as
``special'' packaged codes, assigned to status indicator ``Q'' under
the OPPS, where separate payment is provided if the code is reported
without any other services that are separately payable under the OPPS
on the same date of service. Otherwise, payment for the ``special''
packaged code is packaged into payment for the separately payable
services provided by the hospital on the same date. We note that these
``special'' packaged codes are a subset of those HCPCS codes that are
assigned to status indicator ``Q,'' which means that their payment is
conditionally packaged under the OPPS. We are proposing to update our
criteria to determine packaged versus separate payment for ``special''
packaged HCPCS codes assigned to status indicator ``Q'' for CY 2008.
For CY 2008, payment for ``special'' packaged codes would be packaged
when these HCPCS codes are billed on the same date of service as a code
assigned to status indicator ``S,'' ``T,'' ``V,'' or ``X.'' When one of
the ``special'' packaged codes assigned to status indicator ``Q'' is
billed on a date of service without a code that is assigned to any of
the four status indicators noted above, the ``special'' packaged code
assigned to status indicator ``Q'' would be separately payable.
The Packaging Subcommittee identified areas for change for some
currently packaged CPT codes that it 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. Based on the comments received, additional issues, and new
data that we shared with the Packaging Subcommittee concerning the
packaging status of codes for CY 2008, the Packaging Subcommittee
reviewed the packaging status of numerous HCPCS codes and reported its
findings to the APC Panel at its March 2007 meeting. The APC Panel
accepted the report of the Packaging Subcommittee, heard several
presentations on certain packaged services, discussed the deliberations
of the Packaging Subcommittee, and recommended that--
1. CMS place CPT code 76937 (Ultrasound guidance for vascular
access requiring ultrasound evaluation of potential access sites,
documentation of selected vessel patency, concurrent realtime
ultrasound visualization of vascular needle entry, with permanent
recording and reporting (list separately in addition to code for
primary procedure)) on the list of ``special'' packaged codes (status
indicator ``Q''). (Recommendation 1)
2. CMS evaluate providing separate payment for trauma activation
when it is reported on a claim for an ED visit, regardless of the level
of the emergency department visit. (Recommendation 2)
3. CMS place CPT code 0175T (Computer aided detection (CAD)
(computer algorithm analysis of digital image data for lesion
detection) with further physician review for interpretation and report,
with or without digitization of film radiographic images, chest
radiograph(s), performed remote from primary interpretation) on the
list of ``special'' packaged codes (status indicator ``Q'').
(Recommendation 3)
4. CMS place CPT code 0126T (Common carotid intima-media thickness
(IMT) study for evaluation of atherosclerotic burden or coronary heart
disease risk factor assessment) on the list of ``special'' packaged
codes (status indicator ``Q'') and that CMS consider mapping the code
to APC 340 (Minor Ancillary Procedures). (Recommendation 4)

[[Page 42686]]

5. CMS place CPT code 0069T (Acoustic heart sound recording and
computer analysis only) on the list of ``special'' packaged codes
(status indicator ``Q'') and that CMS exclude APC 0096 (Non-Invasive
Vascular Studies) as a potential placement for this CPT code.
(Recommendation 5)
6. CMS maintain the packaged status of HCPCS code A4306 (Disposable
drug delivery system, flow rate of less than 50 ml per hour) and that
CMS present additional data on this system to the APC Panel when
available. (Recommendation 6)
7. CMS reevaluate the packaged OPPS payment for CPT code 99186
(Hypothermia; total body) based on current research and availability of
new therapeutic modalities. (Recommendation 7)
8. The Packaging Subcommittee remains active until the next APC
Panel meeting. (Recommendation 8)
We address each of these recommendations in turn in the discussion
that follows.
Recommendation 1
For CY 2008, we are proposing to maintain CPT code 76937 as a
packaged service. We are not adopting the APC Panel's recommendation to
pay separately for this code in some circumstances as a ``special''
packaged code. In the CY 2006 OPPS final rule with comment period (70
FR 68544 through 68545), in response to several public comments, we
reviewed in detail the claims data related to CPT code 76937. During
its March 2006 APC Panel meeting, after reviewing data pertinent to CPT
code 76937, the APC Panel recommended that CMS maintain the packaged
status of this code for CY 2007, and we accepted that recommendation.
During the March 2007 APC Panel meeting, after reviewing current data
and listening to a public presentation, the Panel recommended that we
treat this code as a ``special'' packaged code for CY 2008, noting that
certain uncommon clinical scenarios could occur where it would be
possible to bill this service alone on a claim, without any other
separately payable OPPS services.
We are proposing to maintain CPT code 76937 as an unconditionally
packaged service for CY 2008, fully consistent with the proposed
packaging approach for the CY 2008 OPPS, as discussed above. Because
CPT code 76937 is a guidance procedure and we are proposing to package
payment for all guidance procedures for CY 2008, we believe it is
appropriate to maintain the unconditionally packaged status of this
code, which is a CPT designated add-on procedure that we would expect
to be generally provided only in association with other independent
services. We applied the updated criteria for determining whether this
service should receive packaged or separately payment under the CY 2008
OPPS. Specifically, we determined that this service is a supportive
ancillary service that is integral to an independent service, resulting
in our CY 2008 proposal to packaged payment for the service.
We discussed this code extensively in both the CY 2006 and CY 2007
final rules with comment period (70 FR 68544 through 68545; 71 FR 67996
through 67997). Our hospital claims data demonstrate that guidance
services are used frequently for the insertion of vascular access
devices, and we have no evidence that patients lack appropriate access
to guidance services necessary for the safe insertion of vascular
access devices in the hospital outpatient setting. Because we believe
that ultrasound guidance would almost always be provided with one or
more separately payable independent procedures, its costs would be
appropriately bundled with the handful of vascular access device
insertion procedures with which it is most commonly performed. We
further believe that hospital staff chooses whether to use no guidance
or fluoroscopic guidance or ultrasound guidance on an individual basis,
depending on the clinical circumstances of the vascular access device
insertion procedure.
Therefore, we do not believe that CPT code 76937 is an appropriate
candidate for designation as a ``special'' packaged code. The CY 2007
CPT book indicates that this code is an add-on code and should be
reported in addition to the code reported for the primary procedure.
According to our CY 2006 claims data available for this proposed rule,
this code was billed over 60,000 times, yet less than one-tenth of 1
percent of all claims for the procedure were billed without any
separately payable OPPS service on the claim. Because this code is
provided alone only extremely rarely, we believe this code would not be
appropriately treated as a ``special'' packaged code. Therefore, we are
proposing to continue to unconditionally package CPT code 76937 for CY
2008.
Recommendation 2
For CY 2008, we are proposing to maintain the packaged status of
revenue code 068x, trauma response, when the trauma response is
provided without critical care services. During the August 2006 APC
Panel meeting, the APC Panel encouraged CMS to pay differentially for
critical care services provided with and without trauma activation. For
CY 2007, as a result of the APC Panel's August 2006 discussion and our
own data analysis, we finalized a policy to pay differentially for
critical care provided with and without trauma activation. The CY 2007
payment rate for critical care unassociated with trauma activation is
$405.04 (APC 0617, Critical Care), while the payment rate for critical
care associated with trauma activation is $899.58 (APC 0617 and APC
0618 (Trauma Response with Critical Care)). During the March 2007 APC
Panel meeting, a presenter requested that CMS also pay differentially
for emergency department visits provided with and without trauma
activation. Two organizations that submitted comment letters for the
APC Panel's review specifically requested separate payment for revenue
code 068x every time it appears on a claim, regardless of the other
services that were billed on that claim. The APC Panel recommended that
CMS evaluate providing separate payment for trauma activation when it
is reported on a claim for an emergency department visit, regardless of
the level of the emergency department visit.
After accepting the APC Panel's recommendation and evaluating this
issue, we continue to believe that, while it is currently appropriate
to pay separately for trauma activation when billed in association with
critical care services, it is also currently appropriate to maintain
the packaged payment status of revenue code 068x when trauma response
services are provided in association with both clinic and emergency
department visits under the CY 2008 OPPS. As mentioned above, it is our
general objective to expand the size of the payment groups under the
OPPS to move toward encounter-based and episode-of-care-based payments
in order to encourage maximum hospital efficiency with a focus on
value-based purchasing. Because trauma activation in association with
emergency department or clinic visits would always be provided in the
same hospital outpatient encounter as the visit for care of the injured
Medicare beneficiary, packaging payment for trauma activation when
billed in association with both clinic and emergency department visits
is most consistent with our proposed packaging approach. We are also
concerned that unpackaging payment for trauma activation in those
circumstances where the trauma response would be less likely to be
essential to appropriately treating a

