FR Doc E8-15539

[Federal Register: July 18, 2008 (Volume 73, Number 139)]
[Proposed Rules]
[Page 41415-42234]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jy08-27]

[[Page 41415]]

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Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 410 and 419

Medicare Program: Proposed Changes to the Hospital Outpatient
Prospective Payment System and CY 2009 Payment Rates; Proposed Changes
to the Ambulatory Surgical Center Payment System and CY 2009 Payment
Rates; Proposed Rule

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410 and 419

[CMS-1404-P]
RIN 0938-AP17

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, 2009.
In addition, this proposed rule would update the revised Medicare
ambulatory surgical center (ASC) payment system to implement applicable
statutory requirements and changes arising from our continuing
experience with this system. In this proposed rule, we propose the
applicable relative payment weights and amounts for services furnished
in ASCs, specific HCPCS codes to which these proposed changes would
apply, and other pertinent ratesetting information for the CY 2009 ASC
payment system. These changes would be applicable to services furnished
on or after January 1, 2009.

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. EST on September
2, 2008.

ADDRESSES: In commenting, please refer to file code CMS-1404-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 this
regulation to http://www.regulations.gov. Follow the instructions for
``Comment or Submission'' and enter the filecode to find the document
accepting comments.
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-1404-P, P.O. Box 8013, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1404-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:
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call the telephone number (410) 786-9994 in advance to schedule
your arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
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 center
issues; Sheila Blackstock, (410) 786-3502--Reporting of quality data
issues.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://
www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, MD 21244, on Monday through Friday of each week from 8:30
a.m. to 4 p.m. EST. To schedule an appointment to view public comments,
phone 1-800-743-3951.

Electronic Access

This Federal Register document is also available from the Federal
Register online database through 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 This 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

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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 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
GME Graduate medical education
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
IME Indirect medical education
I/OCE Integrated Outpatient Code Editor
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
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L.
110-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NCD National Coverage Determination
NTIOL New technology intraocular lens
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 vaccine
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) payment system. The
provisions relating to the OPPS are included in sections I. through
XIV., and XVI. through XXI. of this proposed rule and in Addenda A, B,
C (Addendum C is available on the Internet only; see section XVIII. 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 XV. and XVII. through XXI. of this proposed rule and in
Addenda AA, BB, DD1, DD2, and EE (Addendum EE is available on the
Internet only; see section XVIII. of this proposed rule) 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, Medicaid, and SCHIP Extension Act of
2007
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, Radiopharmaceuticals, and Devices
6. Proposed OPPS Payment for Brachytherapy Sources
7. Proposed OPPS Payment for Drug Administration Services
8. Proposed OPPS Payment for Hospital Outpatient Visits
9. Proposed Payment for Partial Hospitalization Services
10. Proposed Procedures That Will Be Paid Only as Inpatient Services
11. OPPS Nonrecurring and Policy Clarifications
12. Proposed OPPS Payment Status and Comment Indicators
13. OPPS Policy and Payment Recommendations
14. Proposed Update of the Revised Ambulatory Surgical Center
Payment System
15. Proposed Quality Data for Annual Payment Updates
16. Healthcare-Associated Conditions
17. 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
c. Proposed Calculation of CCRs
(1) Development of the CCRs
(2) Charge Compression
2. Proposed Calculation of Median Costs
a. Claims Preparations
b. Splitting Claims and Creation of ``Pseudo'' Single Claims
c. Completion of Claim Records and Median Cost Calculations
d. Proposed Calculation of Single Procedure APC Criteria-Based
Median Costs
(1) Device-Dependent APCs
(2) Blood and Blood Products
(3) Single Allergy Tests
(4) Echocardiography Services
(5) Nuclear Medicine Services
(6) Hyperbaric Oxygen Therapy
(7) Payment for Ancillary Outpatient Services When Patient Expires
(-CA Modifier)
e. Proposed Calculation of Composite APC Criteria-Based Median Costs
(1) Extended Assessment and Management Composite APCs (APCs 8002 and
8003)
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC
8001)
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC
(APC 8000)
(4) Mental Health Services Composite APC (APC 0034)

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(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007,
and 8008)
3. Proposed Calculation of OPPS Scaled Payment Weights
4. Proposed Changes to Packaged Services
a. Background
b. Service-Specific Packaging Issues
(1) Package Services Addressed by APC Panel Recommendations
(2) IVIG Preadministration-Related Services
B. Proposed Conversion Factor Update
C. Proposed Wage Index Changes
D. Proposed Statewide Average Default CCRs
E. 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)
F. Proposed Hospital Outpatient Outlier Payments
1. Background
2. Proposed Outlier Calculation
3. Outlier Reconciliation
G. Proposed Calculation of an Adjusted Medicare Payment from the
National Unadjusted Medicare Payment
H. Proposed Beneficiary Copayments
1. Background
2. Proposed Copayments
3. Calculation of a Proposed Adjusted Copayment Amount for an APC
Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
A. Proposed OPPS 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 2008
2. Proposed Treatment of New Category I and III CPT Codes and Level
II HCPCS Codes
B. Proposed OPPS 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. Background
2. Proposed Movement of Procedures from New Technology APCs to
Clinical APCs
D. Proposed OPPS APC-Specific Policies
1. Trauma Response Associated with Hospital Critical Care Services
(APC 0618)
2. Suprachoroidal Delivery of Pharmacologic Agent (APC 0236)
3. Closed Treatment Fracture of Finger/Toe/Trunk (APC 0043)
4. Individual Psychotherapy (APCs 0322 and 0323)
5. Implant Injection for Vesicoureteral Reflex (APC 0162)
IV. Proposed OPPS Payment for Devices
A. 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
B. Proposed Adjustment to OPPS Payments for Partial or Full Credit
Devices
1. Background
2. Proposed APCs and Devices Subject to the Adjustment Policy
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
A. Proposed OPPS Transitional Pass-Through Payment for Additional
Costs of Drugs, Biologicals, and Radiopharmaceuticals
1. Background
2. Proposed Drugs and Biologicals with Expiring Pass-Through Status
in CY 2008
3. Proposed Drugs, Biologicals, and Radiopharmaceuticals with New or
Continuing Pass-Through Status in CY 2009
4. Proposed Reduction of Transitional Pass-Through Payments for
Diagnostic Radiopharmaceuticals to Offset Costs Packaged into APC
Groups
B. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals without Pass-Through Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals,
and Radiopharmaceuticals
a. Drugs, Biologicals, and Therapeutic Radiopharmaceuticals
b. Proposed Payment for Diagnostic Radiopharmaceuticals and Contrast
Agents
3. Proposed Payment for Drugs and Biologicals without Pass-Through
Status That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs)
b. Proposed Payment Policy
c. Proposed Payment for Blood Clotting Factors
4. Proposed Payment for Therapeutic Radiopharmaceuticals
a. Background
b. Proposed Payment Policy
5. 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. Background
B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Brachytherapy Sources
A. Background
B. Proposed OPPS Payment Policy
VIII. Proposed OPPS Payment for Drug Administration Services
A. Background
B. Proposed Coding and Payment for Drug Administration Services
IX. Proposed OPPS Payment for Hospital Outpatient Visits
A. Background
B. Proposed Policies for Hospital Outpatient Visits
1. Clinic Visits: New and Established Patient Visits
2. Emergency Department Visits
3. Visit Reporting Guidelines
X. Proposed Payment for Partial Hospitalization Services
A. Background
B. Proposed PHP APC Update
C. Proposed Policy Changes
1. Proposal to Deny Payments for Low Intensity Days
2. Proposal to Strengthen PHP Patient Eligibility Criteria
3. Proposed Partial Hospitalization Coding Update
C. Proposed Separate Threshold for Outlier Payments to CMHCs
XI. Proposed Procedures That Will Be Paid Only as Inpatient
Procedures
A. Background
B. Proposed Changes to the Inpatient List
XII. OPPS Nonrecurring Technical and Policy Clarifications
A. Physician Supervision of HOPD Services
1. Background
2. Summary
B. Reporting of Pathology Services for Prostrate Saturation Biopsy
XIII. Proposed OPPS Payment Status and Comment Indicators
A. Proposed OPPS 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
XIV. OPPS Policy and Payment Recommendations
A. Medicare Payment Advisory Commission (MedPAC) Recommendations
1. March 2008 Report
2. June 2007 Report
B. APC Panel Recommendations
C. OIG Recommendations
XV. Proposed Update of the Revised Ambulatory Surgical Center
Payment System
A. Background
1. Legislative Authority for the ASC Payment System
2. Prior Rulemaking
3. Policies Governing Changes to the Lists of HCPCS Codes and
Payment Rates for ASC Covered Surgical Procedures and Covered
Ancillary Services
B. Proposed Treatment of New Codes
1. Proposed Treatment of New Category I and III CPT Codes and Level
II HCPCS Codes
2. Proposed Treatment of New Level II HCPCS Codes Implemented in
April and July 2008
C. Proposed Update to the Lists of ASC Covered Surgical Procedures
and Covered Ancillary Services
1. Covered Surgical Procedures
a. Proposed Additions to the List of ASC Covered Surgical Procedures
b. Covered Surgical Procedures Designated as Office Based
(1) Background
(2) Proposed Changes to Covered Surgical Procedures Designated as
Office-Based for CY 2009
c. Covered Surgical Procedures Designated as Device-Intensive

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(1) Background
(2) Proposed Changes to List of Covered Surgical Procedures
Designated as Device-Intensive for CY 2009
2. Covered Ancillary Services
D. Proposed ASC Payment for Covered Surgical Procedures and Covered
Ancillary Services
1. Proposed Payment for Covered Surgical Procedures
a. Background
b. Proposed Update to ASC Covered Surgical Procedure Payment Rates
for CY 2009
c. Proposed Adjustment to ASC Payments for Partial or Full Device
Credit
2. Proposed Payment for Covered Ancillary Services
a. Background
b. Proposed Payment for Covered Ancillary Services for CY 2009
E. New Technology Intraocular Lenses
1. Background
2. NTIOL Application Process for Payment Adjustment
3. Classes of NTIOLs Approved and New Request for Payment Adjustment
a. Background
b. Requests to Establish New NTIOL Class for CY 2009 and Deadline
for Public Comment
4. Proposed Payment Adjustment
5. Proposed ASC Payment for Insertion of IOLs
F. Proposed ASC Payment and Comment Indicators
1. Background
2. Proposed ASC Payment and Comment Indicators
G. Calculation of the ASC Conversion Factor and ASC Payment Rates
1. Background
2. Proposed Policy Regarding Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2009 and Future
Years
b. Updating the ASC Conversion Factor
3. Display of Proposed ASC Payment Rates
XVI. 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 Update
B. Existing Hospital Outpatient Measures for CY 2009
C. Proposed Quality Measures for CY 2010 and Subsequent Calendar
Years and Proposed Process to Update Measures
1. Proposed Quality Measures for CY 2010 Payment Determinations
2. Proposed Process for Updating Measures
3. Possible New Quality Measures for CY 2011 and Subsequent Calendar
Years
D. Proposed Payment Reduction for Hospitals That Fail to Meet the
HOP QDRP Requirements for the CY 2009 Payment Update
1. Background
2. Proposed Reduction of OPPS Payments for Hospitals That Fail to
Meet the HOP QDRP CY 2009 Payment Update Requirements
a. Calculation of Reduced National Unadjusted Payment Rates
b. Calculation of Reduced Minimum Unadjusted and National Unadjusted
Beneficiary Copayments
c. Treatment of Other Payment Adjustments
E. Requirements for HOP Quality Data Reporting for CY 2010 and
Subsequent Calendar Years
1. Administrative Requirements
2. Data Collection and Submission Requirements
3. HOP QDRP Validation Requirements
a. Proposed Data Validation Requirements for CY 2010
b. Alternative Data Validation Approaches for CY 2011
F. Publication of HOP QDRP Data
G. Proposed HOP QDRP Reconsideration and Appeals Procedures
H. Reporting of ASC Quality Data
XVII. Healthcare-Associated Conditions
A. Background
B. Broadening the Concept of the IPPS Hospital-Acquired Conditions
Payment Provision to the OPPS
1. Criteria for Possible Candidate OPPS Conditions
2. Collaboration Process
3. Potential OPPS Healthcare-Associated Conditions
4. OPPS Infrastructure and Payment for Encounters Resulting in
Healthcare-Associated Conditions
XVIII. Files Available to the Public Via the Internet
A. Information in Addenda Related to the Proposed CY 2009 Hospital
OPPS
B. Information in Addenda Related to the Proposed CY 2009 ASC
Payment System
XIX. Collection of Information Requirements
A. Legislative Requirement for Solicitation of Comments
B. Associated Information Collections Not Specified in Regulatory
Text
C. Addresses for Submittal of Comments on ICRs
XX. Response to Comments
XXI. Regulatory Impact Analysis
A. Overall Impact
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Small Rural Hospitals
4. Unfunded Mandates
5. Federalism
B. Effects of OPPS Changes in This Proposed Rule
1. Alternatives Considered
2. Limitation of Our Analysis
3. Estimated Effects of This Proposed Rule on Hospitals
4. Estimated Effects of This Proposed Rule on CMHCs
5. Estimated Effects of This Proposed Rule on Beneficiaries
6. Conclusion
7. 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 Proposed Requirements for Reporting of Quality Data
for Annual Hospital Payment Update
E. Executive Order 12866

Regulation Text

Addenda

Addendum A--Proposed OPPS APCs for CY 2009
Addendum AA--Proposed ASC Covered Surgical Procedures for CY 2009
(Including Surgical Procedures for Which Payment Is Packaged)
Addendum B--Proposed OPPS Payment by HCPCS Code for CY 2009
Addendum BB--Proposed ASC Covered Ancillary Services Integral to
Covered Surgical Procedures for CY 2009 (Including Ancillary
Services for Which Payment Is Packaged)
Addendum D1--Proposed OPPS Payment Status Indicators
Addendum DD1--Proposed ASC Payment Indicators
Addendum D2--Proposed OPPS Comment Indicators
Addendum DD2--Proposed ASC Comment Indicators
Addendum E--Proposed HCPCS Codes That Would Be Paid Only as
Inpatient Procedures for CY 2009
Addendum L--Proposed Out-Migration Adjustment
Addendum M--Proposed HCPCS Codes for Assignment to Composite APCs
for CY 2009

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.
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act
(BBRA) of 1999 (Pub. L. 106-113) made major changes in the hospital
outpatient prospective payment system (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, also made additional changes in the OPPS. In addition, the
Medicare Improvements and Extension Act under Division B of Title I of
the

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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.
Further, the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of
2007 (Pub. L. 110-173), enacted on December 29, 2007, made additional
changes in the OPPS. A discussion of these changes is included in
sections I.E., II.C., V., and VII. of this proposed rule.
The OPPS was first implemented for services furnished on or after
August 1, 2000. Implementing regulations for the OPPS are located at 42
CFR part 419.
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment
classification (APC) group to which the service is 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 generally use the median cost of the item or service assigned to an
APC group.
For new technology items and services, special payments under the
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act
provides for temporary additional payments, which we refer to as
``transitional pass-through payments,'' for at least 2 but not more
than 3 years for certain drugs, biological agents, brachytherapy
devices used for the treatment of cancer, and categories of other
medical devices. For new technology services that are not eligible for
transitional pass-through payments, and for which we lack sufficient
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 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 payment for screening and diagnostic mammography
services from the OPPS. The Secretary exercised the authority granted
under the statute to also 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, not less often than annually, and to revise the
groups, relative payment weights, and other adjustments that take into
account changes in medical practices, changes in technologies, and the
addition of new services, new cost data, and other relevant information
and factors.
Since initially implementing the OPPS, we have published final
rules in the Federal Register annually to implement statutory
requirements and changes arising from our continuing experience with
this system. We published in the Federal Register on November 27, 2007
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580). 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
2008 OPPS on the basis of claims data from January 1, 2006, through
December 31, 2006, 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 26, 2006 final rule with
comment period (71 FR 67960) pertaining to the APC assignment of HCPCS
codes identified in Addendum B to that rule with the new interim (NI)
comment indicator; and public comments received on the August 2,

[[Page 41421]]

2007 OPPS/ASC proposed rule for CY 2008 (72 FR 42628).
Subsequent to publication of the CY 2008 OPPS/ASC final rule with
comment period, we published in the Federal Register on February 22,
2008, a correction notice (73 FR 9860) to correct certain technical
errors in the CY 2008 OPPS/ASC final rule with comment period.

D. APC Advisory Panel

1. Authority of the APC Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of
the BBRA, 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 it 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 payment weights. For purposes of
this APC 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 continues to be
technical in nature; is 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,
membership, 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 13 subsequent
meetings, with the last meeting taking place on March 5, and March 6,
2008. Prior to each meeting, we publish a notice in the Federal
Register to announce the meeting, and when necessary, to solicit
nominations for APC Panel membership, and to announce new members.
The APC Panel has established an operational structure that, in
part, includes the use of three subcommittees to facilitate its
required APC review process. At its March 2008 meeting, the APC Panel
recommended that the Observation and Visit Subcommittee's name be
changed to the ``Visits and Observation Subcommittee.'' We are
accepting this recommendation and will refer to the subcommittee by its
new name, as appropriate, throughout this proposed rule. Thus, the
three current subcommittees are the Data Subcommittee, the Visits and
Observation 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
Visits and Observation 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 last approved at the March 2008 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 2008 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 refer readers to previously
published hospital OPPS final rules or the Web site mentioned earlier
in this section.

E. Provisions of the Medicare, Medicaid, and SCHIP Extension Act of
2007

The Medicare, Medicaid and SCHIP Extension Act (MMSEA) of 2007,
(Pub. L. 110-173), enacted on December 29, 2007, included the following
provisions that affect the OPPS and the revised APC payment system:
1. Increase in Physician Payment Update
Section 101 of the MMSEA provides a 0.5 percent increase in the
physician payment update from January 1, 2008 through June 30, 2008;
revises the Physician Assistance and Quality Initiative Fund, and
extends through 2009 the physician quality reporting system. We refer
readers to section XV. of this proposed rule for discussion of the
effect of this provision on services paid under the revised ASC payment
system.
2. Extended Expiration Date for Cost-Based OPPS Payment for
Brachytherapy Sources and Therapeutic Radiopharmaceuticals
Section 106 of the MMSEA amended section 1833(t)(16)(C) of the Act,
as amended by section 107 of the MIEA-TRCHA to extend for an additional
6 months, through June 30, 2008, payment for brachytherapy devices at
hospitals' charges adjusted to costs and to mandate that the same cost-
based payment methodology apply to therapeutic radiopharmaceuticals for
the same extended payment period. We refer readers to sections V. and
VII of this proposed rule for discussion of this provision.
3. Alternative Volume Weighting in Computation of Average Sales Price
(ASP) for Medicare Part B Drugs
Section 112 of the MMSEA amended section 1847A(b) to provide for
application of alternative volume weighting in computing the average
sales price (ASP) for payment of Part B multiple source and single
source drugs furnished after April 1, 2008, and for a special rule,
beginning April 1, 2008, for payment of single source drugs or
biologicals treated as a multiple source drug. This provision is
discussed in section V. of this proposed rule.

[[Page 41422]]

4. Extended Expiration Date for Certain IPPS Wage Index Geographic
Reclassifications and Special Exceptions
Section 117 of the MMSEA extended through September 30, 2008, both
the reclassifications that were extended by section 106 of MIEA-TRCHA
as well as certain special exception wage indices referenced in the FY
2005 IPPS final rule (69 FR 49105 and 49107). This provision also
amended section 508 of Pub. L. 108-173 to specify conditions specific
to the reclassification of a group of hospitals in a geographic area
for discharges occurring during FY 2008. In addition, for hospital
reclassifications extended by section 106(a) of the MIEA-TRCHA, that
resulted in a lower wage index for the second half of FY 2007 than
applicable to such hospitals during the first half of FY 2007, section
117 of the MMSEA directs the Secretary to apply a higher wage index to
such hospitals for the entire FY 2007. We refer readers to section
II.C. of this proposed rule for discussion of this provision.

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 2009. These changes would be effective
for services furnished on or after January 1, 2009. We are also setting
forth proposed changes to the Medicare revised ASC payment system for
CY 2009. These changes would be effective for services furnished on or
after January 1, 2009. 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 changes to packaged services.
The proposed update to the conversion factor used to
determine payment rates under the OPPS. In this section we set forth
changes in the amounts and factors for calculating the full annual
update increase to the conversion factor.
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 pass-
through payment for specific categories of devices and the proposed
adjustment for devices furnished at no cost or with partial or full
credit.
4. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
In section V. of this proposed rule, we discuss proposed CY 2009
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, Radiopharmaceuticals, and Devices
In section VI. of this proposed rule, we discuss the estimate of CY
2009 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 Payment for Drug Administration Services
In section VIII. of this proposed rule, we set forth our proposed
policy concerning payment and coding for drug administration services.
8. Proposed OPPS Payment for Hospital Outpatient Visits
In section IX. of this proposed rule, we set forth our proposed
policies for the payment of clinic and emergency department visits and
critical care services based on claims paid under the OPPS.
9. Proposed Payment for Partial Hospitalization Services
In section X. of this proposed rule, we set forth our proposed
payment for partial hospitalization services, including the proposed
separate threshold for outlier payments for CMHCs.
10. Proposed Procedures That Will Be Paid Only as Inpatient Procedures
In section XI. of this proposed rule, we discuss the procedures
that we are proposing to remove from the inpatient list and assign to
APCs.
11. OPPS Nonrecurring Technical and Policy Clarifications
In section XII. of this proposed rule, we set forth our
nonrecurring technical and policy clarifications.
12. Proposed OPPS Payment Status and Comment Indicators
In section XIII. of this proposed rule, we discuss our proposed
changes to the definitions of status indicators assigned to APCs and
present our proposed comment indicators for the CY 2009 OPPS/ASC final
rule with comment period.
13. OPPS Policy and Payment Recommendations
In section XIV. of this proposed rule, we address recommendations
made by the Medicare Payment Advisory Commission (MedPAC) in its June
2007 and March 2008 reports to Congress, by the APC Panel regarding the
OPPS for CY 2009, and by the Office of the Inspector General (OIG) in
its June 2007 report.
14. Proposed Update of the Revised Ambulatory Surgical Center Payment
System
In section XV. of this proposed rule, we discuss the proposed
update of the revised ASC payment system payment rates for CY 2009.
15. Proposed Reporting of Hospital Outpatient Quality Data for Annual
Hospital Payment Rate Updates and CY 2009 Payment Reduction
In section XVI. of this proposed rule, we discuss the proposed
quality

[[Page 41423]]

measures for reporting hospital outpatient quality data for CY 2010 and
subsequent calendar years, set forth the requirements for data
collection and submission for the annual payment update, and propose a
reduction in the OPPS payment for hospitals that fail to meet the HOP
QDRP requirements for CY 2009.
16. Healthcare-Associated Conditions
In section XVII. of this proposed rule, we discuss considerations
related to potentially extending the principle of Medicare not paying
more for the preventable healthcare-associated conditions acquired
during inpatient stays paid under the IPPS to other Medicare payment
systems for healthcare-associated conditions that occur or result from
care in other settings.
17. Regulatory Impact Analysis
In section XXI. of this proposed rule, we set forth an analysis of
the impact the proposed changes would have on affected entities and
beneficiaries.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Weights

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. As discussed in
the November 13, 2000 interim final rule (65 FR 67824 through 67827),
except for some reweighting due to a small number of APC changes, these
relative payment weights continued to be in effect for CY 2001.
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, 2009, and before January 1, 2010 (CY 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 2009, we
used approximately 130 million final action claims for hospital
outpatient department (HOPD) services furnished on or after January 1,
2007, and before January 1, 2008. (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 130 million final action claims for services provided in
hospital outpatient settings used to calculate the CY 2009 OPPS payment
rates for this proposed rule, approximately 100 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 100 million claims, approximately 45 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
52 million whole claims of the approximately 54 million claims that
remained to set the OPPS APC relative weights that we are proposing for
the CY 2009 OPPS. From the 52 million whole claims, we created
approximately 90 million single records, of which approximately 60
million were ``pseudo'' single claims (created from multiple procedure
claims using the process we discuss in this section). Approximately
627,000 claims trimmed out on cost or units in excess of +/-3 standard
deviations from the geometric mean, yielding approximately 89 million
single bills used for median setting. Ultimately, we were able to use
for proposed CY 2009 ratesetting some portion of the data from 96
percent of the CY 2007 claims containing services payable under the
OPPS.
The proposed APC relative weights and payments for CY 2009 in
Addenda A and B to this proposed rule were calculated using claims from
CY 2007 that were processed before January 1, 2008, 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 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 2009 payment rates.
b. Proposed Use of Single and Multiple Procedure Claims
For CY 2009, 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
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. As we have for several years, we
continued to use date of service stratification and a list of codes to
be bypassed to convert multiple procedure claims to ``pseudo'' single
procedure claims. Through 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 numerous separately paid procedures reported on the same date
on one 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 2008 OPPS/ASC final rule with comment period (72 FR 66590
through 66597). In addition, for CY 2008, we increased packaging and
created composite APCs, which also increased the number of bills we
were able to use for median calculation by enabling us to use claims
that contained multiple major procedures that previously would not have
been usable. We refer readers to section II.A.2.e. of this proposed
rule for discussion of the use of claims to establish median costs for
composite APCs.
We are proposing to continue to apply these processes to enable us
to use as much claims data as possible for ratesetting for the CY 2009
OPPS. Application of these processes in development of this proposed
rule data resulted in our being able to use some or all of the data
from 96 percent of the total claims that are eligible for use in

[[Page 41424]]

the OPPS ratesetting and modeling for this proposed rule. This process
enabled us to create, for this proposed rule, approximately 60 million
``pseudo'' single claims, including multiple imaging composite ``single
session'' bills (we refer readers to section II.A.2.e.(5) of this
proposed rule for further discussion), and approximately 30 million
``natural'' single bills. For this proposed rule, ``pseudo'' single
procedure bills represent 67 percent of all single bills used to
calculate median costs. This compares favorably to the CY 2008 OPPS/ASC
final rule with comment period data in which ``pseudo'' single bills
represented 66 percent of all single bills used to calculate the median
costs on which the CY 2008 OPPS payment rates were based.
For CY 2009, we are proposing to bypass 452 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 2008 OPPS bypass list. Since
the inception of the bypass list, we have calculated the percent of
``natural'' single bills that contained packaging for each HCPCS code
and the amount of packaging in each ``natural'' single bill for each
code. We have generally retained the codes on the previous year's
bypass list and used the update year's data (for CY 2009, data
available for the first CY 2008 APC Panel meeting for services
furnished on and after January 1, 2007 through and including September
30, 2007) 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)
is open to public comment. We removed two HCPCS codes from the CY 2008
bypass list for this CY 2009 proposal because the codes were deleted on
December 31, 2005, specifically C8951 (Intravenous infusion for
therapy/diagnosis; each additional hour (List separately in addition to
C8950)) and C8955 (Chemotherapy administration, intravenous; infusion
technique, each additional hour (List separately in addition to
C8954)). We updated HCPCS codes on the CY 2008 bypass list that were
mapped to new HCPCS codes for CY 2009 ratesetting. We are proposing to
add to the bypass list all HCPCS codes not on the CY 2008 bypass list
that, using the APC Panel data, meet the same previously established
empirical criteria for the bypass list that are summarized below. We
assume that the representation of packaging in the single claims for
any given code is comparable to packaging for that code in the multiple
claims. The proposed criteria for the bypass list are:
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
separately 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 HCPCS codes
that CMS medical advisors believe have minimal associated packaging
based on their clinical assessment of the complete CY 2009 OPPS
proposal. To ensure clinical consistency in our treatment of related
services, we are also proposing to add the other CPT add-on codes for
drug administration services to the CY 2009 bypass list, in addition to
the CPT codes for additional hours of infusion that were previously
included on the CY 2008 bypass list, because adding them enables us to
use many correctly coded claims for initial drug administration
services that would otherwise not be available for ratesetting. The
result of this proposal is that the packaged costs associated with add-
on drug administration services are packaged into payment for the
initial administration service, as has been our payment policy for the
past 2 years for the CPT codes for additional hours of infusion. We are
also proposing to add HCPCS code G0390 (Trauma response team activation
associated with hospital critical care service) because we think it is
appropriate to attribute all of the packaged costs that appear on a
claim with HCPCS code G0390 and CPT code 99291 (Critical care,
evaluation and management of the critically ill or critically injured
patient; first 30-74 minutes) to CPT code 99291. If we did not add
HCPCS code G0390 to the bypass list, we would have many fewer claims to
use to set the median costs for APCs 0617 (Critical Care) and 0618
(Trauma Response with Critical Care). By definition, we could not have
any properly coded ``natural'' single bills for HCPCS code G0390.
Including HCPCS code G0390 on the bypass list allows us to create more
``pseudo'' single bills for CPT code 99291 and HCPCS code G0390, and,
therefore, to improve the accuracy of the median costs of APCs 0617 and
0618 to which the two codes are assigned, respectively. The Integrated
Outpatient Code Editor (I/OCE) logic rejects a line for HCPCS code
G0390 if CPT code 99291 is not also reported on the claim. Therefore,
we cannot assess whether HCPCS code G0390 would meet the empirical
criteria for inclusion on the bypass list because we have no
``natural'' single claims for HCPCS code G0390.
As a result of the multiple imaging composite APCs that we are
proposing to establish for CY 2009 as discussed in section II.A.2.e.(5)
of this proposed rule, the ``pseudo'' single converter logic for
bypassed codes that are also members of multiple imaging composite APCs
would change. When creating the set of ``pseudo'' single claims, claims
that contain ``overlap bypass codes,'' that is, those HCPCS codes that
are both on the bypass list and are members of the multiple imaging
composite APCs, are identified first. These HCPCS codes are then
processed to create multiple imaging composite ``single'' bills, that
is, claims containing HCPCS codes from only one imaging family, thus
suppressing the initial use of these codes as bypass codes. However,
these ``overlap bypass codes'' are retained on the bypass list because
single unit occurrences of these codes are identified as single bills
at the end of the ``pseudo'' single processing logic. The net effect of
using these HCPCS codes in building multiple imaging composite ``single
session'' claims rather than for bypass purposes is a slight reduction
in the number of ``pseudo'' single claims available for the ``overlap
bypass codes'' and a handful of services that would be frequently
billed with an ``overlap bypass code.'' This process also creates
multiple imaging composite ``single session'' bills that can be used
for calculating composite APC median costs. ``Overlap bypass codes''
that would be members of the proposed multiple imaging composite APCs
are identified by asterisks (*) in Table 1.
We note that this list contains bypass codes that were appropriate
to claims for services in CY 2007 and, therefore, includes codes that
were deleted for CY 2008. Moreover, there are codes on the proposed
bypass list that are new for CY 2008 and which are appropriate
additions to the bypass list in preparation for use of the CY 2008
claims for creation of the CY 2010 OPPS. Table 1 below includes a list
of the bypass codes that we are proposing

[[Page 41425]]

for CY 2009. We specifically request public comment on this proposed
list of bypass codes for CY 2009.

Table 1.--Proposed CY 2009 Bypass Codes for Creating ``Pseudo'' Single
Claims for Calculating Median Costs
------------------------------------------------------------------------
``Overlap bypass
HCPCS code Short descriptor codes''
------------------------------------------------------------------------
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.
17000........................... Destruct premalg ..................
lesion.
17003........................... Destruct premalg ..................
les, 2-14.
29220........................... Strapping of low ..................
back.
31231........................... Nasal endoscopy, ..................
dx.
31579........................... Diagnostic ..................
laryngoscopy.
51798........................... Us urine capacity ..................
measure.
53661........................... Dilation of ..................
urethra.
54240........................... Penis study....... ..................
56820........................... Exam of vulva w/ ..................
scope.
57150........................... Treat vagina ..................
infection.
67820........................... Revise eyelashes.. ..................
69210........................... Remove impacted ..................
earwax.
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 ..................
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.

[[Page 41426]]

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.
76100........................... X-ray exam of body ..................
section.
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.
76776........................... Us exam k transpl *
w/doppler.
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.
77072........................... X-rays for bone ..................
age.
77073........................... X-rays, bone ..................
length studies.
77074........................... X-rays, bone ..................
survey, limited.
77075........................... X-rays, bone ..................
survey complete.
77076........................... X-rays, bone ..................
survey, infant.
77077........................... Joint survey, ..................
single view.
77078........................... Ct bone density, ..................
axial.
77079........................... Ct bone density, ..................
peripheral.
77080........................... Dxa bone density, ..................
axial.
77081........................... Dxa bone density/ ..................
peripheral.
77082........................... Dxa bone density, ..................
vert fx.
77083........................... Radiographic ..................
absorptiometry.
77084........................... Magnetic image, ..................
bone marrow.
77280........................... Set radiation ..................
therapy field.
77285........................... Set radiation ..................
therapy field.
77290........................... Set radiation ..................
therapy field.
77295........................... Set radiation ..................
therapy field.
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.
77332........................... Radiation ..................
treatment aid(s).
77333........................... Radiation ..................
treatment aid(s).
77334........................... Radiation ..................
treatment aid(s).
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.

[[Page 41427]]

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.. ..................
86977........................... RBC pretreatment, ..................
serum.
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........................... Immunohistochemist ..................
ry.
88346........................... Immunofluorescent ..................
study.
88347........................... Immunofluorescent ..................
study.
88348........................... Electron ..................
microscopy.
88358........................... Analysis, tumor... ..................
88360........................... Tumor ..................
immunohistochem/
manual.
88361........................... Tumor ..................
immunohistochem/
comput.
88365........................... In situ ..................
hybridization
(FISH).
88368........................... Insitu ..................
hybridization,
manual.
88399........................... Surgical pathology ..................
procedure.
89049........................... Chct for mal ..................
hyperthermia.
89230........................... Collect sweat for ..................
test.
89240........................... Pathology lab ..................
procedure.
90472........................... Immunization ..................
admin, each add.
90474........................... Immune admin oral/ ..................
nasal addl.
90761........................... Hydrate iv ..................
infusion, add-on.
90766........................... Ther/proph/dg iv ..................
inf, add-on.
90767........................... Tx/proph/dg addl ..................
seq iv inf.
90770........................... Sc ther infusion, ..................
addl hr.
90771........................... Sc ther infusion, ..................
reset pump.
90775........................... Tx/pro/dx inj new ..................
drug 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.
90811........................... Intac psytx, 20- ..................
30, w/e&m.
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.
90899........................... Psychiatric ..................
service/therapy.
92002........................... Eye exam, new ..................
patient.
92004........................... Eye exam, new ..................
patient.
92012........................... Eye exam ..................
established pat.
92014........................... Eye exam & ..................
treatment.
92020........................... Special eye ..................
evaluation.
92025........................... Corneal topography ..................
92081........................... Visual field ..................
examination(s).
92082........................... Visual field ..................
examination(s).
92083........................... Visual field ..................
examination(s).
92135........................... Ophth dx imaging ..................
post seg.
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........................... Electroretinograph ..................
y.
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.
92556........................... Speech audiometry, ..................
complete.

[[Page 41428]]

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.
93017........................... Cardiovascular ..................
stress test.
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.
95250........................... Glucose ..................
monitoring, cont.
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.
95872........................... Muscle test, one ..................
fiber.
95900........................... Motor nerve ..................
conduction test.
95921........................... Autonomic nerv ..................
function test.
95925........................... Somatosensory ..................
testing.
95926........................... 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.
96402........................... Chemo hormon ..................
antineopl sq/im.
96411........................... Chemo, iv push, ..................
addl drug.
96415........................... Chemo, iv ..................
infusion, addl hr.
96417........................... Chemo iv infus ..................
each addl seq.
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.

[[Page 41429]]

99241........................... Office ..................
consultation.
99242........................... Office ..................
consultation.
99243........................... Office ..................
consultation.
99244........................... Office ..................
consultation.
99245........................... Office ..................
consultation.
0144T........................... CT heart wo dye; ..................
qual calc.
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.
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.
G0389........................... Ultrasound exam ..................
AAA screen.
G0390........................... Trauma response w/ ..................
hosp criti.
M0064........................... Visit for drug ..................
monitoring.
Q0091........................... Obtaining screen ..................
pap smear.
------------------------------------------------------------------------

c. Proposed Calculation of CCRs
(1) Development of the CCRs
We calculated hospital-specific overall CCRs and hospital-specific
departmental CCRs for each hospital for which we had CY 2007 claims
data. For CY 2009 OPPS ratesetting, we used the set of claims processed
during CY 2007. We applied the hospital-specific CCR to the hospital's
charges at the most detailed level possible, based on a revenue code-
to-cost center crosswalk that contains a hierarchy of CCRs used to
estimate costs from charges for each revenue code. That crosswalk is
available for review and continuous comment on the CMS Web site at:
http://www.cms.hhs.gov/HospitalOutpatientPPS/03_
crosswalk.asp#TopOfPage. We calculated CCRs for the standard and
nonstandard cost centers accepted by the electronic cost report
database. In general, the most detailed level at which we calculated
CCRs was the hospital-specific departmental level.
We are proposing to make a change to the revenue code-to-cost
center crosswalk for the CY 2009 OPPS. Specifically, for revenue code
0904 (Activity Therapy), we are proposing to make cost center 3550
(Psychiatric/Psychological Services) the primary cost center and to
make cost center 6000 (Clinic services) the secondary cost center. For
CY 2008, for revenue code 0904, the primary cost center is 3580
(Recreational Therapy), cost center 3550 is secondary; and cost center
6000 is tertiary. We are proposing this change to conform the OPPS
methodology for hospital claims to the crosswalk that is being used to
calculate partial hospitalization costs for CMHCs.
We would like to affirm that the longstanding Medicare principles
of cost apportionment at Sec. 413.53 convey that, under the
departmental method of apportionment, the cost of each ancillary
department is to be apportioned separately rather than being combined
with another department. However, CMS does not specify a revenue code-
to-cost center crosswalk that hospitals must adopt to prepare the cost
report, but instead, requires hospitals to submit their individual
crosswalk to the Medicare contractor when the cost report is filed. The
proposed CY 2009 OPPS revenue code-to-cost center crosswalk contains
several potential cost center locations for a revenue code because it
is an attempt to best represent the association of revenue codes with
cost centers across all hospitals for modeling purposes. Assignment to
cost centers is mutually exclusive and only defaults to the next level
when the cost center with higher priority is unavailable. The changes
to the crosswalk for revenue code 0904 mentioned above are used by CMS
for modeling purposes only, and we fully expect hospitals to comply
with the Medicare reimbursement policies when reporting their costs and
charges on the cost report.
At the March 2008 APC Panel meeting, we reviewed with the APC
Panel's Data Subcommittee the current revenue code-to-cost center
crosswalk, as well as other data in preparation for the CY 2009
rulemaking cycle. At this meeting, the APC Panel recommended that the
Data Subcommittee continue its work and we are accepting that
recommendation. We will continue to work with the APC Panels' Data
Subcommittee to prepare and review data and analyses relevant to the
APC configurations and OPPS payment policies for hospital outpatient
items and services.
(2) Charge Compression
Since the implementation of the OPPS, some commenters have raised
concerns about potential bias in the OPPS cost-based weights due to
``charge compression,'' which is the practice of applying a lower
charge markup to higher-cost services and a higher charge markup to
lower-cost services. As a result, the cost-based weights suffer from
aggregation bias, undervaluing high cost items and overvaluing low cost
items if an estimate of average markup embodied in a single CCR is
applied to items of widely varying costs in the same cost center.
Commenters expressed increased concern about the impact of charge
compression when, partially in response to recommendations of the
Medicare Payment Advisory Commission (MedPAC), CMS proposed to set the
relative weights for payment under the IPPS based on the costs of
inpatient hospital services, rather than the charges for the services.
To explore this issue, in August 2006 we awarded a contract to RTI
International (RTI) to study the effects of charge compression in
calculating the IPPS relative weights, particularly with regard to the
impact on inpatient diagnosis-related group (DRG) payments, and to
consider methods to reduce the variation in the CCRs used to calculate
costs for the IPPS relative weights across services within cost
centers. Of specific note was RTI's analysis of a regression-based
methodology estimating an average adjustment for CCR by type of revenue
code from an observed relationship between provider cost center CCRs
and proportional billing of high and low cost services in the cost
center. RTI issued a report in March 2007 with its findings on charge
compression. The report is available on the CMS Web site at: http://
www.cms.hhs.gov/reports/downloads/Dalton.pdf. Although this report was
focused largely on charge compression in the context of the IPPS cost-
based relative weights, several of the findings were relevant to the
OPPS. Therefore, we discussed the findings and our responses to that
interim draft report in the CY 2008 OPPS/ASC proposed rule (72 FR 42641
through 42643) and reiterated them in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66599 through 66602).
As RTI noted in its 2007 report that its research was limited to
IPPS DRG cost-based weights and that it did not examine potential areas
of charge compression specific to hospital outpatient services, we were
concerned