[[Page 42687]]

Medicare beneficiary would reduce the incentive for hospitals to
provide the most efficient and cost-effective care. We note that, while
we are proposing for CY 2008 to continue to provide separate payment
for trauma activation in association with critical care services, we
may reconsider this payment policy for future OPPS updates as we
further develop encounter-based and episode-of-care-based payment
approaches.
Furthermore, continued packaged payment for trauma activation when
unassociated with critical care is consistent with the principles of a
prospective payment system, where hospitals receive payment based on
the median cost related to all of the hospital resources associated
with the main service provided. In various situations, each hospital's
costs may be higher or lower than the median cost used to set payment
rates. In light of our proposed packaging approach for the CY 2008
OPPS, we believe it is particularly important not to make any changes
in our payment policies for other services that are not fully aligned
with promoting efficient, judicious, and deliberate care decisions by
hospitals that allow them maximum flexibility to manage their resources
through encouraging the most cost-effective use of hospital resources
in providing the care necessary for the treatment of Medicare
beneficiaries. Packaging payment encourages hospitals to establish
protocols that ensure that services are furnished only when they are
medically necessary and to carefully scrutinize the services ordered by
practitioners to minimize unnecessary use of hospital resources.
Therefore, we are adopting the APC Panel's recommendation that we
evaluate providing separate payment for revenue code 068x when provided
in association with emergency department visits. For CY 2008, after our
thorough assessment, we are proposing to maintain the packaged status
of revenue code 068x, except when revenue code 068x is billed in
association with critical care services.
Recommendation 3
For CY 2008, we are proposing to maintain the unconditionally
packaged status of CPT codes 0174T (Computer aided detection (CAD)
(computer algorithm analysis of digital image data for lesion
detection) with further physician review for interpretation and report,
with or without digitization of film radiographic images, chest
radiograph(s), performed concurrent with primary interpretation) and
0175T. These services involve the application of computer algorithms
and classification technologies to chest x-ray images to acquire and
display information regarding chest x-ray regions that may contain
indications of cancer. CPT code 0152T (Computer aided detection
(computer algorithm analysis of digital image data for lesion
detection) with further physician review for interpretation, with or
without digitization of film radiographic images; chest radiograph(s)
(List separately in addition to code for primary procedure)), the
predecessor code to CPT codes 0174T and 0175T, was indicated as an add-
on code to chest x-ray CPT codes for CY 2006, according to the AMA's CY
2006 CPT book. However, on July 1, 2006, the AMA released to the public
an update that deleted CPT codes 0152T and replaced it with the two new
Category III CPT codes 0174T and 0175T.
In its March 2006 presentation to the APC Panel, before the AMA had
released the CY 2007 changes to CPT code 0152T, a presenter requested
that we pay separately for this service and assign it to a New
Technology APC with a payment rate of $15, based on its estimated cost,
clinical considerations, and similarity to other image post processing
services that are paid separately. We proposed to accept the APC
Panel's recommendation to package CPT code 0152T for CY 2007.
In its August 2006 presentation to the APC Panel, after the AMA had
released the CY 2007 code changes, the same presenter requested that we
assign both of the two new codes to a New Technology APC with a payment
rate of $15. The APC Panel members discussed these codes extensively.
They considered the possibility of treating CPT code 0175T as a
``special'' packaged code, thereby assigning payment to the code only
when it was performed by a hospital without any other separately
payable OPPS service also provided on the same day. They questioned the
meaning of the word ``remote'' in the code descriptor for CPT code
0175T, noting that was unclear as to whether remote referred to time,
geography, or a specific provider. They believed it was likely that a
hospital without a CAD system that performed a chest x-ray and sent the
x-ray to another hospital for performance of the CAD would be providing
the CAD service under arrangement and, therefore, would be providing at
least one other service (chest x-ray) that would be separately paid.
Thus, even in these cases, payment for the CAD service could be
appropriately packaged. After significant and lengthy deliberation, the
APC Panel recommended that we package payment for both of the new CPT
codes, 0174T and 0175T, for CY 2007.
In its March 2007 presentation to the APC Panel, the same presenter
requested that we pay separately for CPT codes 0174T and 0175T, mapping
them to New Technology APC 1492, with a payment rate of $15. The
presenter indicated that chest x-ray CAD is not a screening tool and
should only be billed to Medicare when applied to chest x-rays
suspicious for lung cancer. The presenter also explained that
additional and distinct hospital resources are required for chest x-ray
CAD that are not required for a standard chest x-ray. In addition,
remote chest x-ray CAD described by CPT code 0175T can be performed at
a different time or location or by a different provider than the chest
x-ray service. The presenter expressed concern that if hospitals were
not paid separately for this technology, hospitals would not be able to
provide it, thereby limiting beneficiary access to chest x-ray CAD. The
APC Panel recommended conditional packaging as a ``special'' packaged
code for CPT code 0175T, but did not recommend a change to the
unconditionally packaged status of CPT code 0174T. We are not adopting
the APC Panel's recommendation for designation of CPT code 0175T as a
``special'' packaged code under the CY 2008 OPPS.
We believe that packaged payment for diagnostic chest x-ray CAD
under a prospective payment methodology for outpatient hospital
services is most appropriate. We are proposing to maintain CPT codes
0174T and 0175T as unconditionally packaged services for CY 2008, fully
consistent with the proposed packaging approach for the CY 2008 OPPS,
as discussed above. Because CPT codes 0174T and 0175T are supportive
ancillary services that fit into the ``image processing'' category, and
we are proposing to package payment for all image processing services
for CY 2008, we believe it is appropriate to maintain the packaged
status of these codes. We applied the updated criteria for determining
whether these two CAD services should receive packaged or separate
payment. Specifically, we determined that this service is a dependent
service that is integral to an independent service, in this case, the
chest x-ray or other OPPS service that we would expect to be provided
in addition to the CAD service.
After hearing many public presentations and discussions regarding
the use of chest x-ray CAD, we continue to believe that even the remote
service would almost always be provided by a hospital either in
conjunction with other separately payable services or

[[Page 42688]]

under arrangement. For example, if a physician orders a chest x-ray and
CAD service to be performed at hospital A, and hospital A, which does
not have the CAD technology, sends the chest-ray to hospital B for the
performance of chest x-ray CAD, hospital B could only provide the CAD
service if it were provided under arrangement, to avoid the OPPS
unbundling prohibition. Assuming that the CAD service was provided
under arrangement, hospital A would bill for the chest x-ray CAD that
was performed by hospital B and would pay hospital B for the service
provided. In that case, hospital A would also bill the chest x-ray
service that it provided. In another scenario that has been described
to us, if a physician were to send a patient to a hospital clinic with
the patient's chest x-ray for consultation, we believe that the patient
would likely receive a visit service, in addition to the chest x-ray
CAD. Therefore, in both of these circumstances, payment for the chest
x-ray CAD would be appropriately packaged into payment for the
separately payable services with which it was provided.
We also do not believe that CPT code 0175T should be treated as a
``special'' packaged code. As discussed earlier in this section with
regard to our packaging proposal for image processing services for CY
2008, we are concerned with establishing payment policies that could
encourage certain inefficient and more costly service patterns,
particularly for those services that do not need to be provided as a
face-to-face encounter with the patient. If we were to assign CPT code
0175T to ``special'' packaged status, we would likely create an
incentive for hospitals to perform chest x-ray CAD remotely, for
example, several days after performance of the initial chest x-ray,
rather than immediately following the chest x-ray on the same day, to
enable the hospital to receive separate payment for the service. In CY
2005, there were approximately 7.3 million claims for all chest x-ray
services in the HOPD, so a payment policy that could induce such
changes in service delivery would be problematic in light of our
commitment to encouraging the most efficient and cost-effective care
for Medicare beneficiaries. Creating such perverse payment incentives
through conditional packaging is a particular problem for those
services that do not need a face-to-face encounter with the patient. In
fact, as part of our proposed CY 2008 packaging approach, we are also
proposing to unconditionally package payment in CY 2008 for several
other image processing services that are not always performed face-to-
face, including HCPCS code G0288 (Reconstruction, computer tomographic
angiography of aorta for surgical planning for vascular surgery) and
CPT code 76377 (3D rendering with interpretation and reporting of
computed tomography, magnetic resource imaging, ultrasound, or other
tomographic modality; requiring image postprocessing on an independent
workstation).
The proposed unconditionally packaged treatment of the two CPT
codes for chest x-ray CAD is fully consistent with the proposed
packaging approach for the CY 2008 OPPS, as discussed above, and the
principles and incentives for efficiency inherent in a prospective
payment system based on groups of services. Packaging these services
creates incentives for providers to furnish services in the most cost-
effective way and provides them with the most flexibility to manage
their resources. As stated above, packaging encourages hospitals to
establish protocols that ensure that services are furnished only when
they are medically necessary and to carefully scrutinize the services
ordered by practitioners to minimize unnecessary use of hospital
resources. Therefore, we are proposing to continue to unconditionally
package payment for CPT codes 0174T and 0175T for CY 2008.
Recommendation 4
For CY 2008, we are adopting the APC Panel's recommendation and
proposing to add CPT code 0126T to the list of ``special'' packaged
codes and assign this code to APC 0340 (Minor Ancillary Procedures).
This service describes an ultrasound procedure that measures common
carotid intima-media thickness to evaluate a patient's degree of
atherosclerosis. This code became effective January 1, 2006. We
received a comment to the CY 2007 proposed rule requesting that this
code become separately payable for CY 2007. At that point, we had no
cost data for the service and, as discussed in the CY 2007 OPPS/ASC
final rule with comment period (71 FR 67998), we reviewed this code
with the Packaging Subcommittee, as is our standard procedure for codes
that we are asked to review during the comment period. The APC Panel
noted that this service could sometimes be provided to a patient
without any other separately payable services. Therefore, the APC Panel
recommended that we add this code to the list of ``special'' packaged
codes and pay for it separately when it is provided without any other
separately payable services on the same day. For circumstances when
this code is paid separately, the APC Panel recommended that we
consider assigning this code to APC 0340.
While we continue to believe that this procedure would not commonly
be provided alone, we are adopting the APC Panel recommendation and are
proposing to treat this code as a ``special'' packaged code subject to
conditional packaging, mapping to APC 0340 for CY 2008 when it would be
separately paid. This is fully consistent with the proposed packaging
approach for the CY 2008 OPPS, as discussed above. Because CPT code
0126T is almost always performed during another procedure, and we are
proposing to package payment for all intraoperative procedures for CY
2008, we believe it is appropriate to designate this CPT code as a
``special'' packaged code. We applied the updated criteria for
determining whether this service should receive packaged or separate
payment. Specifically, we determined that this service is usually a
dependent service that is integral to an independent service, but that
it could sometimes be provided without an independent service.
As with all ``special'' packaged codes, we will closely monitor
cost data and frequency of separate payment for this procedure as soon
as we have more claims data available.
Recommendation 5
For CY 2008, we are proposing to maintain the packaged status of
CPT code 0069T, and we are not adopting the APC Panel's recommendation
to designate this service as a ``special'' packaged code. This service
uses signal processing technology to detect, interpret, and document
acoustical activities of the heart through special sensors applied to a
patient's chest. This code was a new Category III CPT code implemented
in the CY 2005 OPPS. CPT code 0069T was an add-on code to an
electrocardiography (EKG) service for CYs 2005 and 2006. However,
effective January 1, 2007, the AMA changed the code descriptor to
remove the add-on code designation for CPT code 0069T. This code has
been packaged under the OPPS since CY 2005.
During the August 2005 APC Panel meeting, the APC Panel recommended
packaging CPT code 0069T for CY 2005. In its March 2006 presentation to
the APC Panel, a presenter requested that we pay separately for CPT
code 0069T and assign it to APC 0099 (Electrocardiograms) based on its
estimated cost and clinical characteristics. The presenter stated that