[[Page 41430]]

that the analysis was too limited in scope because typically hospital
cost report CCRs encompass both inpatient and outpatient services for
each cost center. Further, because both the IPPS and OPPS rely on cost-
based weights, we preferred to introduce any methodological adjustments
to both payment systems at the same time. We believe that because
charge compression affects the cost estimates for services paid under
both IPPS and OPPS in the same way, it is appropriate that we would use
the same approach to address the issue. Finally, we noted that we
wished to assess the educational activities being undertaken by the
hospital community to improve cost reporting accuracy in response to
RTI's findings, either as an adjunct to or in lieu of regression-based
adjustments to CCRs.
We have since expanded RTI's analysis of charge compression to
incorporate outpatient services. In August 2007, we again contracted
with RTI. Under this contract, we asked RTI to evaluate the cost
estimation process for the OPPS relative weights. This research
included a reassessment of the regression-based CCR models using
hospital outpatient and inpatient charge data, as well as a detailed
review of the OPPS revenue code-to-cost center crosswalk and the OPPS'
hospital-specific CCR methodology. In evaluating cost-based estimation,
in general, the results of RTI's analyses impact both the OPPS APC
relative weights and the IPPS MS-DRG (Medicare-Severity) relative
weights. With the release of the IPPS FY 2009 proposed rule in April
2008, CMS also posted an interim report discussing RTI's research
findings for the IPPS MS-DRG relative weights to be available during
the public comment period on the FY 2009 IPPS proposed rule. This
report can be found on RTI's Web site at: http://www.rti.org/reports/
cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_
200804.pdf. The IPPS-specific chapters, which were separately displayed
in the April 2008 interim report, as well as the more recent OPPS
chapters, are included in the July 2008 RTI final report entitled,
``Refining Cost to Charge Ratios for Calculating APC and DRG Relative
Payment Weights,'' that became available at the time of the development
of this proposed rule. The RTI final report can be found on RTI's Web
site at: http://www.rti.org.
RTI's final report distinguished between two types of research
findings and recommendations, those pertaining to the accounting or
cost report data itself and those related to statistical regression
analysis. Because the OPPS uses a hospital-specific CCR methodology,
employs detailed cost report data, and estimates costs at the claim
level, CMS asked RTI to closely evaluate the accounting component of
the cost-based weight methodology, specifically the revenue code-to-
cost center crosswalk. In reviewing the cost report data for
nonstandard cost centers used in the crosswalk, RTI discovered some
problems concerning the classification of nonstandard cost centers, and
reclassified nonstandard cost centers by reading providers' cost center
labels. Standard cost centers are preprinted in the CMS-approved cost
report software, while nonstandard cost centers are identified and
updated periodically through analysis of frequently used labels. RTI
also evaluated the revenue code-to-cost center crosswalk after
examining hospitals' cost report and revenue code billing patterns in
order to reduce aggregation bias inherent in defaulting to the overall
ancillary CCR and generally to improve the empirical accuracy of the
crosswalk.
With regard to the statistical adjustments, RTI confirmed the
findings of its March 2007 report that regression models are a valid
approach for diagnosing potential aggregation bias within selected
services for the IPPS and found that regression models are equally
valid for setting payments under the OPPS. RTI also suggested that
regression-based CCRs could provide a short-term correction until
accounting data could be refined to support more accurate CCR estimates
under both the IPPS and the OPPS. RTI again found aggregation bias in
devices, drugs, and radiology and, using combined outpatient and
inpatient claims, expanded the number of recommended regression-
adjusted CCRs.
In almost all cases, RTI observed that potential distortions in the
APC relative weights were proportionally much greater than for MS-DRGs
for both accounting-based and statistical adjustments because APC
groups are small and generally price a single service. However, just as
the overall impacts on MS-DRGs were more moderate because MS-DRGs
experienced offsetting effects of changes in cost estimation, a given
hospital outpatient visit might include more than one service, leading
to offsetting effects in cost estimation for services provided in the
outpatient episode as a whole. In general, APC relative weights are
more volatile than MS-DRG relative weights from year to year yet OPPS
provider impacts are typically quite modest and, in light of this
experience, we expect that overall provider impacts could be much more
moderate than those suggested by individual APC impacts from the RTI
analysis.
Notwithstanding likely offsetting effects at the provider-level,
RTI asserted that, while some averaging is appropriate for a
prospective payment system, extreme distortions in APC payments for
individual services bias perceptions of service profitability and may
lead hospitals to inappropriately set their charge structure. RTI noted
that this may not be true for ``core'' hospital services, such as
oncology, but has a greater impact in evolving areas with greater
potential for provider-induced demand, such as specialized imaging
services. RTI also noted that cost-based weights are only one component
of a final prospective payment rate. There are other rate adjustments
(wage index, indirect medical education (IME), and disproportionate
share hospital (DSH)) to payment derived from the revised cost-based
weights and the cumulative effect of these components may not improve
the ability of final payment to reflect resource cost. With regard to
APCs and MS-DRGs that contain substantial device costs, RTI cautioned
that other prospective payment system adjustments (wage index, IME, and
DSH) largely offset the effects of charge compression among hospitals
that receive these adjustments. RTI endorsed short-term regression-
based adjustments, but also concluded that more refined and accurate
accounting data are the preferred long-term solution to mitigate charge
compression and related bias in hospital cost-based weights.
As a result of this research, RTI made 11 recommendations, 2 of
which are specific to IPPS MS-DRGs and are not discussed in this
proposed rule. The first set of non-IPPS-specific recommendations
concentrates on short-term accounting changes to current cost report
data; the second set addresses short-term regression-based and other
statistical adjustments. RTI concluded its recommendations with longer-
term accounting changes to the cost report. (RTI report, ``Refining
Cost to Charge Ratios for Calculating APC and MS-DRG Relative Payment
Weights,'' July 2008). Given the magnitude and scope of impacts on APC
relative weights that would result from adopting both accounting and
statistical changes, as specifically observed in Chapter 6 of RTI's
July 2008 final report and Attachments 4a, 4b, and 5 (RTI report,
``Refining Cost to Charge Ratios for Calculating APC and MS-DRG
Relative Payment Weights,'' July 2008), we are not proposing to adopt
any short-term adjustments to OPPS payment rate

[[Page 41431]]

calculations for CY 2009. Furthermore, the numerous and substantial
changes that RTI recommends have significantly complex interactions
with one another and we believe that we should proceed cautiously. In a
budget neutral payment system, increases in payment for some services
must be countered by reductions to payment for other services.
We are, however, specifically seeking public comments on several of
RTI's recommended accounting-based changes pertaining to the cost
report as discussed below because we plan to consider these public
comments in our current revision to the Medicare hospital cost report
and in our decisions pertaining to the CY 2010 OPPS. We believe that
improved and more precise cost reporting is the best way to improve the
accuracy of all cost-based payment weights, including relative weights
for the IPPS MS-DRGs. Because both the IPPS and the OPPS rely on cost-
based weights derived, in part, from data on the Medicare hospital cost
report form, public comments on recommended changes to the cost report
should address any impact on both the inpatient and outpatient payment
systems.
We noted in the FY 2009 IPPS proposed rule that we are updating the
cost report form to eliminate outdated requirements in conjunction with
the Paperwork Reduction Act (PRA), and that we plan to propose actual
changes to the cost reporting form, the attending cost reporting
software, and the cost report instructions in Chapter 36 of the
Medicare Provider Reimbursement Manual (PRM), Part II (73 FR 23546
through 23547). We anticipate proposing these revisions shortly. We
would consider any public comments on our proposals for cost report
changes, as well as any public comments on RTI's cost estimation
findings and recommendations for revising the cost report in general,
in updating the cost report. We expect the revised cost report may be
available for hospitals to use when submitting cost reports during FY
2010, that is, for cost reporting periods beginning after October 1,
2008, and we expect that we would be able to use some of these data for
setting payment rates for future OPPS updates.
RTI's first set of four recommendations for accounting changes
addressed improved use of existing cost report and claims data. RTI
recommended: (1) Immediately using text searches of providers' line
descriptions to more appropriately classify nonstandard cost centers in
current hospital cost report data; (2) changing cost report preparation
software to impose fixed descriptions on nonstandard cost centers; (3)
slightly revising CMS' cost center aggregation table to eliminate
duplicative or misplaced nonstandard cost centers and to add
nonstandard cost centers for common services without one; and (4)
adopting RTI's recommended changes to the revenue code-to-cost center
crosswalk.
Given the magnitude and scope of impacts resulting from RTI's
recommended revisions, we are not proposing to adopt any of the short-
term accounting changes, including text searches of providers' line
descriptions to more appropriately classify nonstandard cost centers
and recommended changes to the revenue code-to-cost center crosswalk.
We will modify the cost report preparation software that will accompany
the revised Medicare cost report form to print a brief fixed
description with a nonstandard cost center number, while continuing to
allow the hospital to enter a line description.
With regard to revisions to the cost center aggregation table, we
are specifically inviting public comment on whether several identified
cost centers are duplicative (RTI report, ``Refining Cost to Charge
Ratios for Calculating APC and MS-DRG Relative Payment Weights,'' July
2008). We are also specifically requesting public comment on creation
of new nonstandard cost centers for services that are well represented
in line descriptions associated with ``other ancillary services'' cost
centers, but for which no distinct nonstandard cost center currently
exists and for which UB-04 revenue codes do exist, including cardiac
rehabilitation, hyperbaric oxygen therapy, and patient education (RTI
report, ``Refining Cost to Charge Ratios for Calculating APC and MS-DRG
Relative Payment Weights,'' July 2008). We will consider these comments
as we continue our work on revising the Medicare hospital cost report
form.
Furthermore, we are interested in public comment on RTI's
recommended changes to the OPPS revenue code-to-cost center crosswalk,
and we may propose to adopt crosswalk changes for CY 2010 based on
RTI's analyses and related public comments received on this issue.
Although available on the CMS Web site for continuous public comment,
we have received relatively few public comments over the last several
years on the OPPS revenue code-to-cost center crosswalk, which has
undergone only minimal change since the inception of the OPPS. RTI's
revised crosswalk in Attachment 2b of its final report reflected all
accounting changes, including reclassification of nonstandard cost
centers from text searches, removal of duplicative cost centers, and
addition of new nonstandard cost centers for common services.
Throughout the July 2008 final report, RTI used a subscripting
nomenclature developed from CMS' aggregation table to identify cost
centers. To disentangle the combined impact of these changes and
clearly communicate RTI's recommended changes in current cost center
numbers, we have made available on the CMS Web site a revised (RTI-
recommended) crosswalk using current standard and nonstandard cost
centers in the same format as the crosswalk proposed for the CY 2009
OPPS. This revised (RTI-recommended) crosswalk may be found on the CMS
Web site under supporting documentation for this proposed rule at:
http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.
We did not include RTI's recommended new or collapsed nonstandard cost
centers in this revised crosswalk.
We are specifically inviting public comment on the numerous changes
included in this crosswalk. Areas of specific interest include the
addition of ``default'' CCRs for clinic, cardiology, and therapy
services before defaulting to the overall ancillary CCR, as is our
current policy. The overall ancillary CCR is charge-weighted and
heavily influenced by the relationship between costs and charges for
surgical and imaging services. RTI also introduced cost center 4300
(Radioisotope) as a primary cost converter for the nuclear medicine
revenue codes (034X). Further, RTI added secondary and tertiary
crosswalk maps for services that frequently appear together, such as
CCRs for Computed Tomography (CT) Scan as a secondary cost converter
for the Magnetic Resonance Imaging (MRI) revenue codes (061X) (RTI
report, ``Refining Cost to Charge Ratios for Calculating APC and MS-DRG
Relative Payment Weights,'' July 2008).
RTI's second set of recommendations concentrated on short-term
statistical regression-based adjustments to address aggregation bias.
RTI recommended: (1) Adopting regression-adjusted OPPS CCRs for
Devices, Other Supplies Sold, Additional Detail Coded Drugs, and
Intravenous (IV) Solutions and Other Drugs Sold; and (2) adopting a set
of CCRs that blend corrected cost report and regression-adjusted CCRs
for CT scanning, MRI, therapeutic radiology, nuclear medicine, and
other diagnostic radiology services for hospitals that did not report
these standard and nonstandard cost centers. We agree that

[[Page 41432]]

improved data for cost estimation in these areas is a desirable goal.
However, we have chosen to concentrate our efforts on concrete steps to
improve the quality of cost report accounting data that ultimately
would be used to calculate both hospital inpatient and outpatient
prospective payment system relative weights. In the proposed rule for
the FY 2009 IPPS (73 FR 23544), for which the public comment period
closed on June 13, 2008, we emphasize this fundamental goal of
improving cost report accounting data rather than making short-term
statistical adjustments.
RTI's third and final set of recommendations focused on long-term
accounting revisions to the cost report and educational efforts to
improve the overall accuracy of accounting data. RTI recommended: (1)
Clarifying cost report instructions and requiring hospitals to use all
standard lines in the cost report if their facility offers the
described services; (2) creating new standard lines on the cost report
for CT Scanning, MRI, Cardiac Catheterization, Devices, and Drugs
Requiring Additional Coding; and (3) educating hospitals through
industry-led educational initiatives directed at methods for capital
cost finding, specifically encouraging providers to use direct
assignment of equipment depreciation and lease costs wherever possible,
or at least to allocate moveable equipment depreciation based on dollar
value of assigned depreciation costs.
We will consider the best means to clarify the principle of
departmental apportionment of costs at Sec. 413.53, which states that
hospitals should apportion separately the costs and charges of each
ancillary department for which charges are customarily made separately
rather than combining those costs and charges with another ancillary
department. RTI noted that many hospitals combine costs and charges for
therapeutic radiology and nuclear medicine services under the
diagnostic radiology cost center, when these are services with their
own specific and distinct charges and cost centers (RTI report,
``Refining Cost to Charge Ratios for Calculating APC and MS-DRG
Relative Payment Weights,'' July 2008). We seek to better understand
the reason for this aggregation and other relatively common scenarios,
such as a failure to report the standard cost center 4700 (Blood
Storing, Processing & Transp.) when the hospital bills Medicare for
blood products that always have storage and processing costs and
charges, as well as any concerns hospitals may have about reporting all
appropriate standard cost centers.
With regard to creating new standard lines on the cost report, we
are proposing standard lines on the cost report for Devices and Drugs
Requiring Additional Coding. In the FY 2009 IPPS proposed rule (73 FR
23546), we proposed to create two new cost centers, Medical Supplies
Charged to Patients and Implantable Devices Charged to Patients, to
replace the current cost center called Supplies Charged to Patients as
part of our initiative to revise and update the Medicare hospital cost
report form. In our discussion of pharmacy overhead cost in section
V.B.3. of this proposed rule, we are proposing to create two other new
cost centers, Drugs with High Overhead Costs Charged to Patients and
Drugs with Low Overhead Costs Charged to Patients, to replace the
current cost center called Drugs Charged to Patient. Public comment on
the proposal for these two other new cost centers included in this
proposed rule should be made in reference to that detailed discussion.
We believe that standard cost centers for CT Scanning, MRI, and
Cardiac Catheterization also may be appropriate as we revise the
Medicare hospital cost report form. CMS already has established
nonstandard cost centers for these services and many, but not all,
hospitals currently report costs and charges in these cost centers. As
noted earlier in this section, cost center coding is a way to
standardize cost reporting across hospitals. Standard cost centers are
preprinted through CMS-approved cost report software, and nonstandard
cost centers are identified and updated periodically through analysis
of frequently used labels. While we currently use available nonstandard
cost center CCRs for cost estimation under the OPPS, creating standard
lines for CT Scanning, MRI, and Cardiac Catheterization would do more
to require hospitals to break out their costs and charges for services
in these clinical areas, especially as we pursue clarifying our
departmental apportionment regulations requiring reporting of distinct
charge types in separate ancillary cost centers. We are specifically
inviting public comment on the appropriateness of creating standard
cost centers for CT Scanning, MRI, and Cardiac Catheterization, rather
than continuing the established nonstandard cost centers for these
services.
The accuracy of capital cost allocation under Medicare allocation
methods remains an issue when discussing the accuracy of CCRs for
radiology and other capital-intensive services. We are supportive of
industry-led educational initiatives to improve the quality of
reporting capital costs on the cost report and, as we explained in the
FY 2008 IPPS final rule with comment period (72 FR 47196), we are
willing to work with the hospital industry to further such initiatives.
In summary, for CY 2009, we are proposing to adopt or support
several of RTI's accounting recommendations that would improve the
accuracy of cost report data, including educational initiatives on
reporting capital costs, additional standard cost centers on the cost
report for Drugs with High Overhead Costs and Drugs with Low Overhead
Costs, adding fixed descriptions to the cost report software, and
clarifying instructions requiring hospitals to report all standard cost
centers if they offer services of the appropriate type. We are
interested in significant public discussion of some of RTI's short-term
and long-term recommendations, including RTI's suggested revisions to
the revenue code-to-cost center crosswalk and recommended creation of
standard cost centers for CT Scanning, MRI, and Cardiac
Catheterization. We believe our CY 2009 proposals and certain short-
term and long-term recommendations included in RTI's July 2008 final
report would further our pursuit of concrete steps for CY 2009 and
future years to improve the overall accuracy of cost report accounting
data and, therefore, hospital cost-based relative weights.
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 2009. 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 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 2009
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.'' These files are
available for the claims that were used to calculate the proposed
payment rates for the CY 2009 OPPS.

[[Page 41433]]

We used the following methodology to establish the relative weights
used in calculating the proposed OPPS payment rates for CY 2009 shown
in Addenda A and B to this proposed rule.
a. Claims Preparation
We used the CY 2007 hospital outpatient claims processed before
January 1, 2008, to set the proposed relative weights for CY 2009. To
begin the calculation of the relative weights for CY 2009, we pulled
all claims for outpatient services furnished in CY 2007 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 would 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 100 million claims that contain hospital
bill types paid under the OPPS.
1. Claims that were not bill types 12X, 13X (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. In
prior years, we also used claims of bill type 14X to set payment rates
under the OPPS. However, bill type 14X ceased to be used to report any
services for which payment is made under the OPPS effective April 1,
2006. Therefore, we did not use these claims in development of the
proposed CY 2009 OPPS rates.
2. Claims that were bill types 12X or 13X (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
2007 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 2006. For this proposed rule, we used
the most recently submitted cost reports to calculate the CCRs to be
used to calculate median costs for the proposed CY 2009 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
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 note that as discussed in
section II.A.1.c.(1) of this proposed rule, we are proposing to remove
cost center 3580 (Recreational Therapy) from the hierarchy of CCRs for
revenue code 0904 (Activity Therapy).
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 2 of this proposed rule contains a
list of the revenue codes we are proposing to package. Revenue codes
not included in Table 2 are those not allowed under the OPPS because
their services could not 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 to
this general methodology for converting charges to costs on each claim
is the calculation of median blood costs, as discussed in section
II.A.2.d.(2) of this proposed rule.
Thus, we applied CCRs as described above to claims with bill type
12X or 13X, 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.
We next copied line-item costs for drugs, blood, and brachytherapy
sources (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.