[[Page 42689]]

the acoustic heart sound recording and analysis service may be provided
with or without a separately reportable electrocardiogram. Members of
the APC Panel engaged in extensive discussion of clinical scenarios as
they considered whether CPT code 0069T could or could not be
appropriately reported alone or in conjunction with several different
procedure codes. Ultimately, the APC Panel recommended assigning this
service to a separately payable status indicator. However, during the
August 2006 meeting, the APC Panel further discussed CMS' proposal to
package payment for CPT code 0069T for CY 2007 and considered the CY
2007 code descriptor change, finally recommending that CMS continue to
package this code for CY 2007.
During the March 2007 APC Panel meeting, the same presenter
requested that we pay separately for this service and assign it to APC
0096 (Non-Invasive Vascular Studies) or to APC 0097 (Cardiac and
Ambulatory Blood Pressure Monitoring), with CY 2007 payment rates of
$94.06 and $62.85, respectively. The presenter stated that the
estimated true cost of this service lies between $62 and $94. The
presenter clarified that this service is usually provided with an EKG,
but noted that the test is sometimes provided without an EKG, according
to its revised code descriptor for CY 2007. The presenter agreed that
it would be rare for the acoustic heart sound procedure to be performed
alone without any other separately payable OPPS services. The APC Panel
recommended that we place CPT code on the list of ``special'' packaged
codes and that we exclude APC 0096 as a potential placement for this
CPT code.
Because this service does not fit into one of the seven identified
categories of packaged codes proposed for the CY 2008 OPPS, we followed
our historical packaging guidelines to determine whether to maintain
the packaged status of this code or to pay for it separately. Based on
the clinical uses that were described during the March 2007 and earlier
APC Panel meetings, APC Panel discussions, and our claims data review,
we continue to believe that it is highly unlikely that CPT code 0069T
would be performed in the HOPD as a sole service without other
separately payable OPPS services. In addition, our data indicate that
this service is estimated to require only minimal hospital resources.
Based on CY 2006 claims, we had only 8 single claims for CPT code
0069T, with a median line-item cost of $5.21, consistent with its low
expected cost. Therefore, we believe that payment for CPT code 0069T is
appropriately packaged because it would usually be closely linked to
the performance of an EKG or other separately payable cardiac service,
would rarely, if ever, be the only OPPS service provided to a patient
in an encounter, and has a low estimated resource cost. The proposed
packaged treatment of this code is consistent with the principles and
incentives for efficiency inherent in a prospective payment system
based on groups of services. Therefore, we are proposing to continue to
package payment for CPT code 0069T for CY 2008.
Recommendation 6
For CY 2008, we are proposing to adopt the APC Panel's
recommendation and maintain the packaged status of HCPCS code A4306. As
requested by the APC Panel, we will also present to the APC Panel
additional data on this system when available.
HCPCS code A4306 describes a disposable drug delivery system with a
flow rate of less than 50 ml per hour. As discussed in a presentation
at the March 2007 APC Panel meeting, there is a particular disposable
drug delivery system that is specifically used to treat postoperative
pain. Since the implementation of the OPPS, this code was assigned to
status indicator ``A,'' indicating that it was payable according to
another fee schedule, in this case, the Durable Medical Equipment (DME)
fee schedule. There were discussions during CYs 2005 and 2006 between
CMS and a manufacturer, and it was determined that this code should be
removed from the DME fee schedule as this code does not describe DME.
For CY 2007, HCPCS code A4306 is payable under the OPPS, with status
indicator ``N'' indicating that its payment is unconditionally
packaged.
One presenter to the APC Panel requested that we pay separately for
this supply under the OPPS. For CY 2007, we packaged payment for this
code because it is considered to be a supply, and since the inception
of the OPPS the established payment policy packages payment for
supplies because they are directly related and integral to an
independent service furnished under the OPPS.
Our CY 2006 claims data indicate that HCPCS code A4306 was billed
on OPPS claims 1,773 times, yielding a line-item median cost of
approximately $3. The APC Panel and a presenter believe that this code
may not always be appropriately billed by hospitals as the data also
show that this code was billed together with computed tomography (CT)
scans of the thorax, abdomen, and pelvis approximately 40 percent of
the time that this supply was reported. The APC Panel speculated that
this code may be currently reported when other types of drug delivery
devices are utilized for nonsurgical procedures or for purposes other
than the treatment of postoperative pain. Therefore, the APC Panel
requested that we share additional data when available.
In summary, because HCPCS code A4306 represents a supply and
payment of supplies is packaged under the OPPS according to
longstanding policy, we are proposing to maintain the packaged status
of HCPCS code A4306 for CY 2008.
Recommendation 7
For CY 2008, we are proposing to maintain the packaged status of
CPT code 99186, consistent with the APC Panel's recommendation that we
reevaluate the packaged OPPS payment for CPT code 99186 based on
current research and the availability of new therapeutic modalities.
This service describes induced total body hypothermia that is
performed on some post-cardiac arrest patients to avoid or lessen brain
damage. The service has been packaged since the implementation of the
OPPS. One presenter to the APC Panel at the March 2007 meeting
requested that this code be assigned a separately payable status
indicator under the OPPS. The presenter expressed concern that
hospitals that provide this service and subsequently transfer the
patient to another hospital prior to admission are not adequately paid
for their services.
Because this service does not fit into one of the seven identified
categories of packaged codes proposed for the CY 2008 OPPS, we followed
our historical packaging guidelines to determine whether to maintain
the packaged status of this code or to pay for it separately. Claims
data indicate that this code was billed 39 times under the OPPS in CY
2006 and was never billed without another separately payable service on
the same date. The proposed CY 2008 median cost for this code is $35,
with individual costs ranging from $17 to $69, likely reflecting the
costs associated with traditional methods of inducing total body
hypothermia, such as ice packs applied to the body. In fact, the
presenter noted that a technologically advanced total body hypothermia
system costs $30,000, with an additional cost of $1,600 per disposable
body suit. As expected, our claims data show that this service was
provided most frequently with high level emergency department visits
and critical care services.

[[Page 42690]]

We believe that the circumstances in which total body hypothermia
would be provided to a Medicare beneficiary and billed under the OPPS
are extremely rare, as patients requiring this therapy would almost
always be admitted as inpatients if they survive. We believe that, in
the uncommon situation where a patient presents to one hospital and
then is cooled and transported to another hospital without admission to
the first hospital, payment for the hypothermia service would be most
appropriately packaged into payment for the many other separately
payable services that it most likely accompanied and that would be paid
to the first hospital under the OPPS.
In addition, consistent with the principles and incentives for
efficiency inherent in a prospective payment system based on groups of
services, packaging payment for this procedure that is highly
integrated with other services provided in the hospital outpatient
encounter creates incentives for providers to furnish services in the
most cost-effective way. In situations where there are a variety of
supplies that could be used to furnish a service, some of which are
more expensive than others, packaging encourages hospitals to use the
most cost-effective item that meets the patient's needs.
Recommendation 8
In response to the APC Panel's recommendation for the Packaging
Subcommittee to remain active until the next APC meeting, we note that
the APC Panel Packaging Subcommittee remains active, and additional
issues and new data concerning the packaging status of codes will be
shared for its consideration as information becomes available. We
continue to encourage submission of common clinical scenarios involving
currently packaged HCPCS codes to the Packaging Subcommittee for its
ongoing review, and we also encourage recommendations of specific
services or procedures whose payment would be most appropriately
packaged under the OPPS. Additional detailed suggestions for the
Packaging Subcommittee should be submitted to APCPanel@cms.hhs.gov,
with ``Packaging Subcommittee'' in the subject line.

B. Proposed Payment for Partial Hospitalization

(If you choose to comment on issues in this section, please include
the caption ``OPPS: Partial Hospitalization'' at the beginning of your
comment.)
1. Background
Partial hospitalization is an intensive outpatient program of
psychiatric services provided to patients as an alternative to
inpatient psychiatric care for beneficiaries who have an acute mental
illness. A partial hospitalization program (PHP) may be provided by a
hospital to its outpatients or by a Medicare-certified community mental
health center (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. The Medicare regulations at 42
CFR 419.21 that implement this provision specify that payments under
the OPPS will be made for partial hospitalization services furnished by
CMHCs as well as those furnished to hospital outpatients. Section
1833(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, we
refer readers to the April 7, 2000 OPPS final rule with comment period
(65 FR 18452).
Historically, the median per diem cost for CMHCs 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
section II.B.2. of this proposed rule and in the CY 2004 OPPS final
rule with comment period (68 FR 63470), we also believe that some CMHCs
manipulated their charges in order to inappropriately receive outlier
payments.
For CY 2005, the PHP 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 the CY 2005 OPPS update, the CMHC median per diem cost was $310,
the hospital-based PHP median per diem cost was $215, and the combined
CMHC and hospital-based median per diem cost was $289. We believed that
the reduction in the CY 2005 CMHC median per diem cost compared to
prior years indicated that the use of updated CCRs had accounted for
the previous increase in CMHC charges and represented a more accurate
estimate of CMHC per diem costs for PHP.
For the CY 2006 OPPS final rule with comment period, we analyzed 12
months of the most current claims data available for hospital and CMHC
PHP services furnished between January 1, 2004, and December 31, 2004.
We also used the most currently available CCRs to estimate costs. The
median per diem cost for CMHCs dropped to $154, while the median per
diem cost for hospital-based PHPs was $201. Based on the CY 2004 claims
data, the average charge per day for CMHCs was $760, considerably
greater than hospital-based per day costs but significantly lower than
what it was in CY 2003 ($1,184). We believed 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 CY
2006 OPPS updated combined hospital-based and CMHC median per diem cost
was $161, a decrease of 44 percent compared to the CY 2005 combined
median per diem amount.
As we were concerned that this amount may not cover the cost for
PHPs, as stated in the CY 2006 OPPS final rule with comment period (70
FR 68548 and 68549), we applied a 15-percent reduction to the combined
hospital-based and CMHC median per diem cost to establish the CY 2005
PHP APC. (We refer readers to the CY 2006 OPPS final rule with comment
period for a full discussion of how we established the CY 2006 PHP rate
(70 FR 68548).) We stated our belief that 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

[[Page 42691]]

day. We stated that 15 percent was an appropriate reduction because it
recognized decreases in median per diem costs in both the hospital data
and the CMHC data, and also reduced the risk of any adverse impact on
access to these services that might result from a large single-year
rate reduction. However, we adopted this policy as a transitional
measure, and stated in the CY 2006 OPPS final rule with comment period
that we would 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 (70 FR 68548).
To apply this methodology for CY 2006, we reduced the CY 2005
combined unscaled hospital-based and CMHC median per diem cost of $289
by 15 percent, resulting in a combined median per diem cost of $245.65
for CY 2006.
For the CY 2007 final rule with comment period, we analyzed 12
months of more current data for hospital and CMHC PHP claims for
services furnished between January 1, 2005, and December 31, 2005. We
also used the most currently available CCRs to estimate costs. Using
these updated data, we recreated the analysis performed for the CY 2007
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 $8 to $173, while the median per diem cost for
hospital-based PHPs decreased $19 to $190. The CY 2005 average charge
per day for CMHCs was $675, similar to the figure noted in the CY 2007
proposed rule ($673) but still significantly lower than what was noted
as the average charge for CY 2003 ($1,184).
The combined hospital-based and CMHC median per diem cost would
have been $175 for CY 2007. Rather than allowing the PHP median per
diem cost to drop to this level, we proposed to reduce the PHP median
cost by 15 percent, similar to the methodology used for the CY 2006
update. However, after considering all public comments received
concerning the proposed CY 2007 PHP per diem rate and results obtained
using the more current data, we modified our proposal to continue using
the 15 percent reduction methodology as the basis for calculating the
combined hospital based and CMHC median per diem cost for CY 2007.
Instead, we made a 5 percent reduction to the CY 2006 median per diem
rate to provide a transitional path to the per diem cost indicated by
the data. We believed that this approach accounted for the downward
direction of the data and addressed concerns raised by commenters about
the magnitude of another 15 percent reduction in 1 year. Thus, to
calculate the CY 2007 APC PHP per diem cost, we reduced $245.65 (the CY
2005 combined hospital-based and CMHC median per diem cost of $289
reduced by 15 percent) by 5 percent, which resulted in a combined per
diem cost of $233.37.
2. Proposed PHP APC Update
For the past 2 years, we were concerned that we did not have
sufficient evidence to support using the median per diem cost produced
by the most current year's PHP data. After extensive analysis, we now
believe we have determined the appropriate level of cost for the type
of day services that is being provided. This analysis included an
examination of revenue-to-cost center mapping, refinements to the per
diem methodology, and an in-depth analysis of the number of units of
service per day.
In the CY 2006 and CY 2007 OPPS updates, the data have produced
median costs that we believe were too low to cover the cost of a
program that typically spans 5 to 6 hours per day. However, we
continued to observe a clear downward trend in the data. We stated that
if the data continue to reflect a low PHP per diem cost in CY 2008, we
expect to continue the transition of decreasing the PHP median per diem
cost to an amount that is more reflective of the data.
We received a comment on the CY 2007 proposed rates that CMS
understated the PHP median cost by not using a hospital-specific CCR
for partial hospitalization. In our response to this comment in the CY
2007 OPPS/ASC final rule with comment period (71 FR 68000), we noted
that, although most hospitals do not have a cost center for partial
hospitalization, we used the CCR as specific to PHP as possible. The
following CMS Web site contains the revenue-code-to-cost-center
crosswalk: http://www.cms.hhs.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage
.