[[Page 41434]]

These line-items are used to calculate a per unit mean and median cost
and a per day mean and median cost for drugs, radiopharmaceutical
agents, blood and blood products, and brachytherapy sources, as well as
other information used to set payment rates, such as a unit-to-day
ratio for drugs.
b. Splitting Claims and Creation of ``Pseudo'' Single Claims
We then split the remaining claims into five groups: single majors,
multiple majors, single minors, multiple minors, and other claims.
(Specific definitions of these groups follow below.) We are proposing
to continue our current policy of defining major procedures as any
procedure having a status indicator of ``S,'' ``T,'' ``V,'' or ``X;''
defining minor procedures as any code having a status indicator of
``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,'' and
classifying ``other'' procedures as any code having a status indicator
other than one that we have classified as major or minor. For CY 2009,
we are proposing that status indicator ``R'' would be assigned to blood
and blood products; status indicator ``U'' would be assigned to
brachytherapy sources; status indicator ``Q1'' would be assigned to all
``STVX-packaged codes;'' status indicator ``Q2'' would be assigned to
all ``T-packaged codes;'' and status indicator ``Q3'' would be assigned
to all codes that may be paid through a composite APC based on
composite-specific criteria or paid separately through single code APCs
when the criteria are not met. The codes with proposed status
indicators ``Q1,'' ``Q2,'' and ``Q3'' were previously assigned status
indicator ``Q'' for the CY 2008 OPPS. As we discuss in section
XIII.A.1. of this proposed rule, we are proposing to assign these new
status indicators to facilitate identification of the different
categories of codes. We are proposing to treat these codes in the same
manner for data purposes for CY 2009 as we treated them for CY 2008.
Specifically, we are proposing to continue to evaluate whether the
criteria for separate payment of codes with status indicator ``Q1'' or
``Q2'' are met in determining whether they are treated as major or
minor codes. Codes with status indicator ``Q1'' or ``Q2'' are carried
through the data either with status indicator ``N'' as packaged or, if
they meet the criteria for separate payment, they are given the status
indicator of the APC to which they are assigned and are considered as
``pseudo'' single major codes. Codes assigned status indicator ``Q3''
are paid under individual APCs unless they occur in the combinations
that qualify for payment as composite APCs and, therefore, they carry
the status indicator of the individual APC to which they are assigned
through the data process and are treated as major codes during both the
split and ``pseudo'' single creation process. The calculation of the
median costs for composite APCs from multiple major claims is discussed
in section II.A.2.e. of this proposed rule.
Specifically, we 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,''
which includes codes with status indicator ``Q3''); claims with one
unit of a status indicator ``Q1'' code (``STVX-packaged'') where there
was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' on the
same claim on the same date; or claims with one unit of a status
indicator ``Q2'' code (``T-packaged'') where there was no code with a
status indicator ``T'' on the same claim on the same date.
2. Multiple Major Claims: Claims with more than one separately
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or
``X,'' which includes codes with status indicator ``Q3''), or multiple
units of one payable procedure. These claims include those codes with a
status indicator ``Q2'' code (``T-packaged'') where there was no
procedure with a status indicator ``T'' on the same claim on the same
date of service but where there was another separately paid procedure
on the same claim with the same date of service (that is, another code
with status indicator ``S,'' ``V,'' or ``X''). We also include in this
set claims that contained one unit of one code when the bilateral
modifier was appended to the code and the code was conditionally or
independently bilateral. In these cases, the claims represented more
than one unit of the service described by the code, notwithstanding
that only one unit was billed.
3. Single Minor Claims: Claims with a single HCPCS code that was
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,''
``U,'' or ``N'' and not status indicator ``Q1'' (``STVX-packaged'') or
status indicator ``Q2'' (``T-packaged'') code.
4. Multiple Minor Claims: Claims with multiple HCPCS codes that are
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,''
``U,'' or ``N;'' claims that contain more than one code with status
indicator ``Q1'' (``STVX-packaged'') or more than one unit of a code
with status indicator ``Q1'' but no codes with status indicator ``S,''
``T,'' ``V,'' or ``X'' on the same date of service; or claims that
contain more than one code with status indicator ``Q2'' (T-packaged),
or ``Q2'' and ``Q1,'' or more than one unit of a code with status
indicator ``Q2'' but no code with status indicator ``T'' on the same
date of service.
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 were 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 OPPS service or a code for a packaged service. Non-OPPS claims
include claims for ``sometimes'' therapy HCPCS codes for wound care
paid sometimes under the OPPS but billed, in these non-OPPS cases, with
revenue codes indicating that the therapy services would be paid under
the Medicare Physician Fee Schedule (MPFS).
The claims listed in numbers 1, 2, 3, and 4 above are included in
the data files that can be purchased as described above. Claims that
contain codes to which we are proposing to assign status indicators
``Q1'' (``STVX-packaged'') and ``Q2'' (``T-packaged'') appear in the
data for the single major file, the multiple major file, and the
multiple minor file used in this proposed rule. Claims that contain
codes to which we are proposing to assign status indicator ``Q3''
(composite APC members) appear in both the data of the single and
multiple major files used in this proposed rule, depending on the
specific composite calculation.
To develop ``pseudo'' single claims for this proposed rule, we
examined both the multiple major claims and the multiple minor claims.
We first examined the multiple major claims for dates of service to
determine if we could break them into ``pseudo'' single procedure
claims using the dates of service for all lines on the claim. If we
could create claims with single major procedures by using dates 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 also used the bypass codes listed earlier in Table 1 and
discussed in section II.A.1.b. of this proposed rule to remove
separately payable procedures that we determined contained limited or
no packaged costs or that 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''

[[Page 41435]]

single procedure claim 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.
However, where only one unit of one of an ``overlap bypass code''
appeared on a claim with only one unit of another separately paid code,
we used the line-item cost of the ``overlap bypass code'' to create a
``pseudo'' single procedure claim for the ``overlap bypass code'' but
did not use the remaining costs on the claim for the other separately
paid procedure. We did not incorporate the changes to create ``pseudo''
single claims from the remaining information on these claims in the
data development process for this proposed rule. We believe this
simplifies our communication of the claims development process to the
public by not adding unnecessary complexity. Furthermore, the limited
increase of only 1 percent in the number of ``pseudo'' single claims
that would be created from the remaining data made it impractical to
include the changes to the data development process that would be
required, taking into consideration the complexity of making such
changes.
We also examined the multiple minor claims to determine whether we
could create ``pseudo'' single procedure claims. Specifically, where
the claim contained multiple codes with status indicator ``Q1''
(``STVX-packaged'') on the same date of service or contained multiple
units of a single code with status indicator ``Q1,'' we selected the
status indicator ``Q1'' HCPCS code that had the highest CY 2008
relative weight, moved the units to one on that HCPCS code, and
packaged all costs for other codes with status indicator ``Q1,'' as
well as all other packaged HCPCS code and packaged revenue code costs,
into a total single cost for the claim to create a ``pseudo'' single
claim for the selected code. We changed the status indicator for
selected codes from the data status indicator of ``N'' to the status
indicator of the APC to which the selected procedure was assigned for
further data processing and considered this claim as a major procedure
claim. We used this claim in the calculation of the APC median cost for
the status indicator ``Q1'' HCPCS code.
Similarly, where a multiple minor claim contained multiple codes
with status indicator ``Q2'' (``T-packaged'') or multiple units of a
single code with status indicator ``Q2,'' we selected the status
indicator ``Q2'' HCPCS code that had the highest CY 2008 relative
weight, moved the units to one on that HCPCS code, and packaged all
costs for other codes with status indicator ``Q2,'' as well as all
other packaged HCPCS code and packaged revenue code costs into a total
single cost for the claim to create a ``pseudo'' single claim for the
selected code. We changed the status indicator for the selected code
from a data status indicator of ``N'' to the status indicator of the
APC to which the selected code was assigned, and we considered this
claim as a major procedure claim.
Lastly, where a multiple minor claim contained multiple codes with
status indicator ``Q2'' (``T-packaged'') and status indicator ``Q1''
(``STVX-packaged''), we selected the status indicator ``Q2'' HCPCS code
(``T-packaged'') that had the highest relative weight for CY 2008,
moved the units to one on that HCPCS code, and packaged all costs for
other codes with status indicator ``Q2,'' costs of all codes with
status indicator ``Q1'' (``STVX-packaged''), other packaged HCPCS code
and packaged revenue code costs into a total single cost for the claim
to create a ``pseudo'' single claim for the selected (``T-packaged'')
code. We favor status indicator ``Q2'' over ``Q1'' HCPCS codes because
``Q2'' HCPCS codes have higher CY 2008 relative weights. If a status
indicator ``Q1'' HCPCS code had a higher CY 2008 relative weight, it
would become the primary code for the simulated single bill process. We
changed the status indicator for the selected status indicator ``Q2''
(``T-packaged'') code from a data status indicator of ``N'' to the
status indicator of the APC to which the selected code was assigned and
we considered this claim as a major procedure claim.
After we assessed the conditional packaging of HCPCS codes with
proposed status indicators ``Q1'' and ``Q2,'' we then assessed the
claims to determine if the proposed criteria for the multiple imaging
composite APCs, discussed in section II.A.2.e.(5) of this proposed
rule, were met. Where the criteria for the proposed imaging composite
APCs were met, we created a ``single session'' claim for the applicable
imaging composite service and determined whether we could use the claim
in ratesetting. For HCPCS codes that are both conditionally packaged
and are proposed members of a multiple imaging composite APC, we first
assessed whether the code would be packaged and if so, the code ceased
to be available for further assessment as part of the composite APC.
Because the code would not be a separately payable procedure, we
considered it to be unavailable for use in setting the composite APC
median cost.
We excluded those claims that we were not able to convert to single
claims even after applying all of the techniques for creation of
``pseudo'' singles to multiple majors and to multiple minors. As has
been our practice in recent years, we also excluded claims that
contained codes that were viewed as independently or conditionally
bilateral and that contained the bilateral modifier (Modifier 50
(Bilateral procedure)) because the line-item cost for the code
represented the cost of two units of the procedure, notwithstanding
that the code appeared with a unit of one.
c. Completion of Claim Records and Median Cost Calculations
We then packaged the costs of packaged HCPCS codes (codes with
status indicator ``N'' listed in Addendum B to this proposed rule and
the costs of those lines for codes with status indicator ``Q1'' or
``Q2'' when they are not separately paid) and packaged revenue codes
into the cost of the single major procedure remaining on the claim.
The list of packaged revenue codes is shown in Table 2 below. As
noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR
66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation
that requires CMS to review the final list of packaged revenue codes
for consistency with OPPS policy and ensure that future versions of the
I/OCE edit accordingly. We compared the packaged revenue codes in the
I/OCE to the final list of packaged revenue codes for the CY 2008 OPPS
(72 FR 66608 through 66609) that we used for packaging costs in median
calculation. As a result of that analysis, we are proposing to use the
packaged revenue codes for CY 2009 displayed in Table 2 below.
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

[[Page 41436]]

services furnished on or after July 1, 2004, the I/OCE assigned
packaging flag number 3 to claims on which hospitals submitted token
charges for a service with status indicator ``S'' or ``T'' (a major
separately paid service under the OPPS) for which the fiscal
intermediary was required to allocate the sum of charges for services
with a status indicator equaling ``S'' or ``T'' based on the weight of
the APC to which each code was 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 equaled the
revenue center payment (that is, the Medicare payment) on the
assumption that where the charge equaled 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).
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 for this proposed rule. Of these 54 million claims, we
were able to use some portion of approximately 52 million whole claims
(96 percent of approximately 54 million potentially usable claims) to
create approximately 90 million single and ``pseudo'' single claims, of
which we used 89 million single bills (after trimming out approximately
627,000 claims as discussed below) in the CY 2009 median development
and ratesetting.
We used the remaining claims to calculate the proposed CY 2009
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 some cases, APC median costs are calculated using variations of
the process outlined above. Section II.A.2.d. of this proposed rule
that follows addresses the calculation of single APC criteria-based
median costs. Section II.A.2.e. of this proposed rule discusses the
calculation of composite APC criteria-based median costs.
Section X.B. of this proposed rule addresses the methodology for
calculating the median cost for partial hospitalization services.

Table 2.--Proposed CY 2009 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.

[[Page 41437]]

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.
0721.......................................... LABOR.
0732.......................................... TELEMETRY.
0762.......................................... OBSERVATION ROOM.
0801.......................................... HEMODIALYSIS.
0802.......................................... PERITONEAL DIALYSIS.
0803.......................................... CAPD.
0804.......................................... CCPD.
0809.......................................... OTHER INPATIENT
DIALYSIS.
0810.......................................... ORGAN ACQUISITION.
0819.......................................... OTHER ORGAN ACQUISITION.
0821.......................................... HEMODIALYSIS COMP OR
OTHER RATE.
0824.......................................... MAINTENANCE 100%.
0825.......................................... SUPPORT SERVICES.
0829.......................................... OTHER HEMO OUTPATIENT.
0942.......................................... EDUCATION/TRAINING.
------------------------------------------------------------------------

d. Proposed Calculation of Single Procedure APC Criteria-Based Median
Costs
(1) Device-Dependent APCs
Device-dependent APCs are populated by HCPCS codes that usually,
but not always, require that a device be implanted or used to perform
the procedure. For a full history of how we have calculated payment
rates for device-dependent APCs in previous years, and a detailed
discussion of how we developed the standard device-dependent APC
ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66739 through 66742). Overviews of the
procedure-to-device edits and device-to-procedure edits used in
ratesetting for device-dependent APCs are available in the CY 2005 OPPS
final rule with comment period (69 FR 65761 through 65763) and the CY
2007 OPPS/ASC final rule with comment period (71 FR 68070 through
68071).
For CY 2009, we are proposing to continue using our standard
methodology for calculating median costs for device-dependent APCs,
which utilizes claims data that generally represent the full cost of
the required device. Specifically, we are proposing to calculate the
medians for device-dependent APCs for CY 2009 using only the subset of
single bills from CY 2007 claims data that pass the procedure-to-device
edits; do not contain token charges for devices; and do not contain the
``FB'' modifier signifying that the device was furnished without cost
to the provider, supplier, or practitioner, or where a full credit was
received. We continue to believe that this methodology gives us the
most appropriate median costs for device-dependent APCs in which the
hospital incurs the full cost of the device.
While the median costs for the majority of device-dependent APCs
show increases from CY 2008 based on the CY 2009 proposed rule claims
data, the median costs for three APCs involving electrode/lead
implantation decreased significantly compared to the CY 2008 final rule
with comment period median costs. Specifically, APCs 0106 (Insertion/
Replacement of Pacemaker Leads and/or Electrodes), 0225 (Implantation
of Neurostimulator Electrodes, Cranial Nerve), and 0418 (Insertion of
Left Ventricular Pacing Electrode), demonstrate median decreases of 26
percent, 52 percent, and 47 percent, respectively. We believe these
decreases reflect hospitals' correction of inaccurate and incomplete
billing practices for these services due to the implementation of
device-to-procedure edits beginning in CY 2007. As discussed in the CY
2007 OPPS/ASC final rule with comment period (71 FR 68070 through
68071), in the course of examining claims data for calculation of the
CY 2007 payment rates, we identified circumstances in which hospitals
billed a device code but failed to bill any procedure code with which
the device could be used correctly. For APCs 0106, 0225, and 0418 in
particular, we saw that hospitals frequently billed a procedure code
for

[[Page 41438]]

lead/electrode implantation with device HCPCS codes for a lead/
electrode and the more expensive pulse generator, but failed to report
a procedure code for generator implantation. These errors in billing
led to the costs of the pulse generator being packaged incorrectly into
the procedure codes for lead/electrode implantation. Hospitals that
coded and billed in this manner received no payment for the procedure
to implant the pulse generator, but these erroneous claims caused the
payment rate for the lead/electrode implantation APCs to be
inappropriately high. To address this problem, we implemented edits to
correct the coding for CY 2007, and the decreases to the median costs
of APCs 0106, 0225, and 0418 for CY 2009 are consistent with what we
expect, based on what we understand to be the nature of the services
and the costs of correctly coded devices. We also note an anticipated
decrease in our frequency of single bills for the services assigned to
APCs 0106, 0225, and 0418, most likely because the device-to-procedure
edits led hospitals to include the pulse generator implantation HCPCS
codes on the same claims, resulting in fewer single claims for the
lead/electrode implantation procedures.
APC 0625 (Level IV Vascular Access Procedures) as configured for CY
2008 and calculated based on CY 2007 claims data also demonstrates a
significant decrease in median cost (approximately 59 percent) relative
to CY 2008 (based on CY 2006 claims data). We believe this decrease is
attributable to the implementation of procedure-to-device edits on
January 1, 2007, for the only CPT code assigned to this APC,
specifically CPT code 36566 (Insertion of tunneled centrally inserted
central venous access device, requiring two catheters via two separate
venous access sites; with subcutaneous port(s)). Because the procedure
described by CPT code 36566 involves the insertion of a dialysis access
system, our edits require that the HCPCS code for that device be
present on the claim any time a hospital bills CPT code 36566. Prior to
January 1, 2007, we believe that hospitals often reported CPT code
36566 without also reporting the device HCPCS code for the dialysis
access system, or incorrectly billed CPT code 36566 for procedures that
do not require the use of the device. Therefore, with the
implementation of procedure-to-device edits, the volume of total CY
2007 claims for CPT code 36566 decreased as hospitals corrected their
claims to report this service only under the appropriate circumstances,
while the correctly coded claims reporting the required device (and
available for CY 2009 ratesetting) increased significantly from CY 2006
to CY 2007. We believe that the CY 2009 proposed rule median cost of
$2,092 calculated for CPT code 36566 from those claims is accurate and
appropriately reflects correct hospital reporting of the procedure and
the associated device. Furthermore, because of the decrease in the
median cost for CPT code 36566, we are proposing for CY 2009 to
reassign the code to APC 0623 (Level III Vascular Access Procedures),
which has a median cost of approximately $1,939. We also are proposing
to delete APC 0625 because no other procedures would map to this APC
once CPT code 36566 is reassigned.
In addition, we note a decrease of approximately 19 percent for APC
0681 (Knee Arthroplasty) relative to CY 2008, which we believe is
attributable to a low volume of services being performed by a small
number of providers. As we have stated in the past, some fluctuation in
relative costs from year to year is to be expected in a prospective
payment system for low volume device-dependent APCs such as APC 0681,
for which the median cost increased approximately 37 percent from CY
2007 to CY 2008.
Table 3 lists the APCs for which we are proposing to use our
standard device-dependent APC ratesetting methodology for CY 2009. We
refer readers to Addendum A to this proposed rule for the proposed
payment rates for these APCs.

Table 3.--Proposed CY 2009 Device-Dependent APCs
----------------------------------------------------------------------------------------------------------------
APC Status indicator APC title
----------------------------------------------------------------------------------------------------------------
0039............................... S Level I Implantation of Neurostimulator.
0040............................... S Percutaneous Implantation of Neurostimulator
Electrodes, Excluding Cranial Nerve.
0061............................... S Laminectomy, Laparoscopy, or Incision for
Implantation of Neurostimulator Electrodes,
Excluding Cranial Nerve.
0082............................... T Coronary or Non Coronary Atherectomy.
0083............................... T Coronary or Non Coronary Angioplasty and
Percutaneous Valvuloplasty.
0084............................... S Level I Electrophysiologic Procedures.
0085............................... T Level II Electrophysiologic Procedures.
0086............................... T Level III Electrophysiologic Procedures.
0089............................... T Insertion/Replacement of Permanent Pacemaker
and Electrodes.
0090............................... T Insertion/Replacement of Pacemaker Pulse
Generator.
0104............................... T Transcatheter Placement of Intracoronary
Stents.
0106............................... T Insertion/Replacement of Pacemaker Leads and/
or Electrodes.
0107............................... T Insertion of Cardioverter-Defibrillator.
0108............................... T Insertion/Replacement/Repair of Cardioverter-
Defibrillator Leads.
0115............................... T Cannula/Access Device Procedures.
0202............................... T Level VII Female Reproductive Procedures.
0222............................... S Level II Implantation of Neurostimulator.
0225............................... S Implantation of Neurostimulator Electrodes,
Cranial Nerve.
0227............................... T Implantation of Drug Infusion Device.
0229............................... T Transcatheter Placement of Intravascular
Shunts.
0259............................... T Level VII ENT Procedures.
0293............................... T Level V Anterior Segment Eye Procedures.
0315............................... S Level III Implantation of Neurostimulator.
0384............................... T GI Procedures with Stents.
0385............................... S Level I Prosthetic Urological Procedures.
0386............................... S Level II Prosthetic Urological Procedures.
0418............................... T Insertion of Left Ventricular Pacing Elect.
0425............................... T Level II Arthroplasty with Prosthesis.
0427............................... T Level II Tube or Catheter Changes or
Repositioning.

[[Page 41439]]

0622............................... T Level II Vascular Access Procedures.
0623............................... T Level III Vascular Access Procedures.
0648............................... T Level IV Breast Surgery.
0652............................... T Insertion of Intraperitoneal and Pleural
Catheters.
0653............................... T Vascular Reconstruction/Fistula Repair with
Device.
0654............................... T Insertion/Replacement of a permanent dual
chamber pacemaker.
0655............................... T Insertion/Replacement/Conversion of a
permanent dual chamber pacemaker.
0656............................... T Transcatheter Placement of Intracoronary Drug-
Eluting Stents.
0674............................... T Prostate Cryoablation.
0680............................... S Insertion of Patient Activated Event
Recorders.
0681............................... T Knee Arthroplasty.
----------------------------------------------------------------------------------------------------------------

(2) Blood and Blood Products
Since the implementation of the OPPS in August 2000, separate
payments have been made for blood and blood products through APCs
rather than packaging them into payments for the procedures with which
they are administered. Hospital payments for the costs of blood and
blood products, as well as the costs of collecting, processing, and
storing blood and blood products, are made through the OPPS payments
for specific blood product APCs.
For the CY 2009 OPPS, we are proposing to continue to establish
payment rates for blood and blood products using our blood-specific CCR
methodology, which utilizes actual or simulated CCRs from the most
recently available hospital cost reports to convert hospital charges
for blood and blood products to costs. This methodology has been our
standard ratesetting methodology for blood and blood products since CY
2005. It was developed in response to data analysis indicating that
there was a significant difference in CCRs for those hospitals with and
without blood-specific cost centers, and past comments indicating that
the former OPPS policy of defaulting to the overall hospital CCR for
hospitals not reporting a blood-specific cost center often resulted in
an underestimation of the true hospital costs for blood and blood
products. Specifically, in order to address the difference in CCRs and
to better reflect hospitals' costs, we are proposing to continue to
simulate blood CCRs for each hospital that does not report a blood cost
center by calculating the ratio of the blood-specific CCRs to
hospitals' overall CCRs for those hospitals that do report costs and
charges for blood cost centers. We would then apply this mean ratio to
the overall CCRs of hospitals not reporting costs and charges for blood
cost centers on their cost reports in order to simulate blood-specific
CCRs for those hospitals. We calculated the proposed median costs upon
which the proposed CY 2009 payment rates for blood and blood products
are based using the actual blood-specific CCR for hospitals that
reported costs and charges for a blood cost center and a hospital-
specific simulated blood-specific CCR for hospitals that did not report
costs and charges for a blood cost center.
We continue to believe that the blood-specific CCR methodology
better responds to the absence of a blood-specific CCR for a hospital
than alternative methodologies, such as defaulting to the overall
hospital CCR or applying an average blood-specific CCR across
hospitals. Because this methodology takes into account the unique
charging and cost accounting structure of each provider, we believe
that it yields more accurate estimated costs for these products. We
believe that continuing with this methodology in CY 2009 would result
in median costs for blood and blood products that accurately reflect
the relative estimated costs of these products for hospitals without
blood cost centers, and, therefore, for these products in general.
As discussed in section XIII.A.1. of this proposed rule, we are
also proposing to create status indicator ``R'' (Blood and Blood
Products), to denote blood and blood products for publication and
payment purposes in CY 2009. We believe that it is necessary to create
a status indicator that is specific to blood and blood products to
facilitate development of blood product median costs under the blood-
specific CCR methodology and to facilitate implementation of the
reduced payments that would be made to hospitals that fail to report
the hospital outpatient quality data, as discussed in section XVI.D.2.
of this proposed rule.
We refer readers to Addendum B to this proposed rule for the CY
2009 proposed payment rates for blood and blood products, which are
identified with proposed status indicator ``R.'' For more detailed
discussion of the blood-specific CCR methodology, we refer readers to
the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full
history of OPPS payment for blood and blood products, we refer readers
to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807
through 66810).
(3) Single Allergy Tests
We are proposing to continue with our methodology of
differentiating single allergy tests (``per test'') from multiple
allergy tests (``per visit'') by assigning these services to two
different APCs to provide accurate payments for these tests in CY 2009.
Multiple allergy tests are currently assigned to APC 0370 (Allergy
Tests), with a median cost calculated based on the standard OPPS
methodology. We provided billing guidance in CY 2006 in Program
Transmittal 804 (issued on January 3, 2006) specifically clarifying
that hospitals should report charges for the CPT codes that describe
single allergy tests to reflect charges ``per test'' rather than ``per
visit'' and should bill the appropriate number of units of these CPT
codes to describe all of the tests provided. However, our CY 2007
claims data available for this CY 2009 proposed rule for APC 0381 do
not reflect improved and more consistent hospital billing practices of
``per test'' for single allergy tests. The median cost of APC 0381,
calculated for this proposed rule according to the standard single
claims OPPS methodology, is approximately $51, significantly higher
than the CY 2008 median cost of APC 0381 of approximately $17
calculated according to the ``per unit'' methodology, and greater than
we would expect for these procedures that are to be reported ``per
test'' with the appropriate number of units. Some claims for single
allergy tests still appear to provide charges that represent a ``per
visit'' charge, rather than a ``per test'' charge.
Therefore, consistent with our payment policy for CYs 2006, 2007,
and

[[Page 41440]]

2008, we are proposing to calculate a ``per unit'' median cost for APC
0381, based upon 520 claims containing multiple units or multiple
occurrences of a single CPT code. The CY 2009 proposed median cost for
APC 0381 using the ``per unit'' methodology is approximately $25. For a
full discussion of this methodology, we refer readers to the CY 2008
OPPS/ASC final rule with comment period (72 FR 66737).
(4) Echocardiography Services
For the CY 2009 OPPS, we are proposing to continue the packaging of
payment for all contrast agents into the payment for the associated
imaging procedure, as we did in CY 2008. For echocardiography services,
we are proposing to estimate median costs using the same methodology
that we used to set medians for these services for CY 2008. In CY 2008,
we finalized a policy to package payment for all contrast agents into
the payment for the associated imaging procedure regardless of whether
the contrast agent met the OPPS drug packaging threshold. Section
1833(t)(2)(G) of the Act requires us to create additional APC groups of
services for procedures that use contrast agents that classify them
separately from those procedures that do not utilize contrast agents.
To reconcile this statutory provision with our final policy of
packaging all contrast agents, for CY 2008, we calculated HCPCS-
specific median costs for all separately payable echocardiography
procedures that may be performed with contrast agents by isolating
single and ``pseudo'' single claims with the following CPT codes where
a contrast agent was also billed on the claim: 93303 (Transthoracic
echocardiography for congenital cardiac anomalies; complete), 93304
(Transthoracic echocardiography for congenital cardiac anomalies;
follow-up or limited study), 93307 (Echocardiography, transthoracic,
real-time with image documentation (2D) with or without M-mode
recording; complete), 93308 (Echocardiography, transthoracic, real-time
with image documentation (2D) with or without M-mode recording; follow-
up or limited study), 93312 ( Echocardiography, transesophageal, real
time with image documentation (2D) (with or without M-mode recording);
including probe placement, image acquisition, interpretation and
report), 93315 (Transesophageal echocardiography for congenital cardiac
anomalies; including probe placement, image acquisition, interpretation
and report), 93318 (Echocardiography, transesophageal (TEE) for
monitoring purposes, including probe placement, real time 2-dimensional
image acquisition and interpretation leading to ongoing (continuous)
assessment of (dynamically changing) cardiac pumping function and to
therapeutic measures on an immediate time basis), and 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). As noted in the CY
2008 OPPS/ASC final rule with comment period (72 FR 66644), our
analysis indicated that all echocardiography procedures that may be
performed with contrast agents are reasonably similar both clinically
and in terms of resource use, as evidenced by similar HCPCS median
costs.
Pursuant to the statute, for CY 2008, we created APC 0128
(Echocardiogram With Contrast) to provide payment for echocardiography
procedures that are performed with a contrast agent. In addition, as
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR
66644 through 66646), in order for hospitals to identify separately and
receive appropriate payment for echocardiography procedures performed
with contrast beginning in CY 2008, we created eight new HCPCS codes
(C8921 through C8928) that corresponded to the related CPT
echocardiography codes and assigned them to the newly created APC 0128.
We instructed hospitals performing echocardiography procedures without
contrast to continue to report the CPT codes and to report the new C-
codes when performing echocardiography procedures with contrast or
without contrast followed by with contrast.
Claims data from CY 2008 are not yet available for ratesetting, so
we do not yet have claims data specific to HCPCS codes C8921 through
C8928 in order to determine the CY 2009 payment rate for APC 0128.
Therefore, for CY 2009, we are proposing to again use the methodology
that we used to set the CY 2008 payment rate for APC 0128 (72 FR
66645). That is, we isolate single and ``pseudo'' single claims in our
database that include those CPT codes in the range of 93303 through
93350 as described above that correspond to the contrast studies
described by HCPCS codes C8921 through C8928. For claims where one of
these echocardiography procedures was billed with a contrast agent, we
packaged the cost of the contrast agent into the cost of the
echocardiography procedure and then calculated a median cost for APC
0128 using this subset of claims to determine the proposed median cost
for APC 0128 of approximately $563. As in CY 2008, the HCPCS code-
specific median costs for echocardiography procedures performed with
contrast are all similar, and we continue to believe these services
share sufficient similarity to be assigned to the same APC.
For CY 2009, we also recalculated the median cost for APCs 0269
(Level II Echocardiogram Without Contrast Except Transesophageal); 0270
(Transesophageal Echocardiogram Without Contrast); and 0697 (Level I
Echocardiogram Without Contrast Except Transesophageal), as we did in
CY 2008 (72 FR 66645). We used claims for CPT codes 93303 through 93350
after removing claims from the ratesetting process that included
contrast agents because these claims were used to set the median cost
for APC 0128.
We continue to believe that these echocardiography APC medians
accurately reflect hospital costs when performing echocardiography
procedures, both with and without contrast. In addition, we believe
that this coding and payment methodology allows us to both adhere to
the statutory requirement to create additional groups of services for
procedures that use contrast agents and to continue packaged payment
for contrast agents.
(5) Nuclear Medicine Services
In CY 2008, we began packaging payment for diagnostic
radiopharmaceuticals into the payment for the associated nuclear
medicine procedure. (For a discussion regarding the distinction between
diagnostic and therapeutic radiopharmaceuticals, we refer readers to
the CY 2008 OPPS/ASC final rule at 72 FR 66636). Prior to the
implementation of this policy, diagnostic radiopharmaceuticals were
subject to the standard OPPS drug packaging methodology whereby
payments are packaged when the estimated mean per day product costs
fall at or below the annual packaging threshold for drugs, biologicals,
and radiopharmaceuticals.
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. All nuclear
medicine procedures require the use of at least

[[Page 41441]]

one radiopharmaceutical or other radiolabeled product, and there are
only a small number of radiopharmaceuticals that may be appropriately
billed with each diagnostic nuclear medicine procedure. For the OPPS,
we distinguish diagnostic radiopharmaceuticals from therapeutic
radiopharmaceuticals for payment purposes, and this distinction is
recognized in the Level II HCPCS codes for diagnostic
radiopharmaceuticals that include the term ``diagnostic'' along with a
radiopharmaceutical in their HCPCS code descriptors. As we stated in
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66635), we
believe that our policy to package payment for diagnostic
radiopharmaceuticals (other than those already packaged when their per
day costs are below the packaging threshold for OPPS drugs,
biologicals, and radiopharmaceuticals) is consistent with OPPS
packaging principles, provides greater administrative simplicity for
hospitals, and encourages hospitals to use the most clinically
appropriate and cost efficient diagnostic radiopharmaceutical for each
study. For more background on this policy, we refer readers to
discussions in the CY 2008 OPPS/ASC proposed rule (72 FR 42667 through
42672) and the CY 2008 OPPS/ASC final rule with comment period (72 FR
66635 through 66641).
We continue to believe that it is most appropriate to package
payment for some radiopharmaceuticals, specifically diagnostic
radiopharmaceuticals, into the payment for diagnostic nuclear medicine
procedures, and we are proposing to continue to package payment for
diagnostic radiopharmaceuticals into the payment for the associated
nuclear medicine procedure for CY 2009 as described in section V.B.2.b.
of this proposed rule.
During the March 2008 APC Panel meeting, the APC Panel recommended
that CMS continue to package payment for diagnostic
radiopharmaceuticals for CY 2009. In addition, the APC Panel
recommended that CMS present data at the first CY 2009 APC Panel
meeting on usage and frequency, geographic distribution, and size and
type of hospitals performing nuclear medicine studies using
radioisotopes in order to ensure that access to diagnostic
radiopharmaceuticals is preserved for Medicare beneficiaries. We are
accepting both of these recommendations.
For CY 2008 ratesetting, we used only claims for nuclear medicine
procedures that contained a diagnostic radiopharmaceutical in
calculating the median costs for APCs including nuclear medicine
procedures (72 FR 66639). This is similar to the established
methodology used for device-dependent APCs before claims reflecting the
procedure-to-device edits were included in our claims data. For CY 2008
we also implemented claims processing edits (called procedure-to-
radiopharmaceutical edits) requiring the presence of a
radiopharmaceutical (or other radiolabeled product) HCPCS code when a
separately payable nuclear medicine procedure is present on a claim.
Similar to our practice regarding the procedure-to-device edits that
have been in place for some time, we continually review comments and
requests for changes related to these edits and, based on our review,
may update the edit list during our quarterly update process if
necessary. The radiopharmaceutical (and other radiolabeled product) and
procedure HCPCS codes that are included in these edits can be viewed on
the OPPS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_
overview.asp.
The CY 2008 OPPS claims that are subject to the procedure-to-
radiopharmaceutical edits will not be available for setting payment
rates until CY 2010 and, therefore, are not yet available to set
payment rates for CY 2009. Therefore, we are proposing to continue our
established CY 2008 methodology for setting the payment rates for APCs
that include nuclear medicine procedures for CY 2009. We used an
updated list of radiolabeled products from the procedure-to-
radiopharmaceutical edit file to identify single and ``pseudo'' single
claims for nuclear medicine procedures that also included at least one
eligible radiolabeled product. Using this subset of claims, we followed
our standard OPPS ratesetting methodology, discussed in section II.A.
of this proposed rule, to calculate median costs for nuclear medicine
procedures and their associated APCs.
We have identified those APCs containing nuclear medicine
procedures that would be subject to this methodology under our CY 2009
proposal in Table 4 below. As in CY 2008, when we set APC median costs
based on single and ``pseudo'' single claims that also included at
least one radiolabeled product on our edit file, we observed an
equivalent or higher median cost than that calculated from all single
and ``pseudo'' single bills. We believe that this methodology
appropriately ensures that the costs of diagnostic radiopharmaceuticals
are included in the ratesetting process for these APCs.

Table 4.--Proposed APCs Where Nuclear Medicine Procedures Are Assigned
With Median Costs Calculated From Claims With an Associated Radiolabeled
Product
------------------------------------------------------------------------
APC APC title
------------------------------------------------------------------------
0307......................... Myocardial Positron Emission Tomography
(PET) imaging.
0308......................... Non-Myocardial Positron Emission
Tomography (PET) imaging.
0377......................... Level II Cardiac Imaging.
0378......................... Level II Pulmonary Imaging.
0389......................... Level I Non-Imaging Nuclear Medicine.
0390......................... Level I Endocrine Imaging.
0391......................... Level II Endocrine Imaging.
0392......................... Level II Non-imaging Nuclear Medicine.
0393......................... Hematologic Processing & Studies.
0394......................... Hepatobiliary Imaging.
0395......................... GI Tract Imaging.
0396......................... Bone Imaging.
0397......................... Vascular Imaging.
0398......................... Level I Cardiac Imaging.
0400......................... Hematopoietic Imaging.
0401......................... Level I Pulmonary Imaging.
0402......................... Level II Nervous System Imaging.
0403......................... Level I Nervous System Imaging.

[[Page 41442]]

0404......................... Renal and Genitourinary Studies.
0406......................... Level I Tumor/Infection Imaging.
0408......................... Level III Tumor/Infection Imaging.
0414......................... Level II Tumor/Infection Imaging.
------------------------------------------------------------------------

(6) Hyperbaric Oxygen Therapy
Since the implementation of OPPS in August 2000, the OPPS has
recognized HCPCS code C1300 (Hyperbaric oxygen under pressure, full
body chamber, per 30 minute interval) for hyperbaric oxygen therapy
(HBOT) provided in the hospital outpatient setting. In the CY 2005
final rule with comment period (69 FR 65758 through 65759), we
finalized a ``per unit'' median cost calculation for APC 0659
(Hyperbaric Oxygen) using only claims with multiple units or multiple
occurrences of HCPCS code C1300 because delivery of a typical HBOT
service requires more than 30 minutes. We observed that claims with
only a single occurrence of the code were anomalies, either because
they reflected terminated sessions or because they were incorrectly
coded with a single unit. In the same rule, we also established that
HBOT would not generally be furnished with additional services that
might be packaged under the standard OPPS APC median cost methodology.
This enabled us to use claims with multiple units or multiple
occurrences. Finally, we also used each hospital's overall CCR to
estimate costs for HCPCS code C1300 from billed charges rather than the
CCR for the respiratory therapy or other departmental cost centers.
Comments on the CY 2005 proposed rule effectively demonstrated that
hospitals report the costs and charges for HBOT in a wide variety of
cost centers. Since CY 2005, we have used this methodology to estimate
the median cost for HBOT. The median costs of HBOT using this
methodology have been relatively stable for the last 5 years. For CY
2009, we are proposing to continue using the same methodology to
estimate a ``per unit'' median cost for HCPCS code C1300 of
approximately $103 using 71,866 claims with multiple units or multiple
occurrences for this proposed rule.
(7) Payment for Ancillary Outpatient Services When Patient Expires (-CA
Modifier)
In the November 1, 2002 final rule with comment period (67 FR
66798), we discussed the creation of the new HCPCS-CA modifier to
address situations where a procedure on the OPPS inpatient list must be
performed to resuscitate or stabilize a patient (whose status is that
of an outpatient) with an emergent, life-threatening condition, and the
patient dies before being admitted as an inpatient. In Program
Transmittal A-02-129, issued on January 3, 2003, we instructed
hospitals on the use of this modifier. For a complete description of
the history of the policy and development of the payment methodology
for these services, we refer readers to the CY 2007 OPPS/ASC final rule
with comment period (71 FR 68157 through 68158).
For CY 2009, we are proposing to continue to use our established
ratesetting methodology for calculating the median cost of APC 0375
(Ancillary Outpatient Services When Patient Expires), and we are
proposing to continue to make one payment under APC 0375 for the
services that meet the specific conditions for using modifier -CA. We
would calculate the relative payment weight for APC 0375 by using all
claims reporting a status indicator ``C'' procedure appended with the -
CA modifier, using estimated costs from claims data for line-items with
a HCPCS code assigned status indicator ``G,'' ``H,'' ``K,'' ``N,''
``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' and ``X''
and charges for packaged revenue codes without a HCPCS code. We
continue to believe that this methodology results in the most
appropriate aggregate median cost for the ancillary services provided
in these unusual clinical situations.
Also, we believe that hospitals are reporting the -CA modifier
according to the policy initially established in CY 2003. The claims
frequency for APC 0375 has been relatively stable over the past few
years. Although the proposed median cost for APC 0375 is slightly lower
for CY 2009 than for CY 2008, generally it has increased significantly
in recent years. Variation in the median cost for APC 0375 is expected
because of the small number of claims and because the specific cases
are grouped by the presence of the -CA modifier appended to an
inpatient procedure and not according to the standard APC criteria of
clinical and resource homogeneity. Cost variation for APC 0375 from
year to year is anticipated and acceptable so long as hospitals
continue judicious reporting of the -CA modifier.
Table 5 shows the number of claims and the median cost for APC 0375
from CY 2006 to CY 2008. For CY 2009, we are proposing a median cost
for APC 0375 of approximately $4,762.