This crosswalk indicates how charges on a claim are mapped to a
cost center for the purpose of converting charges to cost. One or more
cost centers are listed for most revenue codes that are used in the
OPPS median calculations, starting with the most specific, and ending
with the most general. Typically, we map the revenue code to the most
specific cost center with a provider-specific CCR. However, if the
hospital does not have a CCR for any of the listed cost centers, we
consider the overall hospital CCR as the default. For partial
hospitalization, the revenue center codes billed by PHPs are mapped to
Primary Cost Center 3550 ``Psychiatric/Psychological Services''. If
that cost center is not available, they are mapped to the Secondary
Cost Center 6000 ``Clinic.'' We use the overall facility CCR for CMHCs
because PHPs are CMHCs' only Medicare cost, and CMHCs do not have the
same cost structure as hospitals. Therefore, for CMHCs, we use the CCR
from the outpatient provider-specific file.
Closer examination of the revenue-code-to-cost-center crosswalk
revealed that 10 of the revenue center codes (shown in the table below)
that are common among hospital based PHP claims did not map to a
Primary Cost Center 3550 ``Psychiatric/Psychological Services'' or a
Secondary Cost Center of 6000 ``Clinic.''

------------------------------------------------------------------------
Revenue center code Revenue center description
------------------------------------------------------------------------
0430............................. Occupational Therapy.
0431............................. Occupational Therapy: Visit charge.
0432............................. Occupational Therapy: Hourly charge.
0433............................. Occupational Therapy: Group rate.
0434............................. Occupational Therapy: Evaluation/re-
evaluation.
0439............................. Occupational Therapy: Other
occupational therapy.
0904............................. Psychiatric/Psychological Treatment:
Activity therapy.
0940............................. Other Therapeutic Services.
0941............................. Other Therapeutic Services:
Recreation Rx.
0942............................. Other Therapeutic Services: Education/
training.
------------------------------------------------------------------------

We believe these 10 revenue center codes did not map to either a
Primary Cost Center 3550 ``Psychiatric/Psychological Services'' or a
Secondary Cost Center 6000 ``Clinic'' because these codes may be used
for services that are not PHP or psychiatric related. For example, many
Occupational Therapy claims are not furnished to PHP patients and,
therefore, should be appropriately mapped to a Primary Cost Center 5100
``Occupation Therapy'' (the general Occupational Therapy Cost Center).
Another example would be claims for Diabetes Education, which is also
not furnished to PHP patients.
In order to more accurately estimate costs for PHP claims, for
purposes of our analysis, we remapped these 10 revenue center codes to
a Primary Cost Center 3550 ``Psychiatric/Psychological Services'' or a
Secondary Cost Center 6000 ``Clinic''. Once we remapped the

[[Page 42692]]

codes, we computed an alternate cost for each line item of the CY 2006
hospital-based PHP claims. There are a total of 638,652 line items in
the CY 2006 hospital-based PHP claims. Prior to remapping, there were
282,871 line items where a default CCR was used to estimate costs.
After the remapping, there were 141,682 line items left defaulting to
the hospitals' overall CCR. While this remapping creates a more
accurate estimate of PHP per diem costs for a significant number of
claims, there was not a large change in the resulting median per diem
cost. The median per diem costs for hospital-based PHPs increased by
$5.20 (from $191.80 to $197).
As part of our effort to produce the most accurate per diem cost
estimate, we have reexamined our methodology for computing the PHP per
diem cost. Section 1833(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. As explained in section
II.B.1 of this proposed rule, payment to providers under OPPS for PHP
services 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. Other than being a per
diem payment, we use the general OPPS ratesetting methodology for
determining median cost.
As we have described in prior Federal Register notices, our current
method for computing per diem costs is as follows: we use data from all
hospital bills reporting condition code 41, which identifies the claim
as partial hospitalization, and all bills from CMHCs. We use 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 are then
computed by summing the line-item costs on each bill and dividing by
the number of days of PHP care provided on the bill. These computed per
diem costs are arrayed from lowest to highest and the middle value of
the array is the median per diem cost.
We have developed an alternate way to determine median cost by
computing a separate per diem cost for each day rather than for each
bill. Under this method, a cost is computed separately for each day of
PHP care. When there are multiple days of care entered on a claim, a
unique cost is computed for each day of care. All of these costs are
then arrayed from lowest to highest and the middle value of the array
would be the median per diem cost.
We believe this alternative method of computing a per diem median
cost produces a more accurate estimate because each day gets an equal
weight towards computing the median. We have considered this
alternative method for several years, but in light of the volatility of
the data, we have not believed it would provide a reasonable and
appropriate median per diem cost. In light of the stabilizing trend in
the data, and in light of the robustness of recent data analysis, we
now believe it is appropriate to propose the adoption of this method.
We believe this method for computing a PHP per diem median cost more
accurately reflects the costs of a PHP and uses all available PHP data.
Therefore, for CY 2008, we are proposing to adopt this alternate method
for computing PHP median per diem costs.
As noted previously, for the past 2 years, the data have produced
median costs that we believe were too low to cover the cost of a
program that typically spans 5 to 6 hours per day. This length of day
would include 5 or 6 services with a break for lunch. We looked at the
number of units of service being provided in a day of care, as a
possible explanation for the low per diem cost for PHP. Our analysis
revealed that both hospital-based and CMHC PHPs have a significant
number of days where less than 4 units of service were provided.
Specifically, 64 percent of the days that CMHCs were paid were for
days where 3 or less units of services were provided, and 34 percent of
the days that hospital-based PHPs were paid were for days where 3 or
less units of service were provided. We believe these findings are
significant because they may explain a lower per diem cost. Therefore,
based on these findings, we computed median per diem costs in two
categories:
(a) All days.
(b) Days with 4 units of service or more (removing days with 3
services or less).
These median per diem costs were computed separately for CMHCs and
hospital based PHPs and are shown in the table below:

------------------------------------------------------------------------
Hospital-
CMHCs based PHPs
------------------------------------------------------------------------
All Days...................................... $178 $186
Days with 4 units or more..................... $191 $218
------------------------------------------------------------------------