Table 5.--Claims for Ancillary Outpatient Services When Patient Expires
(-CA Modifier) for CYs 2006 Through 2008
------------------------------------------------------------------------
Number Median
Prospective payment year of cost
claims ($)
------------------------------------------------------------------------
CY 2006.............................................. 370 2,717
CY 2007.............................................. 260 3,549
CY 2008.............................................. 183 4,945
------------------------------------------------------------------------

e. Proposed Calculation of Composite APC Criteria-Based Median Costs
As discussed in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66613), we believe it is important that the OPPS enhance
incentives for hospitals to provide only necessary, high quality care
and to provide that care as efficiently as possible. For CY 2008, we
developed composite APCs to provide a single payment for groups of
services that are typically performed together during a single clinical
encounter and that result in the provision of a complete service.
Bundling payment for multiple independent services into a single OPPS
payment in this way enables hospitals to manage their resources with
maximum flexibility by monitoring and adjusting the volume and
efficiency of services themselves. An additional advantage to the
composite APC model is that we can use data from correctly coded
multiple procedure claims to calculate payment rates for the specified
combinations of services, rather than relying upon single procedure
claims which typically are low in volume and/or incorrectly coded. We
refer readers to section II.A.4. of the CY 2008 OPPS/ASC final rule
with comment period for a full discussion of the development of the
composite APC methodology (72 FR

[[Page 41443]]

66611 through 66614 and 66650 through 66652).
We continue to consider the development and implementation of
larger payment bundles, such as composite APCs, a long-term policy
objective for the OPPS and continue to explore other areas where this
payment model may be utilized. In developing this proposed rule, we
followed the same methodology for identifying possible composite APCs
as we did for CY 2008. Specifically, we examined the multiple procedure
claims that we could not convert to single procedure claims to identify
common combinations of services for which we have relatively few single
procedure claims. We then performed a clinical assessment of the
combinations that we identified to determine whether our findings were
consistent with our understanding of the services furnished. In
addition, consistent with our stated intention to involve the APC Panel
in our future exploration of how we can develop encounter-based and
episode-based payment groups (72 FR 66614), we also specifically
explored a possible composite APC for radioimmunotherapy in response to
a recommendation of the APC Panel from its September 2007 meeting.
After performing claims analysis and clinical assessments as
described above, and taking into consideration the recommendation of
the APC Panel from its March 2008 meeting that we continue pursing a
radioimmunotherapy composite APC, we are not proposing a composite APC
payment for radioimmunotherapy for CY 2009, as discussed further in
section V.B.4. of this proposed rule. However, we are proposing to
expand the composite APC model to one new clinical area for CY 2009,
multiple imaging services, as described in detail in section
II.A.2.e.(5) of this proposed rule. We also are proposing to continue
our established composite APC policies for extended assessment and
management, low dose rate (LDR) prostate brachytherapy, cardiac
electrophysiologic evaluation and ablation, and mental health services
for CY 2009, as discussed in sections II.A.2.e.(1), II.A.2.e.(2),
II.A.2.e.(3), and II.A.2.e.(4), respectively, of this proposed rule.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and
8003)
For the CY 2009 OPPS we are proposing to continue to include
composite APC 8002 (Level I Extended Assessment and Management
Composite) and composite APC 8003 (Level II Extended Assessment and
Management Composite) in the OPPS. In addition, we are proposing to
include HCPCS code G0384 (Level 5 hospital emergency department visit
provided in a type B emergency department) in the criteria that
determine eligibility for payment for composite APC 8003. For CY 2008,
we created these two new composite APCs to provide payment to hospitals
in certain circumstances when extended assessment and management of a
patient occur (an extended visit). In most circumstances, observation
services are supportive and ancillary to the other services provided to
a patient. In the circumstances when observation care is provided in
conjunction with a high level visit or direct admission and is an
integral part of a patient's extended encounter of care, payment is
made for the entire care encounter through one of two composite APCs as
appropriate.
As defined for the CY 2008 OPPS, composite APC 8002 describes an
encounter for care provided to a patient that includes a high level
(Level 5) clinic visit or direct admission to observation in
conjunction with observation services of substantial duration (72 FR
66648 through 66649). Composite APC 8003 describes an encounter for
care provided to a patient that includes a high level (Level 4 or 5)
emergency department visit or critical care services in conjunction
with observation services of substantial duration. HCPCS code G0378
(Observation services, per hour) is assigned status indicator ``N,''
signifying that its payment is always packaged. As noted in the CY 2008
OPPS/ASC final rule with comment period (72 FR 66648 through 66649),
the I/OCE evaluates every claim received to determine if payment
through a composite APC is appropriate. If payment through a composite
APC is inappropriate, the I/OCE, in conjunction with the PRICER,
determines the appropriate status indicator, APC, and payment for every
code on a claim. The specific criteria that must be met for the two
extended assessment and management composite APCs to be paid are
provided below in the description of the claims that were selected for
the calculation of the proposed CY 2009 median costs for these
composite APCs. The general composite APC logic and observation care
reporting criteria have also been included in updates to the Claims
Processing and Benefit Policy Manuals through Change Request 5916
(Program Transmittals 82 and 1145), dated February 8, 2008, and we are
not proposing to change these criteria for the CY 2009 OPPS.
When we created composite APCs 8002 and 8003 for CY 2008, we
retained as general reporting requirements for all observation services
those criteria related to physician order and evaluation;
documentation; and observation beginning and ending time as listed in
section XI. of the CY 2008 final rule with comment period (72 FR
66812). We are not proposing to change these reporting requirements for
the CY 2009 OPPS. These 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.
As noted in detail in sections IX.C and XI. of the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66802 through 66805 and 66814),
we saw a normal and stable distribution of clinic and emergency
department visit levels. We do not expect to see an increase in the
proportion of visit claims for high level visits as a result of the new
composite APCs adopted for CY 2008 and proposed for CY 2009. Similarly,
we expect that hospitals will not purposely change their visit
guidelines or otherwise upcode clinic and emergency department visits
reported with observation care solely for the purpose of composite
payment. As stated in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66648), we expect to carefully monitor any changes in
billing practices on a service-specific and hospital-specific level to
determine whether there is reason to request that Quality Improvement
Organizations (QIOs) review the quality of care furnished, or to
request that Benefit Integrity contractors or other contractors review
the claims against the medical record. However, we will not have claims
available for analysis that reflect the new CY 2008 payment policy for
the extended assessment and management composite APCs until the CY 2010
annual OPPS rulemaking cycle.
At the March 2008 meeting of the APC Panel, we discussed with the
Visits and Observation Subcommittee, as well as with the full APC
Panel, the extended assessment and management composite APCs and
observation-related data previously requested by the APC Panel at its
September 2007 meeting. At its March 2008 meeting, the APC Panel
recommended that CMS provide them with additional data related to the
frequency and median cost for the extended assessment and management
composite APCs and length-of-stay

[[Page 41444]]

frequency distribution data for observation services, with additional
detail at the 24-48 hour and greater than 48 hour levels. We are
accepting those recommendations and will provide additional data as
requested at the next APC Panel meeting in 2008. In addition, the APC
Panel recommended continuation of the Visits and Observation
Subcommittee's work. We also are accepting that recommendation.
For CY 2009, we are proposing to continue the extended assessment
and management composite APC payment methodology for APCs 8002 and
8003. As stated above, we are also proposing to continue the general
reporting requirements for observation services reported with HCPCS
code G0378. We continue to believe that the composite APCs 8002 and
8003 and the related policies provide the most appropriate means of
paying for these services. We are proposing to calculate the median
costs for APCs 8002 and 8003 using all single and ``pseudo single''
procedure claims for CY 2007 that meet the criteria for payment of each
composite APC.
Specifically, to calculate the proposed median costs for composite
APCs 8002 and 8003, we selected single and ``pseudo'' single claims
that met each of the following criteria:
1. Did not contain a HCPCS code to which we have assigned status
indicator ``T'' with a date of service 1 day earlier than the date of
service associated with HCPCS code G0378. (By selecting these claims
from single and ``pseudo'' single claims, we had already assured that
they would not contain a code for a service with status indicator ``T''
on the same date of service.);
2. Contained 8 or more units of HCPCS code G0378; and
3. Contained one of the following codes:
In the case of composite APC 8002, HCPCS code G0379
(Direct admission of patient for hospital observation care) on the same
date of service as G0378; or CPT code 99205 (Office or other outpatient
visit for the evaluation and management of a new patient (Level 5)); or
CPT code 99215 (Office or other outpatient visit for the evaluation and
management of an established patient (Level 5)) provided on the same
date of service or one day before the date of service for HCPCS code
G0378.
In the case of composite APC 8003, CPT code 99284
(Emergency department visit for the evaluation and management of a
patient (Level 4)); CPT code 99285 (Emergency department visit for the
evaluation and management of a patient (Level 5)); CPT code 99291
(Critical care, evaluation and management of the critically ill or
critically injured patient; first 30-74 minutes); or HCPCS code G0384
provided on the same date of service or one day before the date of
service for HCPCS code G0378. (As discussed in detail below, we are
proposing to add HCPCS code G0384 to the eligibility criteria for
composite APC 8003 for CY 2009.)
We applied the standard packaging and trimming rules to the claims
before calculating the proposed median costs. The proposed CY 2009
median cost resulting from this process for composite APC 8002 is $364,
which was calculated from 14,968 single and ``pseudo'' single bills
that met the required criteria. The proposed median cost for composite
APC 8003 is $670, which was calculated from 83,491 single and
``pseudo'' single bills that met the required criteria. This is the
same methodology we used to calculate the medians for composite APCs
8002 and 8003 for the CY 2008 OPPS (72 FR 66649).
As discussed in more detail in section IX.B. of this proposed rule,
we are proposing to reassign HCPCS code G0384 from APC 0608 (Level 5
Hospital Clinic Visits) to APC 0616 (Level 5 Emergency Visits).
Consistent with this change for CY 2009, we are also proposing to add
HCPCS code G0384 to the eligibility criteria for payment of composite
APC 8003. Because these visits are rare, we would not expect that
adding HCPCS code G0384 to the eligibility criteria for payment for
extended assessment and management composite APC 8003 would
significantly increase the relative frequency of the Type B emergency
department Level 5 visits reported using HCPCS code G0384.
As discussed further in sections III.D and IX. of this proposed
rule and consistent with our CY 2008 final policy, when calculating the
median costs for the clinic, Type A emergency department visit, Type B
emergency department visit, and critical care APCs (0604 through 0617
and 0626 through 0629), we would utilize our methodology that excludes
those claims for visits that are eligible for payment through the two
extended assessment and management composite APCs, that is APC 8002 or
APC 8003. We believe that this approach would result in the most
accurate cost estimates for APCs 0604 through 0617 and 0626 through
0629 for CY 2009.
Also as discussed in section XIII.A.1. of this proposed rule, for
CY 2009, we are proposing to replace current status indicator ``Q''
with three new separate status indicators: ``Q1,'' ``Q2,'' and ``Q3.''
We believe that this proposed change would make our policy more
transparent to hospitals and would facilitate the use of status
indicator-driven logic in our ratesetting calculations, and in hospital
billing and accounting systems. Under this proposal, status indicator
``Q3'' would be assigned to all codes that may be paid through a
composite APC based on composite-specific criteria or separately
through single code APCs when the criteria are not met. Therefore, we
are proposing that each of the direct admission, clinic, and emergency
department visit codes that may be paid through composite APCs 8002 and
8003 be assigned status indicator ``Q3'' for CY 2009. We are proposing
that HCPCS code G0378 would continue to be always packaged by assigning
the HCPCS code status indicator ``N,'' its current status indicator
under the CY 2008 OPPS.
We are also proposing that the payment policy for separate payment
of HCPCS code G0379 that was finalized for the CY 2008 OPPS (72 FR
66814 through 66815) would continue to apply for CY 2009 when the
criteria for payment of this service through composite APC 8002 are not
met. The criteria for payment of HCPCS code G0379 under either
composite APC 8002, as part of the extended assessment and management
composite service or APC 0604, as a separately payable individual
service are: (1) both HCPCS codes G0378 and G0379 are reported with the
same date of service; and (2) no service with a status indicator of
``T'' or ``V'' or Critical Care (APC 0617) is provided on the same date
of service as HCPCS code G0379. If either of the above criteria is not
met, HCPCS code G0379 is assigned status indicator ``N'' and its
payment is packaged into the payment for other separately payable
services provided in the same encounter.
In summary, for CY 2009, we are proposing to continue the extended
assessment and management composite APC payment methodology and the
general reporting requirements for observation services reported with
HCPCS code G0378. We are proposing to base the CY 2009 OPPS payment for
composite APC 8002 on a median cost of $364 and to base the payment for
composite APC 8003 on a median cost of $670. For CY 2009, we are also
proposing to add HCPCS code G0384 to the eligibility criteria for
payment of composite APC 8003. Furthermore, we are proposing to assign
status indicator ``Q3'' to each of the visit codes that may be paid
through the Level I and Level II extended assessment and management
composite APCs.

[[Page 41445]]

(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
LDR prostate brachytherapy is a treatment for prostate cancer in
which needles or catheters are inserted into the prostate, followed by
permanent implantation of radioactive sources into the prostate through
the hollow needles or catheters. At least two CPT codes are used to
report the composite treatment service because there are separate codes
that describe placement of the needles/catheters and the application of
the brachytherapy sources: CPT code 55875 (Transperineal placement of
needles or catheters into prostate for interstitial radioelement
application, with or without cystoscopy) and CPT code 77778
(Interstitial radiation source application; complex). Generally, the
component services represented by both codes are provided in the same
operative session in the same hospital on the same date of service to
the Medicare beneficiary treated with LDR brachytherapy for prostate
cancer. As discussed in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66653), OPPS payment rates for CPT code 77778, in
particular, have fluctuated over the years. We were frequently informed
by the public that reliance on single procedure claims to set the
median costs for these services resulted in use of only incorrectly
coded claims for LDR prostate brachytherapy because a correctly coded
claim should include, for the same date of service, CPT codes for both
needle/catheter placement and application of radiation sources, as well
as separately coded imaging and radiation therapy planning services
(that is, a multiple procedure claim).
In order to base payment on claims for the most common clinical
scenario, and to contribute to our goal of providing payment under the
OPPS for a larger bundle of component services provided in a single
hospital encounter, beginning in CY 2008 we provide a single payment
for LDR prostate brachytherapy when the composite service, billed as
CPT codes 55875 and 77778, is furnished in a single hospital encounter.
We base the payment for composite APC 8001 (LDR Prostate Brachytherapy
Composite) on the median cost derived from claims for the same date of
service that contain both CPT codes 55875 and 77778 and that do not
contain other separately paid codes that are not on the bypass list. In
uncommon occurrences in which the services are billed individually,
hospitals continue to receive separate payments for the individual
services. We refer readers to the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66652 through 66655) for a full history of OPPS
payment for LDR prostate brachytherapy and a detailed description of
how we developed the LDR prostate brachytherapy composite APC.
For CY 2009, we are proposing to continue paying for LDR prostate
brachytherapy services using the composite APC methodology proposed and
implemented for CY 2008. That is, we are proposing to use CY 2007
claims on which both CPT codes 55875 and 77778 were billed on the same
date of service with no other separately paid procedure codes (other
than those on the bypass list) to calculate the payment rate for
composite APC 8001. Consistent with our CY 2008 practice, we would not
use the claims that meet these criteria in the calculation of the
median costs for APCs 0163 (Level IV Cystourethroscopy and Other
Genitourinary Procedures) and 0313 (Brachytherapy) to which HCPCS codes
55875 and 77778 are assigned respectively; median costs for APCs 0163
and 0313 would continue to be calculated using single procedure claims.
As discussed in section XIII.A.1. of this proposed rule, we also are
proposing to use new status indicator ``Q3'' (Codes that May be Paid
Through a Composite APC), to denote HCPCS codes such as CPT codes 55875
and 77778 that may be paid through a composite APC for publication and
payment purposes for CY 2009, rather than status indicator ``Q'' that
is being used in CY 2008. We are proposing the status indicator change
to facilitate identification of HCPCS codes that may be paid through
composite APCs and to facilitate development of the composite APC
median costs.
We continue to believe that this composite APC contributes to our
goal of creating hospital incentives for efficiency and cost
containment, while providing hospitals with the most flexibility to
manage their resources. We also continue to believe that data from
claims reporting both services required for LDR prostate brachytherapy
provide the most accurate median cost upon which to base the composite
APC payment rate.
Using partial year CY 2007 claims data available for the CY 2009
proposed rule, we were able to use 6,897 claims that contained both CPT
code 77778 and 55875 to calculate the median cost upon which the CY
2009 proposed payment for composite APC 8001 is based. The proposed
median cost for composite APC 8001 for CY 2009 is approximately $3,509.
This is an increase compared to the CY 2008 OPPS/ASC final rule with
comment period in which we calculated a final median cost for this
composite APC of approximately $3,391 based on a full year of CY 2006
claims data. The CY 2009 proposed composite APC median is slightly less
than $3,581, the sum of the proposed median costs for APCs 0163 (Level
IV Cystourethroscopy and other Genitourinary Procedures) and 0651
(Complex Interstitial Radiation Source Application) ($2,388 + $1,193),
the APCs to which CPT codes 77778 and 55875 map if one service is
billed on a claim without the other. We believe that the proposed
median cost for composite APC 8001 of approximately $3,509, which is
calculated from claims we believe to be correctly coded, would result
in a reasonable and appropriate payment rate for this service in CY
2009.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC
(APC 8000)
Cardiac electrophysiologic evaluation and ablation services
frequently are performed in varying combinations with one another
during a single episode of care in the HOPD. Therefore, correctly coded
claims for these services often include multiple codes for component
services that are reported with different CPT codes and that, prior to
CY 2008, were always paid separately through different APCs
(specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC
0086 (Ablate Heart Dysrhythm Focus), and APC 0087 (Cardiac
Electrophysiologic Recording/Mapping)). As a result, there would never
be many single bills for cardiac electrophysiologic evaluation and
ablation services, and those that are reported as single bills would
often represent atypical cases or incorrectly coded claims. As
described in the CY 2008 OPPS/ASC final rule with comment period (72 FR
66655 through 66659), the APC Panel and the public expressed persistent
concerns regarding the limited and reportedly unrepresentative single
bills available for use in calculating the median cost for these
services according to our standard OPPS methodology.
Effective January 1, 2008, we established APC 8000 (Cardiac
Electrophysiologic Evaluation and Ablation Composite) to pay for a
composite service made up of at least one specified electrophysiologic
evaluation service and one electrophysiologic ablation service.
Calculating a composite APC for these services allowed us to utilize
many more claims than were available to establish the individual APC
median

[[Page 41446]]

costs for these services, and we also saw this composite APC as an
opportunity to advance our stated goal of promoting hospital efficiency
through larger payment bundles. In order to calculate the median cost
upon which the payment rate for composite APC 8000 is based, we used
multiple procedure claims that contained at least one CPT code from
group A for evaluation services and at least one CPT code from group B
for ablation services reported on the same date of service on an
individual claim. We refer readers to Table 6 for identification of the
CPT codes that are assigned to groups A and B. For a full discussion of
how we identified the group A and group B procedures and established
the CY 2008 payment rate for the cardiac electrophysiologic evaluation
and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66655 through 66659). 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, payments are made under the appropriate single procedure
APCs and the composite APC does not apply.
For CY 2009, we are proposing to continue paying for cardiac
electrophysiologic evaluation and ablation services using the composite
APC methodology established for CY 2008. Consistent with our CY 2008
practice, we would not use the claims that meet these criteria in the
calculation of the median costs for APCs 0085 (Level II
Electrophysiologic Procedures) and 0086 (Level III Electrophysiologic
Procedures), to which the HCPCS codes in both groups A and B for
composite APC 8000 are otherwise assigned. Median costs for APCs 0085
and 0086 would continue to be calculated using single procedure claims.
As discussed in section XIII.A.1. of this proposed rule, we also are
proposing to use new status indicator ``Q3'' (Codes that May be Paid
Through a Composite APC) to denote HCPCS codes such as the cardiac
electrophysiologic evaluation and ablation CPT codes that may be paid
through a composite APC for publication and payment purposes for CY
2009, rather than the status indicator ``Q'' that is being used in CY
2008. We continue to believe that the 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. Further, 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.
Using partial year CY 2007 claims data available for this proposed
rule, we were able to use 5,603 claims containing a combination of
group A and group B codes and calculated a proposed median cost of
approximately $9,174 for composite APC 8000. This is an increase
compared to the CY 2008 OPPS/ASC final rule with comment period in
which we calculated a final median cost for this composite APC of
approximately $8,438 based on a full year of CY 2006 claims data. We
believe that the proposed median cost of $9,174 calculated from a high
volume of correctly coded multiple procedure claims results in an
accurate and appropriate proposed payment for cardiac
electrophysiologic evaluation and ablation services when at least one
evaluation service is furnished during the same clinical encounter as
at least one ablation service. Table 6 below lists the groups of
procedures upon which we are proposing to base composite APC 8000 for
CY 2009.