As expected, excluding the low unit days resulted in a higher
median per diem cost estimate. However, if the programs have many ``low
unit days,'' their cost and Medicare payment should reflect this level
of service. It would not be appropriate to set the PHP rate to exclude
the ``low unit days'' because these days are covered PHP days. We
believe the analysis of the number of units of service per day supports
a lower per diem cost. Therefore, including all days supports the data
trend towards a lower per diem cost and we believe more accurately
reflects the costs of providing these PHP services.
Although the minimum number of PHP services required in a PHP day
is three, it was never our intention that this represented the typical
number of services to be provided in a typical PHP day. Our intention
was to cover days that consisted of only three services, generally
because a patient was transitioning towards discharge. Rather than set
separate rates for half-days and full-days, we believed it was
appropriate to set one rate that would be paid for all PHP days,
including those for patients transitioning towards discharge. We intend
that the PHP benefit is for a full day, with shorter days only
occurring while a patient transitions out of the PHP.
However, as indicated in the data, many programs have these ``low
unit days,'' and we believe their cost and Medicare payment should
reflect this level of service. It would not be appropriate to set the
PHP rate excluding the low unit days because these days are covered.
Again, we believe the data support the estimated per diem cost under
$200 that we have observed in the data.
At this time, we believe the most appropriate payment rate for PHPs
is computed using both hospital-based and CMHC PHP data, including the
remapped data for all days, resulting in a median per diem cost of
$178. Therefore, we are proposing a CY 2008 APC PHP per diem cost of
$178.
3. Proposed Separate Threshold for Outlier Payments to CMHCs
In the November 7, 2003 final rule with comment period (68 FR
63469), we indicated that, given the difference in PHP charges between
hospitals and CMHCs, we did not believe it was appropriate to make
outlier payments to CMHCs using the outlier percentage target amount
and threshold established for hospitals. There was a significant
difference in the amount of outlier payments made to hospitals and
CMHCs for PHP. In addition, further analysis indicated that using the
same OPPS

[[Page 42693]]

outlier threshold for both hospitals and CMHCs did not limit outlier
payments to high cost cases and resulted in excessive outlier payments
to CMHCs. Therefore, beginning in CY 2004, we established a separate
outlier threshold for CMHCs. For CYs 2004 and 2005, 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. For CY 2006, we set the estimated outlier target at 1.0
percent and allocated a portion of that 1.0 percent, 0.6 percent (or
0.006 percent of total OPPS payments), to CMHCs for PHP services. For
CY 2007, we set the estimated outlier target at 1.0 percent and
allocated a portion of that 1.0 percent, an amount equal to 0.15
percent of outlier payments and 0.0015 percent of total OPPS payments
to CMHCS for PHP service outliers. The CY 2007 CMHC outlier threshold
is met when the cost of furnishing services by a CMHC exceeds 3.40
times the PHP APC payment amount. The CY 2007 OPPS outlier payment
percentage is 50 percent of the amount of costs in excess of the
threshold.
The separate outlier threshold for CMHCs became effective January
1, 2004, and has resulted in more commensurate outlier payments. In CY
2004, the separate outlier threshold for CMHCs resulted in $1.8 million
in outlier payments to CMHCs. In CY 2005, the separate outlier
threshold for CMHCs resulted in $0.5 million in outlier payments to
CMHCs. In contrast, in CY 2003, more than $30 million was paid to CMHCs
in outlier payments. We believe this difference in outlier payments
indicates that the separate outlier threshold for CMHCs has been
successful in keeping outlier payments to CMHCs in line with the
percentage of OPPS payments made to CMHCs.
As noted in section II.G. of this proposed rule, for CY 2008, we
are proposing to continue our policy of setting aside 1.0 percent of
the aggregate total payments under the OPPS for outlier payments. We
are proposing that a portion of that 1.0 percent, an amount equal to
0.03 percent of outlier payments and 0.0003 percent of total OPPS
payments, would be allocated to CMHCs for PHP service outliers. As
discussed in section II.G. of this proposed rule, we again are
proposing to set a dollar threshold in addition to an APC multiplier
threshold for OPPS outlier payments. However, because the PHP is the
only APC for which CMHCs may receive payment under the OPPS, we would
not expect to redirect outlier payments by imposing a dollar threshold.
Therefore, we are not proposing to set a dollar threshold for CMHC
outliers. As noted above, we are proposing to set the outlier threshold
for CMHCs for CY 2008 at 3.40 times the APC payment amount and the CY
2008 outlier payment percentage applicable to costs in excess of the
threshold at 50 percent.

C. Proposed Conversion Factor Update

(If you choose to comment on issues in this section, please include
the caption ``OPPS: Conversion Factor'' at the beginning of your
comment.)
Section 1833(t)(3)(C)(ii) of the Act requires us to update the
conversion factor used to determine payment rates under the OPPS on an
annual basis. Section 1833(t)(3)(C)(iv) of the Act provides that, for
CY 2008, 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 proposed hospital market basket increase for FY 2008 published
in the IPPS proposed rule on May 3, 2007, is 3.3 percent (72 FR 24835).
To set the OPPS proposed conversion factor for CY 2008, we increased
the CY 2007 conversion factor of $61.468, as specified in the CY 2007
OPPS/ASC final rule with comment period (71 FR 68003), by 3.3 percent.
In accordance with section 1833(t)(9)(B) of the Act, we further
adjusted the conversion factor for CY 2007 to ensure that the revisions
that we are proposing to make to our updates for a revised wage index
and rural adjustment are made on a budget neutral basis. We calculated
an overall budget neutrality factor of 1.0025 for wage index changes by
comparing total payments from our simulation model using the FY 2008
IPPS proposed wage index values to those payments using the current (FY
2007) IPPS wage index values. This adjustment reflects an adjustment of
1.0009 for changes to the wage index and an additional 1.0016 to
accommodate the IPPS budget neutrality adjustment for inclusion of the
rural floor. As discussed further in section II.D. of this proposed
rule, for the first time, the proposed FY 2008 IPPS wage indices
include a blanket budget neutrality adjustment for including the rural
floor provision, which previously had been applied to the IPPS
standardized amount. For further discussion of this proposed policy in
its entirety, we refer readers to the FY 2008 IPPS proposed rule (72 FR
24787 through 24792). This proposed adjustment is specific to the IPPS.
For the OPPS, we have increased the conversion factor by the
proportional amount of the rural floor budget neutrality adjustment to
accommodate this proposed change.
We estimated the rural adjustment for CY 2008 to reflect the
proposed extension of the adjustment to payment for brachytherapy
sources as discussed in section II.F.2. of this proposed rule, but as
the impact of the proposed extension was negligible, we did not change
the proposed rural adjustment. Therefore, we calculated a budget
neutrality factor of 1.000 for the rural adjustment. For CY 2008, we
estimate that allowed pass through spending for both drugs and devices
would equal approximately $54 million, which represents 0.15 percent of
total OPPS projected spending for CY 2008. The proposed conversion
factor also is adjusted by the difference between the 0.21 percent pass
through dollars set aside in CY 2007 and the 0.15 percent estimate for
CY 2008 pass through spending. Finally, proposed payments for outliers
remain at 1.0 percent of total payments for CY 2008.
The proposed market basket increase update factor of 3.3 percent
for CY 2008, the required wage index and rural budget neutrality
adjustment of approximately 1.0025, and the proposed adjustment of 0.06
percent for the difference in the pass-through set aside result in a
proposed standard OPPS conversion factor for CY 2008 of $63.693.