Table 6.--Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which We Base Composite
APC 8000
----------------------------------------------------------------------------------------------------------------
Proposed
Codes used in combinations: At least one in HCPCS code single code Proposed CY 2009 SI (composite)
Group A and one in Group B CY 2009 APC
----------------------------------------------------------------------------------------------------------------
Group A
Electrophysiology evaluation............... 93619 0085 Q3
Electrophysiology evaluation............... 93620 0085 Q3
Group B
Ablate heart dysrhythm focus............... 93650 0085 Q3
Ablate heart dysrhythm focus............... 93651 0086 Q3
Ablate heart dysrhythm focus............... 93652 0086 Q3
----------------------------------------------------------------------------------------------------------------

(4) Mental Health Services Composite APC (APC 0034)
For the CY 2009 OPPS, we are proposing to continue our longstanding
policy of limiting 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 consider to be the most
resource intensive of all outpatient mental health treatment. We refer
readers to the April 7, 2000 OPPS final rule with comment period (65 FR
18455) for the initial discussion of this longstanding policy. We
continue to believe that 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 than the partial hospitalization per diem payment.
For CY 2009, as discussed further in section X.B. of this proposed
rule, we are proposing to create two new APCs, 0172 (Level I Partial
Hospitalization (3 services)) and 0173 (Level II Partial
Hospitalization (4 or more services)), to replace APC 0033 (Partial
Hospitalization), which we are proposing to delete for CY 2009. In
summary, when a community mental health center (CMHC) or hospital
provides three units of partial hospitalization services and meets all
other partial hospitalization payment criteria, the CMHC or hospital
would be paid through APC 0172. When the CMHC or hospital provides four
or more units of partial hospitalization services and meets all other
partial hospitalization payment criteria, the hospital would be paid
through APC 0173. For CY 2009, we are proposing to set the payment rate
for mental health composite APC 0034 at the same rate as APC 0173,
which is the maximum partial hospitalization per diem payment. We
believe this APC payment

[[Page 41447]]

rate would provide the most appropriate payment for composite APC 0034,
taking into consideration the intensity of the mental health services
and the differences in the HCPCS codes for mental health services that
could be paid through this composite APC compared with the HCPCS codes
that could be paid through partial hospitalization APC 0173. Through
the I/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 maximum per diem partial hospitalization
payment [listed as APC 0173 (Level II Partial Hospitalization (4 or
more services))], those specified mental health services would be
assigned to APC 0034 (Mental Health Services Composite), which has the
same payment rate as APC 0173, and the hospital would be paid one unit
of APC 0034. In the CY 2008 OPPS/ASC final rule with comment period (72
FR 66651), we clarified that this longstanding policy regarding payment
of APC 0034 for combinations of independent mental health services
provided in a single hospital encounter resembles the payment policy
for composite APCs that we finalized for LDR prostate brachytherapy and
cardiac electrophysiologic evaluation and ablation services for CY
2008. Similar to the logic for those two composite APCs, the I/OCE
currently determines, and we are proposing for CY 2009 that it would
continue to determine, whether to pay these specified mental health
services individually or to make a single payment at the same rate as
the APC 0173 per diem rate for partial hospitalization for all of the
specified mental health services furnished on that date of service.
However, we note that this established policy for payment of APC 0034
differs from the payment policies for the LDR prostate brachytherapy
and cardiac electrophysiologic evaluation and ablation 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.
For CY 2008 (72 FR 66651), we changed the status indicator to ``Q''
for the HCPCS codes that describe 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. For CY 2009, we are proposing to change the status
indicator from ``Q'' (Packaged Services Subject to Separate Payment
under OPPS Payment Criteria) to ``Q3,'' (Codes that May be Paid Through
a Composite APC), for those HCPCS codes that describe the specified
mental health services to which APC 0034 applies. This is consistent
with our proposal to change the status indicator from ``Q'' to ``Q3''
for all HCPCS codes that may be paid through composite APCs, in order
to further refine our identification of the different types of
conditionally packaged HCPCS codes that were previously all assigned
the same status indicator ``Q'' under the OPPS. We are proposing to
apply this status indicator policy to the HCPCS codes that are assigned
to composite APC 0034 in Addendum M to this proposed rule. We are also
proposing to change the status indicator from ``P'' (Partial
Hospitalization) to ``S'' (Significant Procedure, Not Discounted when
Multiple), for APC 0034. Although APC 0034 has been historically
assigned status indicator ``P'' under the OPPS, this APC provides
payment for mental health services that are furnished in an HOPD
outside of a partial hospitalization program. This proposed status
indicator change should have no practical implications for hospitals
from a billing or payment perspective. Rather, we believe that it is
more appropriate to assign status indicator ``S'' to an APC that
describes mental health services that are provided outside of a partial
hospitalization program. We refer readers to section XIII.A. of this
proposed rule for a complete discussion of status indicators and our
proposed status indicator changes for CY 2009.
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 0173. However, we are proposing to change the status
indicator to ``Q3'' for the HCPCS codes for the mental health services
to which this policy applies, consistent with our belief that payment
for these services should be packaged into a single payment made at the
same rate as a day of partial hospitalization unless the sum of the
individual payments for these codes would be less than the payment for
composite APC 0034.
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and
8008)
Under current OPPS policy, hospitals receive a full APC payment for
each imaging service on a claim, regardless of how many procedures are
performed during a single session using the same imaging modality or
whether the procedures are performed on contiguous body areas. In
response to a 2005 MedPAC recommendation to reduce the technical
component payment for multiple imaging services performed on contiguous
body areas, CMS proposed a payment reduction policy for multiple
imaging procedures performed on contiguous body areas in both the CY
2006 MPFS proposed rule (70 FR 45849 through 45851) and the CY 2006
OPPS proposed rule (70 FR 42748 through 42751). In the March 2005
MedPAC report entitled, ``Report to the Congress: Medicare Payment
Policy,'' MedPAC concluded that Medicare's physician's office payment
rates for imaging services were based on each service being provided
independently and that the rates did not account for efficiencies that
may be gained when multiple studies using the same imaging modality are
performed in the same session. In both the CY 2006 MPFS proposed rule
(70 FR 45849) and the CY 2006 OPPS proposed rule (70 FR 42751), we
suggested that although each imaging procedure entails the use of
hospital resources, including certain staff, equipment, and supplies,
some of those resource costs are not incurred twice when the procedures
are performed in the same session and thus, should not be paid as if
they were incurred twice. Specifically, for CY 2006, for both the MPFS
and the OPPS, we proposed to apply a 50-percent reduction in the
payment for certain second and subsequent imaging procedures performed
during the same session, similar to the longstanding OPPS policy of
reducing payments for certain second and subsequent surgical procedures
performed during the same operative session. We developed the 50-
percent reduction estimate using MPFS input data to estimate the
practice expense resources associated with equipment time and indirect
costs that would not occur for the second and subsequent procedures. We
proposed that the reduction would apply only to individual services
within 11 designated imaging families, which were comprised of
procedures utilizing similar modalities across contiguous body areas
and developed based on MPFS billing data. The imaging modalities
included in the proposal

[[Page 41448]]

were ultrasound, computed tomography (CT), computed tomographic
angiography (CTA), magnetic resonance imaging (MRI), and magnetic
resonance angiography (MRA). Prior to making the proposal for the OPPS,
we confirmed that the CY 2004 OPPS claims for the CY 2006 OPPS update
demonstrated comparable clustering of imaging procedures by modality
and within family. The OPPS and MPFS imaging services provided across
families would not be subject to the reduction policy as proposed for
CY 2006. The proposed 11 families of imaging services were as follows:
Ultrasound (Chest/Abdomen/Pelvis-Non-Obstetrical)
CT and CTA (Chest/Thorax/Abd/Pelvis)
CT and CTA (Head/Brain/Orbit/Maxillofacial/Neck)
MRI and MRA (Chest/Abd/Pelvis)
MRI and MRA (Head/Brain/Neck)
MRI and MRA (Spine)
CT (Spine)
MRI and MRA (Lower Extremities)
CT and CTA (Lower Extremities)
MR and MRI (Upper Extremities and Joints)
CT and CTA (Upper Extremities)
In response to the multiple imaging payment reduction policy
proposed for the CY 2006 OPPS (70 FR 68707 through 68708), several
commenters requested that we postpone implementation until we performed
further analyses and were able to find more substantial, hospital-based
data to support the 50-percent payment reduction rather than base the
policy on MPFS data. Commenters argued that, unlike a relative value
unit (RVU) estimate of the total resources associated with a single
service for the MPFS, the OPPS cost-based methodology already
incorporates the efficiencies of performing multiple procedures during
the same session and that median cost estimates for single procedures
reflect these savings. Specifically, an imaging CCR consists of the
labor and allocated capital and overhead costs for all imaging provided
in a department specified by each hospital on its cost report, divided
by the total charges for all imaging services provided. In short,
commenters stated that because the OPPS cost estimates used for setting
the OPPS payment rates for imaging services already reflect costs for a
department in general, the CCR used to adjust charges to costs
currently incorporated savings from the imaging efficiencies associated
with multiple procedures provided in a single session. By applying this
CCR to every charge on a claim, commenters noted that CMS averages
multiple imaging efficiencies for all imaging services across all
service costs estimated with the departmental CCR. At its August 2005
meeting, the APC Panel heard this and other arguments and recommended
that CMS postpone implementation of the policy for a year in order to
gather more data on the impact of the proposed changes.
In the CY 2006 OPPS final rule with comment period (70 FR 68516),
we acknowledged that, based on our analysis of how hospitals report
charges and costs for diagnostic radiology services, it may be correct
that the median costs from hospital claims data for the imaging
services in the 11 families proposed for the reduction policy already
reflect reduced median costs based, in part, on hospitals' provision of
multiple imaging services in a single session. However, we expressed
concern that the marginal effect of imaging efficiencies on a given CCR
may be negligible, thereby underestimating the impact of multiple
imaging efficiencies, especially where hospitals reported all
diagnostic radiology services in one cost center and did not split the
costs and charges for advanced imaging with CT, MRI, or ultrasound into
separate cost centers. Because efficiencies are inherent in our cost
methodology, our analysis did not provide a definitive answer regarding
how much, on average, the OPPS median costs for single imaging services
in the 11 families are reduced due to existing hospital efficiencies
related to multiple services provided in a single session. Accordingly,
we did not implement a multiple imaging payment reduction policy for
the OPPS in CY 2006 (a modified MPFS multiple imaging payment reduction
policy was implemented with a 25-percent reduction policy for certain
second and subsequent imaging services for CY 2006, and that same
reduction policy currently remains in effect under the MPFS). In the CY
2006 OPPS final rule with comment period (70 FR 68707 through 68708),
we stated that, depending upon the results of future analyses, we might
revisit this issue and propose revisions to the structure of our
payment rates for imaging procedures in order to ensure that those
rates properly reflect the relative costs of initial and subsequent
imaging procedures. Since publication of the CY 2006 OPPS final rule
with comment period, MedPAC has encouraged us to continue our analyses
in order to improve payment accuracy for imaging services under the
OPPS, including considering adopting a multiple procedure payment
reduction policy.
In preparation for the CY 2009 OPPS proposed rule, we revisited the
issue of how we could improve the accuracy of OPPS payment for multiple
imaging services and incorporate the lower marginal cost for conducting
second and subsequent imaging procedures in the same imaging session.
As already noted, for CY 2008, we developed a composite APC methodology
to provide a single payment for two or more major independent services
that are typically performed together during a single operative session
and that result in the provision of a complete service (72 FR 66650
through 66652). The composite APCs for LDR prostate brachytherapy
services and cardiac electrophysiologic evaluation and ablation
services discussed in sections II.A.2.e.(2) and (3), respectively, of
this proposed rule are classic examples. Providing one payment for an
entire session encourages hospitals to closely evaluate the resources
they use for all components of the composite service in order to
improve their payment relative to the costs of performing the composite
service. We decided to explore capturing efficiencies for multiple
imaging procedures through a composite APC payment methodology when a
hospital provides more than one imaging procedure using the same
modality during a single session.
We began by reexamining the 11 imaging families of HCPCS codes for
contiguous body areas involving a single imaging modality that we had
proposed for CY 2006 and that are currently in use under the MPFS for
the multiple imaging procedure payment reduction policy. We based this
code-specific analysis on the HCPCS codes recognized under the OPPS for
the same services that are included in the 11 CY 2008 MPFS imaging
families, and in addition, we incorporated the 10 HCPCS codes that are
proposed for inclusion in these 11 families for the CY 2009 MPFS. We
collapsed the 11 MPFS imaging families into 3 OPPS imaging families
according to their modality--1 for ultrasound, 1 for CT and CTA, and 1
for MRI and MRA services. These larger OPPS imaging families generally
correspond to the larger APC groups of services paid under OPPS
relative to the service-specific payment under the MPFS. We believe
that these larger OPPS imaging families are appropriate because
eliminating the contiguous body area concept that is central to the
MPFS imaging families should not significantly limit potential
efficiencies in an imaging session. For example, we would not expect
second and subsequent imaging services of the same modality involving
noncontiguous body areas to require duplicate facility

[[Page 41449]]

services such as greeting the patient, providing education and
obtaining consent, retrieving prior exams, setting up an intravenous
infusion, and preparing and cleaning the room, any more than second and
subsequent imaging procedures of the same modality on contiguous body
areas. The contiguous body area concept was a component of MedPAC's
recommendation for reducing physician payment, but we believe it is
less appropriate for a single, session-based OPPS composite imaging
payment. In addition, using these collapsed OPPS families would add
only 12 percent additional claims to those eligible for composite
payment relative to using the 11 MPFS imaging families, suggesting that
under the OPPS, multiple imaging claims are within the same imaging
modality and involve contiguous body areas the vast majority of the
time. Nevertheless, the three OPPS imaging families would allow us to
capture additional claims for payment under an imaging composite
payment methodology.
Another unique aspect of imaging services for OPPS ratesetting, in
general, is their inclusion on our bypass list and contribution to
creating ``pseudo'' single claims, particularly those services that are
specifically performed without the administration of contrast. Our
creation of ``pseudo'' single claims from multiple procedure claims is
discussed in section II.A.1.b. of this proposed rule. In beginning to
model these potential multiple imaging composite APCs, we noted that
there would be overlap between the bypass list and noncontrast imaging
HCPCS codes that are included in the three OPPS imaging families. The
bypass process removes any line-item for a bypass HCPCS code,
irrespective of units, from multiple procedure claims. The line-item
information is used to make at least one ``pseudo'' single bill and the
line-items remaining on the claim are split by date and reassessed for
single bill status. To model the median costs for the potential
multiple imaging composite APCs, we removed any HCPCS codes in the OPPS
imaging families that overlap with codes on our bypass list to avoid
splitting claims with multiple units or multiple occurrences of codes
in an OPPS imaging family into new ``pseudo'' single claims. The
imaging HCPCS codes that we removed from the bypass list for purposes
of calculating proposed multiple imaging composite APC median costs
appear in Table 7 below. (We refer readers to section II.A.1.b. of this
proposed rule for further discussion of how we treat claims with HCPCS
codes in the OPPS imaging families that are also on the bypass list.)
We integrated the identification of imaging composite ``single
session'' claims, that is, claims with multiple imaging procedures
within the same family on the same date of service, into the creation
of ``pseudo'' single claims to ensure that claims were split in the
``pseudo'' single process into accurate reflections of either a
composite ``single session'' imaging service or a standard sole imaging
service resource cost. Like all single bills, the new composite
``single session'' claims were for the same date of service and
contained no other separately paid services in order to isolate the
session imaging costs. Our last step after processing all claims
through the ``pseudo'' single process was to make line-items for HCPCS
codes in the OPPS imaging families remaining on multiple procedure
claims with one unit of the imaging HCPCS code and no other imaging
services in the families into ``pseudo'' single bills for use in
calculating the median costs for sole imaging services.

Table 7.--Proposed OPPS Imaging Family Services Overlapping With HCPCS
Codes on the Proposed CY 2009 Bypass List
------------------------------------------------------------------------

------------------------------------------------------------------------
Family 1--Ultrasound
------------------------------------------------------------------------
76700..................................... Us exam, abdom, complete.
76705..................................... Echo exam of abdomen.
76770..................................... Us exam abdo back wall,
comp.
76775..................................... Us exam abdo back wall, lim.
------------------------------------------------------------------------
Family 1--Ultrasound
------------------------------------------------------------------------
76776..................................... Us exam k transpl w/doppler.
76856..................................... Us exam, pelvic, complete.
76870..................................... Us exam, scrotum.
76857..................................... Us exam, pelvic, limited.
------------------------------------------------------------------------
Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
70450..................................... Ct head/brain w/o dye.
70480..................................... Ct orbit/ear/fossa w/o dye.
70486..................................... Ct maxillofacial w/o dye.
70490..................................... Ct soft tissue neck w/o dye.
71250..................................... Ct thorax w/o dye.
72125..................................... Ct neck spine w/o dye.
72128..................................... Ct chest spine w/o dye.
72131..................................... Ct lumbar spine w/o dye.
72192..................................... Ct pelvis w/o dye.
73200..................................... Ct upper extremity w/o dye.
73700..................................... Ct lower extremity w/o dye.
74150..................................... Ct abdomen w/o dye.
------------------------------------------------------------------------
Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
70336..................................... Magnetic image, jaw joint.
70544..................................... Mr angiography head w/o dye.
70551..................................... Mri brain w/o dye.
72141..................................... Mri neck spine w/o dye.
72146..................................... Mri chest spine w/o dye.
72148..................................... Mri lumbar spine w/o dye.
73218..................................... Mri upper extremity w/o dye.
------------------------------------------------------------------------
Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
73221..................................... Mri joint upr extrem w/o
dye.
------------------------------------------------------------------------
Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
73718..................................... Mri lower extremity w/o dye.
73721..................................... Mri jnt of lwr extre w/o
dye.
------------------------------------------------------------------------

One final requirement of our assessment of multiple imaging
composite APCs was our expansion of the OPPS families for the three
modalities--ultrasound, CT and CTA, and MRI and MRA--into five
composite APCs to accommodate the statutory requirement in section
1833(t)(2)(G) of the Act, that the OPPS provide payment for imaging
services provided with contrast and without contrast through separate
payment groups. Ultrasound studies do not utilize contrast and thus
this family constituted a single composite APC. However, we had to
split the families for CT and CTA, and MRI and MRA, into two separate
composite APCs each to reflect whether the procedures were performed
with or without contrast. We examined the HCPCS codes on our ``single
session'' claims, and if the claim had at least one HCPCS code that was
performed with contrast, we classified the ``single session'' bill as
``with contrast.'' We then recalculated the median costs for the
standard (sole service) imaging APCs based on single and ``pseudo''
single bills and the imaging composite APC median costs based on
appropriate ``single session'' bills with multiple imaging procedures.
We were able to identify 1.7 million ``single session'' claims out
of an estimated 4 million potential composite cases from our
ratesetting claims database, or almost half of all eligible claims, to
calculate median costs for the 5 OPPS multiple imaging composite APCs.
We used 8 million single and ``pseudo'' single claims to set the
medians for the standard (sole service) APCs for the same imaging
procedures. We specifically note that the proposed CY 2009 payment
rates for multiple imaging services provided during the same session
and within the same OPPS

[[Page 41450]]

imaging family are based entirely on median costs derived empirically
from OPPS claims and Medicare cost report data.
In general, we found that the per service median cost for each of
the multiple imaging procedures performed during a single session, and
reflected in the composite APC median costs, was modestly less than the
sole service median cost when only one imaging service was performed
during a single session, as reflected in the median cost of the
standard (sole service) imaging APCs (that is, those imaging services
that would not have qualified for payment through a multiple imaging
composite APC under the proposed composite methodology). However, we
also noticed that the proposed CY 2009 median costs for the standard
(sole service) imaging APCs increased slightly compared to the median
costs that we would calculate using the current OPPS imaging service
payment policy. These variations in median costs are consistent with
our expectations. Because the OPPS cost-based payment weight
methodology estimates a standard cost per imaging procedure for each
hospital, these results suggest that the imaging composite ``single
session'' claims disproportionately represent services furnished by
more efficient providers that frequently perform more than one imaging
procedure during a single session. The lower cost claims also may
include more providers that appropriately report costs and charges for
nonstandard cost centers for advanced imaging on their cost reports.
In light of these findings, we determined that a proposal to revise
our methodology for paying for multiple imaging procedures is warranted
because the current OPPS policy of providing a full APC payment for
each imaging service on a claim, regardless of how many procedures are
performed during a single session using the same imaging modality,
neither reflects nor promotes the efficiencies hospitals can achieve
when they perform multiple imaging procedures during a single session,
as seen in the claims data.
Therefore, we are proposing to utilize the three OPPS imaging
families discussed above, incorporating statutory requirements to
differentiate OPPS payment for imaging services provided with contrast
and without contrast as required by section 1833(t)(2)(G) of the Act,
to create five multiple imaging composite APCs for payment in CY 2009.
The proposed APCs are: APC 8004 (Ultrasound Composite); APC 8005 (CT
and CTA without Contrast Composite); APC 8006 ( CT and CTA with
Contrast Composite); APC 8007 (MRI and MRA without Contrast Composite);
and APC 8008 (MRI and MRA with Contrast Composite). We calculated the
proposed median costs for these APCs using CY 2007 claims data by
isolating ``single session'' claims with more than one imaging service
within a family as discussed above. Unlike our CY 2006 proposal where
we would have applied a 50-percent payment reduction for second and
subsequent imaging procedures comparable to the proposed MPFS policy,
the CY 2009 OPPS proposal would calculate the composite APC payment
amounts empirically from estimated costs on claims for multiple imaging
services provided in a single session. This proposed composite
methodology for multiple imaging services parallels the payment
methodologies that we are proposing for other composite APCs under the
CY 2009 OPPS.
Table 8 below presents the HCPCS codes comprising the three OPPS
imaging families and five composite APCs that would be created under
this proposal for CY 2009, along with the proposed median costs upon
which the payment rates for these composite APCs would be based. The
HCPCS codes included in Table 8 are assigned status indicator ``Q3'' in
Addendum B to this proposed rule to identify their status as
potentially payable through a composite APC. Their composite APC
assignments are identified in Addendum M to this proposed rule.
To implement this proposed policy, we would provide one composite
APC payment each time a hospital bills more than one procedure
described by the HCPCS codes in one OPPS imaging family displayed in
Table 8 below on a single date of service. If the hospital performs a
procedure without contrast during the same session as at least one
other procedure with contrast using the same imaging modality, then the
hospital would receive payment for the ``with contrast'' composite APC.
A single imaging procedure, or imaging procedures reported with HCPCS
codes assigned to different OPPS imaging families, would be paid
according to the standard OPPS methodology through the standard (sole
service) imaging APCs to which they are proposed for assignment in CY
2009. We are proposing that hospitals would continue to use the same
HCPCS codes to report imaging services, and that the I/OCE would
determine when combinations of imaging procedures would qualify for
composite APC payment or would map to standard APCs for payment. We
would make a single payment for those imaging services that qualify for
composite APC payment, as well as the packaged services furnished on
the same date of service. The proposed composite APCs would have status
indicators of ``S,'' signifying that payment for the APC would not be
reduced when appearing on the same claim with other significant
procedures.