D. Proposed Wage Index Changes

(If you choose to comment on issues in this section, please include
the caption ``OPPS: Wage Index'' at the beginning of your comment.)
Section 1833(t)(2)(D) of the Act requires the Secretary to
determine a wage adjustment factor to adjust, for geographic wage
differences, the portion of the OPPS payment rate and the copayment
standardized amount attributable to labor and labor related cost. Since
the inception of the OPPS, CMS policy has been to wage adjust 60
percent of the OPPS payment, based on a regression analysis that
determined that approximately 60 percent of the costs of services paid
under the OPPS were attributable to wage costs. We confirmed that this
labor related share for outpatient services is still appropriate during
our regression analysis for the payment adjustment for rural hospitals
in the CY 2006 OPPS final rule with comment period (70 FR 68553). We
are not proposing to revise this policy for the CY 2008 OPPS. We refer
readers to section II.H. of this proposed rule for a description and
example of how the wage index for a

[[Page 42694]]

particular hospital is used to determine the payment for the hospital.
This adjustment must be made in a budget neutral manner. (As we have
done in prior years, we are proposing to adopt the final IPPS wage
indices for the OPPS and to extend these wage indices to hospitals that
participate in the OPPS but not the IPPS (referred to in this section
as ``non IPPS'' hospitals).)
As discussed in section II.A. of this proposed rule, we standardize
60 percent of estimated costs (labor-related costs) for geographic area
wage variation using the IPPS pre-reclassified wage indices in order to
remove the effects of differences in area wage levels in determining
the national unadjusted OPPS payment rate and the copayment amount.
As published in the original OPPS April 7, 2000 final rule with
comment period (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. Thus, the wage index that
applies to a particular hospital under the IPPS will also apply to that
hospital under the OPPS. 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 accordance with our established policy, we are proposing
to use the final FY 2008 final version of these wage indices to
determine the wage adjustments for the OPPS payment rate and copayment
standardized amount that would be published in our final rule with
comment period for CY 2008.
We note that the proposed FY 2008 IPPS wage indices continue to
reflect a number of changes implemented over the past few years as a
result of the revised Office of Management and Budget (OMB) standards
for defining geographic statistical areas, the implementation of an
occupational mix adjustment as part of the wage index, wage adjustments
provided for under Pub. L. 105-33 and Pub. L. 108-173, and
clarification of our policy for multicampus hospitals. The following is
a brief summary of the components of the proposed FY 2008 IPPS wage
indices and any adjustments that we are proposing to apply to the OPPS
for CY 2008. We refer the reader to the FY 2008 IPPS proposed rule (72
FR 24776 through 24802) for a detailed discussion of the changes to the
wage indices and to the correction notice to the FY 2008 IPPS proposed
rule published in the Federal Register on June 7, 2007 (72 FR 31507).
In this proposed rule, we are not reprinting the proposed FY 2008 IPPS
wage indices referenced in the discussion below, with the exception of
the out-migration wage adjustment table (Addendum L to this proposed
rule). We also refer readers to the CMS Web site for the OPPS at http://www.cms.hhs.gov/providers/hopps.
At this Web site, the reader will

find a link to the proposed FY 2008 IPPS wage indices tables and to
those tables as corrected in the correction notice to the FY 2008 IPPS
proposed rule published in the Federal Register on June 7, 2007.
1. The proposed continued use of the Core Based Statistical Areas
(CBSAs) issued by the 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 IPPS final rule,
CMS adopted the new OMB definitions for wage index purposes. In the FY
2008 IPPS proposed rule, we again stated that hospitals located in
Metropolitan Statistical Areas (MSAs) will be urban and hospitals that
are located in Micropolitan Areas or outside CBSAs will be rural. We
also reiterated our policy that when an MSA is divided into one or more
Metropolitan Divisions, we use the Metropolitan Division for purposes
of defining the boundaries of a particular labor market area. To help
alleviate the decreased payments for previously urban hospitals that
became rural under the new geographical definitions, we allowed these
hospitals to maintain for the 3-year period from FY 2005 through FY
2007, the wage index of the MSA where they previously had been located.
This hold harmless provision expires after FY 2007. We adopted the same
policy for OPPS, but because the OPPS operates on a calendar year, wage
index policies are in effect through December 31, 2007. To be
consistent with the IPPS, as proposed in the FY 2008 IPPS proposed
rule, beginning in CY 2008 (January 1, 2008) under the OPPS, these
hospitals will receive their statewide rural wage index. Hospitals paid
under the IPPS are eligible to apply for reclassification in FY 2008.
As noted above, for purposes of estimating an adjustment for the
OPPS payment rates to accommodate geographic differences in labor costs
in this proposed rule, we have used the wage indices identified in the
FY 2008 IPPS proposed rule and as corrected in the June 7, 2007
correction notice to the FY 2008 IPPS proposed rule, that are fully
adjusted for differences in occupational mix using the entire 6-month
survey data collected in 2006.
2. The reclassifications of hospitals to geographic areas for
purposes of the wage index. For purposes of the OPPS wage index, we are
proposing to adopt all of the IPPS reclassifications for FY 2008,
including reclassifications that the Medicare Geographic Classification
Review Board (MGCRB) approved. We note that reclassifications under
section 508 of Pub. L. 108-173 were set to terminate March 31, 2007.
However, section 106(a) of the MIEA-TRHCA extended any geographic
reclassifications of hospitals that were made under section 508 and
that would expire on March 31, 2007 until September 30, 2007. On March
23, 2007, we published a notice in the Federal Register (72 FR 13799)
that indicated how we are implementing section 106 of the MIEA-TRHCA
through September 30, 2007. Because the section 508 provision will
expire on September 30, 2007, the OPPS wage index will not include any
reclassifications under section 508 for CY 2008.
3. The out-migration wage adjustment to the wage index. In the FY
2008 IPPS proposed rule (72 FR 24798 through 24799), we discussed the
out-migration adjustment under section 505 of Pub. L. 108-173 for
counties under this adjustment. Hospitals paid under the IPPS located
in the qualifying section 505 ``out-migration'' counties receive a wage
index increase unless they have already been otherwise reclassified. We
note that in the FY 2008 IPPS proposed rule, we propose using the post-
reclassified, rather than the pre-reclassified wage indices, in
calculating the out-migration adjustment. (See the FY 2008 IPPS
proposed rule for further information on the out-migra