Table 8.--Proposed OPPS Imaging Families and Multiple Imaging Procedure
Composite APCs
------------------------------------------------------------------------

------------------------------------------------------------------------
Family 1--Ultrasound
------------------------------------------------------------------------
APC 8004 (Ultrasound Composite) Proposed CY 2009 Median Cost
= $194.14
------------------------------------------------------------------------
76604..................................... Us exam, chest.
76700..................................... Us exam, abdom, complete.
76705..................................... Echo exam of abdomen.
76770..................................... Us exam abdo back wall,
comp.
76775..................................... Us exam abdo back wall, lim.
76776..................................... Us exam k transpl w/Doppler.
76831..................................... Echo exam, uterus.
76856..................................... Us exam, pelvic, complete.
76870..................................... Us exam, scrotum.
76857..................................... Us exam, pelvic, limited.
------------------------------------------------------------------------
Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
APC 8005 (CT and CTA without Contrast Proposed CY 2009 Median Cost
Composite) * = $422.98
------------------------------------------------------------------------
0067T..................................... Ct colonography;dx.
70450..................................... Ct head/brain w/o dye.
70480..................................... Ct orbit/ear/fossa w/o dye.
70486..................................... Ct maxillofacial w/o dye.
70490..................................... Ct soft tissue neck w/o dye.
71250..................................... Ct thorax w/o dye.
72125..................................... Ct neck spine w/o dye.
------------------------------------------------------------------------
Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
APC 8005 (CT and CTA without Contrast Proposed CY 2009 Median Cost
Composite) * = $422.98
------------------------------------------------------------------------
72128..................................... Ct chest spine w/o dye.
72131..................................... Ct lumbar spine w/o dye.
72192..................................... Ct pelvis w/o dye.
73200..................................... Ct upper extremity w/o dye.
73700..................................... Ct lower extremity w/o dye.
74150..................................... Ct abdomen w/o dye.
------------------------------------------------------------------------
APC 8006 (CT and CTA with Contrast Proposed CY 2009 Median Cost
Composite) = $639.09
------------------------------------------------------------------------
70487..................................... Ct maxillofacial w/dye.
70460..................................... Ct head/brain w/dye.

[[Page 41451]]

70470..................................... Ct head/brain w/o & w/dye.
70481..................................... Ct orbit/ear/fossa w/dye.
70482..................................... Ct orbit/ear/fossa w/o&w/
dye.
70488..................................... Ct maxillofacial w/o & w/
dye.
70491..................................... Ct soft tissue neck w/dye.
70492..................................... Ct sft tsue nck w/o & w/dye.
70496..................................... Ct angiography, head.
70498..................................... Ct angiography, neck.
71260..................................... Ct thorax w/dye.
71270..................................... Ct thorax w/o & w/dye.
71275..................................... Ct angiography, chest.
72126..................................... Ct neck spine w/dye.
72127..................................... Ct neck spine w/o & w/dye.
72129..................................... Ct chest spine w/dye.
72130..................................... Ct chest spine w/o & w/dye.
72132..................................... Ct lumbar spine w/dye.
72133..................................... Ct lumbar spine w/o & w/dye.
72191..................................... Ct angiograph pelv w/o&w/
dye.
72193..................................... Ct pelvis w/dye.
72194..................................... Ct pelvis w/o & w/dye.
73201..................................... Ct upper extremity w/dye.
73202..................................... Ct uppr extremity w/o&w/dye.
73206..................................... Ct angio upr extrm w/o&w/
dye.
------------------------------------------------------------------------
Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
APC 8006 (CT and CTA with Contrast Proposed CY 2009 Median Cost
Composite) = $639.09
------------------------------------------------------------------------
73701..................................... Ct lower extremity w/dye.
73702..................................... Ct lwr extremity w/o&w/dye.
73706..................................... Ct angio lwr extr w/o&w/dye.
74160..................................... Ct abdomen w/dye.
74170..................................... Ct abdomen w/o & w/dye.
74175..................................... Ct angio abdom w/o & w/dye.
75635..................................... Ct angio abdominal arteries.
* If a ``without contrast'' CT or CTA procedure is performed during the
same session as a ``with contrast'' CT or CTA procedure, the I/OCE will
assign APC 8006 rather than APC 8005.
------------------------------------------------------------------------
Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
APC 8007 (MRI and MRA without Contrast Proposed CY 2009 Median Cost
Composite) * = $724.66
------------------------------------------------------------------------
70336..................................... Magnetic image, jaw joint.
70540..................................... Mri orbit/face/neck w/o dye.
70544..................................... Mr angiography head w/o dye.
70547..................................... Mr angiography neck w/o dye.
70551..................................... Mri brain w/o dye.
70554..................................... Fmri brain by tech.
71550..................................... Mri chest w/o dye.
72141..................................... Mri neck spine w/o dye.
72146..................................... Mri chest spine w/o dye.
72148..................................... Mri lumbar spine w/o dye.
72195..................................... Mri pelvis w/o dye.
73218..................................... Mri upper extremity w/o dye.
73221..................................... Mri joint upr extrem w/o
dye.
73718..................................... Mri lower extremity w/o dye.
73721..................................... Mri jnt of lwr extre w/o
dye.
74181..................................... Mri abdomen w/o dye.
75557..................................... Cardiac mri for morph.
75559..................................... Cardiac mri w/stress img.
C8901..................................... MRA w/o cont, abd.
------------------------------------------------------------------------
Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
APC 8007 (MRI and MRA without Contrast Proposed CY 2009 Median Cost
Composite) * = $724.66
------------------------------------------------------------------------
C8904..................................... MRI w/o cont, breast, uni.
C8907..................................... MRI w/o cont, breast, bi.
C8910..................................... MRA w/o cont, chest.
C8913..................................... MRA w/o cont, lwr ext.
C8919..................................... MRA w/o cont, pelvis.
------------------------------------------------------------------------
APC 8008 (MRI and MRA with Contrast Proposed CY 2009 Median Cost
Composite) = $1,002.72
------------------------------------------------------------------------
70549..................................... Mr angiograph neck w/o&w/
dye.
70542..................................... Mri orbit/face/neck w/dye.
70543..................................... Mri orbt/fac/nck w/o & w/
dye.
70545..................................... Mr angiography head w/dye.
70546..................................... Mr angiograph head w/o&w/
dye.
------------------------------------------------------------------------
APC 8008 (MRI and MRA with Contrast Proposed CY 2009 Median Cost
Composite) = $1,002.72
------------------------------------------------------------------------
70548..................................... Mr angiography neck w/dye.
70552..................................... Mri brain w/dye.
70553..................................... Mri brain w/o & w/dye.
71551..................................... Mri chest w/dye.
71552..................................... Mri chest w/o & w/dye.
72142..................................... Mri neck spine w/dye.
72147..................................... Mri chest spine w/dye.
72149..................................... Mri lumbar spine w/dye.
72156..................................... Mri neck spine w/o & w/dye.
72157..................................... Mri chest spine w/o & w/dye.
72158..................................... Mri lumbar spine w/o & w/
dye.
72196..................................... Mri pelvis w/dye.
72197..................................... Mri pelvis w/o & w/dye.
73219..................................... Mri upper extremity w/dye.
73220..................................... Mri uppr extremity w/o&w/
dye.
73222..................................... Mri joint upr extrem w/dye.
73223..................................... Mri joint upr extr w/o&w/
dye.
73719..................................... Mri lower extremity w/dye.
73720..................................... Mri lwr extremity w/o&w/dye.
73722..................................... Mri joint of lwr extr w/dye.
------------------------------------------------------------------------
Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
APC 8008 (MRI and MRA with Contrast Proposed CY 2009 Median Cost
Composite) = $1,002.72
------------------------------------------------------------------------
73723..................................... Mri joint lwr extr w/o&w/
dye.
74182..................................... Mri abdomen w/dye.
74183..................................... Mri abdomen w/o & w/dye.
75561..................................... Cardiac mri for morph w/dye.
75563..................................... Card mri w/stress img & dye.
C8900..................................... MRA w/cont, abd.
C8902..................................... MRA w/o fol w/cont, abd.
C8903..................................... MRI w/cont, breast, uni.
C8905..................................... MRI w/o fol w/cont, brst,
un.
C8906..................................... MRI w/cont, breast, bi.
C8908..................................... MRI w/o fol w/cont, breast.
C8909..................................... MRA w/cont, chest.
C8911..................................... MRA w/o fol w/cont, chest.
C8912..................................... MRA w/cont, lwr ext.
C8914..................................... MRA w/o fol w/cont, lwr ext.
------------------------------------------------------------------------
APC 8008 (MRI and MRA with Contrast Proposed CY 2009 Median Cost
Composite) = $1,002.72
------------------------------------------------------------------------
C8918..................................... MRA w/cont, pelvis.
C8920..................................... MRA w/o fol w/cont, pelvis.
------------------------------------------------------------------------
* If a ``without contrast'' MRI or MRA procedure is performed during the
same session as a ``with contrast'' MRI or MRA procedure, the I/OCE
will assign APC 8008 rather than 8007.
------------------------------------------------------------------------

3. Proposed Calculation of OPPS Scaled Payment Weights
Using the APC median costs discussed in sections II.A.1. and 2. of
this proposed rule, we calculated the proposed relative payment weights
for each APC for CY 2009 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 mid-level
clinic visits were among 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 (71 FR 67990), 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 selected APC 0606 as the base because

[[Page 41452]]

APC 0606 was the middle level clinic visit APC (that is, Level 3 of
five levels). We had 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 were among the most
frequently performed services in the hospital outpatient setting.
Therefore, for CY 2009, to maintain consistency in using a median for
calculating unscaled weights representing the median cost of some of
the most frequently provided services, we are proposing to continue to
use the median cost of the mid-level clinic visit APC, proposed APC
0606, to calculate unscaled weights. Following our standard
methodology, but using the proposed CY 2009 median cost for APC 0606,
for CY 2009 we assigned APC 0606 a relative payment weight of 1.00 and
divided the median cost of each APC by the proposed 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.
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 2009 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 2008 relative weights to aggregate payments using
the CY 2009 proposed relative weights. Again 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
1.3354 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 2009 OPPS.
4. Proposed Changes to Packaged Services
a. Background
The OPPS, like other prospective payment systems, relies on the
concept of averaging, where the payment may be more or less than the
estimated costs of providing a service or package of services for a
particular patient, but with the exception of outlier cases, is
adequate to ensure access to appropriate care. Packaging and bundling
payment for multiple interrelated services into a single payment create
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 purchase price
of 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 necessary services are furnished, while carefully
scrutinizing 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 and bundling 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.
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.
Over the past several years of the OPPS, greater unpackaging of payment
has occurred simultaneously with continued growth in OPPS expenditures
as a result of increasing volumes of individual services. In an attempt
to address this increase in volume of services, in the CY 2008 OPPS/ASC
final rule with comment period, we finalized additional packaging for
the CY 2008 OPPS, which included the establishment of four new
composite APCs for CY 2008, specifically APC 8000 (Cardiac
Electrophysiologic Evaluation and Ablation Composite), APC 8001 (LDR
Prostate Brachytherapy Composite), APC 8002 (Level I Extended
Assessment & Management Composite), and APC 8003 (Level II Extended
Assessment & Management Composite) (72 FR 66650 through 66659). HCPCS
codes that may be paid through a composite APC if certain composite-
specific criteria are met or otherwise may be paid separately are
assigned status indicator ``Q'' for CY 2008, and we consider them to be
conditionally packaged. We discuss composite APCs in more detail in
section II.A.2.e. of this proposed rule.
In addition, in the CY 2008 OPPS/ASC final rule with comment
period, (72 FR 66610 through 66659), we adopted the packaging of
payment for 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. The seven categories are: Guidance services, image
processing services, intraoperative services, imaging supervision and
interpretation services, diagnostic radiopharmaceuticals, contrast
media, and observation services. 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 finalized our assignment of status
indicator ``N'' to those HCPCS codes that we believe are always
integral to the performance of the primary modality, so we always
package their costs into the costs of the separately paid primary
services with which they are billed. Services assigned status indicator
``N'' in CY 2008 are unconditionally packaged.
We also finalized our assignment of status indicator ``Q'' to those
HCPCS

[[Page 41453]]

codes that we believe are typically integral to the performance of the
primary modality and, in such cases, we package payment for their costs
into the costs of the separately paid primary services with which they
are usually billed. An ``STVX-packaged code'' describes a HCPCS code
whose payment is packaged when one or more separately paid primary
services are furnished in the hospital outpatient encounter. A ``T-
packaged code'' describes a code whose payment is packaged when one or
more separately paid surgical procedures are provided during the
hospital encounter. ``STVX-packaged codes'' and ``T-packaged codes''
are paid separately in those uncommon cases when they do not meet their
respective criteria for packaged payment. ``STVX-packaged codes'' and
``T-packaged HCPCS codes'' assigned status indicator ``Q'' in CY 2008
are conditionally packaged.
We use the term ``dependent service'' to refer to the HCPCS codes
that represent services that are typically ancillary and supportive to
a primary diagnostic or therapeutic modality. We use the term
``independent service'' to refer to the HCPCS codes that represent the
primary therapeutic or diagnostic modality into which we 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.''
An example of a CY 2008 change in the OPPS packaging status for a
dependent HCPCS code that is ancillary and supportive is CPT code 61795
(Stereotactic computer-assisted volumetric (navigational) procedure,
intracranial, extracranial, or spinal (List separately in addition to
code for primary procedure)). CPT code 61795 was assigned separate
payment in CY 2007 but its payment is packaged during CY 2008. This
service is only performed during the course of a surgical procedure.
Several of the surgical procedures that we would expect to be reported
in association with CPT code 61795 are assigned to APC 0075 (Level V
Endoscopy Upper Airway) for CY 2008. We consider the stereotactic
guidance service to be an ancillary and supportive service that may be
performed only in the same operative session as a procedure that could
otherwise be performed independently of the stereotactic guidance
service.
During its March 2008 meeting, the APC Panel recommended that CMS
report to the APC Panel at its first CY 2009 meeting the impact of
packaging on the net payments for patient care. We will take this
recommendation into consideration and determine which data we can
provide at the first CY 2009 APC Panel meeting that would best respond
to this recommendation. The APC Panel also recommended that CMS present
data at the first CY 2009 APC Panel meeting on usage and frequency,
geographic distribution, and size and type of hospitals performing
nuclear medicine examinations and using radioisotopes to ensure that
access to these services is preserved for Medicare beneficiaries. This
recommendation is discussed in more detail in section V.B.2.b. of this
proposed rule.
Hospitals include charges for packaged services on their claims,
and the costs associated with those packaged services are then added to
the costs of separately payable procedures on the same claims in
establishing payment rates for the separately payable services. We
encourage hospitals to report all HCPCS codes that describe packaged
services that were provided, unless CPT or CMS provide other guidance.
If a HCPCS code is not reported when a packaged service is provided, it
can be challenging to track utilization patterns and resource costs.
For CY 2009, we are proposing to further refine our identification
of the different types of conditionally packaged HCPCS codes that were
previously all assigned status indicator ``Q'' (Packaged Services
Subject to Separate Payment under OPPS Payment Criteria) under the
OPPS. We are proposing to create and assign status indicators ``Q1''
[bs] (``STVX-Packaged Codes''), ``Q2'' (``T-Packaged
Codes''), or ``Q3'' (Codes that may be paid through a composite APC) to
each conditionally packaged HCPCS code. We refer readers to section
XIII.A.1. of this proposed rule for a complete discussion of status
indicators and our proposed status indicator changes for CY 2009.
While most conditionally packaged HCPCS codes are assigned to only
one of the conditionally packaged categories described above, for CY
2009, we are proposing to assign one particular HCPCS code to two
conditionally packaged categories. Specifically, we are proposing to
treat CPT code 75635 (Computed tomographic angiography, abdominal aorta
and bilateral iliofemoral lower extremity runoff, with contrast
material(s), including noncontrast images, if performed, and image
postprocessing) as both a ``T-packaged code'' and a component of
composite APC 8006 (CT and CTA with Contrast Composite). We are
proposing to assign this code status indicator ``Q2'' in Addendum B and
``Q3'' in Addendum M, to signify its dual treatment. For CY 2009, we
are proposing to first assess whether CPT code 75635 would be packaged
or separately payable, based on its status as a ``T-packaged code.'' If
the service reported with CPT code 75635 would be separately payable
due to the absence of another procedure on the claim with status
indicator ``T'' for the same date of service, the code would then be
assessed in the context of any other relevant imaging services reported
on the claim for the same date of service to determine whether payment
for CPT code 75635 under composite APC 8006 would be appropriate. If
the criteria for payment of the code under composite APC 8006 are not
met, then CPT code 75635 would be separately paid based on the proposed
APC 0662 (CT Angiography) and its corresponding proposed payment rate
displayed in Addendum B to this proposed rule.
b. Service-Specific Packaging Issues
(1) Packaged Services Addressed by APC Panel Recommendations
The Packaging Subcommittee of the APC Panel was established to
review all packaged HCPCS codes. 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 in section
II.A.4.a. of this proposed rule regarding our packaging approach for CY
2008, we established packaging criteria that apply to seven categories
of codes whose payments are packaged. Four of the APC Panel's packaging
recommendations from its March 2008 meeting reference codes that are
included in the seven categories of services that we packaged for CY
2008. For these four recommendations, we specifically applied the
packaging considerations that apply to those seven categories of codes
in determining whether a code should be proposed as packaged or
separately payable for CY 2009. Specifically, we determined whether a
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 two APC Panel recommendations that do
not fit into any of the seven categories of services that were part of
the CY 2008

[[Page 41454]]

packaging approach, we applied the packaging criteria noted above that
were historically used under the OPPS. Moreover, we took into
consideration our interest in possibly expanding the size of payment
groups for component services to provide encounter-based or episode-of-
care-based payment in the future in order to encourage hospital
efficiency and provide hospitals with maximal flexibility to manage
their resources.
The Packaging Subcommittee reviewed the packaging status of
numerous HCPCS codes and reported its findings to the APC Panel at its
March 2008 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 provide additional data to support packaging radiation
oncology guidance services for review by the Data Subcommittee at the
next APC Panel meeting.
2. CPT code 36592 (Collection of blood specimen using established
central or peripheral catheter, venous, not otherwise specified) be
treated as an ``STVX-packaged code'' for CY 2009 and assigned to the
same APC as CPT code 36591 (Collection of blood specimen from a
completely implantable venous access device) until adequate data are
collected that would enable CMS to determine its own payment rate.
3. HCPCS code A4306 (Disposable drug delivery system, flow rate of
less than 50 mL per hour) remain packaged for CY 2009.
4. CPT code 74305 (Cholangiography and/or pancreatography; through
existing catheter, radiological supervision and interpretation) be
treated as a ``T-packaged code'' for CY 2009 and that CMS consider
assigning this code to APC 0263 (Level I Miscellaneous Radiology
Procedures).
5. CMS reinstate separate payment for the following intravascular
ultrasound and intracardiac echocardiography codes: CPT codes 37250
(Intravascular ultrasound (non-coronary vessel) during diagnostic
evaluation and/or therapeutic intervention; initial vessel); 37251
(Intravascular ultrasound (non-coronary vessel) during diagnostic
evaluation and/or therapeutic intervention; each additional vessel);
92978 (Intravascular ultrasound (coronary vessel or graft) during
diagnostic evaluation and/or therapeutic intervention including imaging
supervision, interpretation and report; initial vessel); 92979
(Intravascular ultrasound (coronary vessel or graft) during diagnostic
evaluation and/or therapeutic intervention including imaging
supervision, interpretation and report; each additional vessel); and
93662 (Intracardiac echocardiography during therapeutic/diagnostic
intervention, including imaging supervision and interpretation).
6. CMS continue to package diagnostic radiopharmaceuticals for CY
2009.
7. The Packaging Subcommittee continue its work.
We address each of these recommendations in turn in the discussion
that follows.

Recommendation 1

In response to the APC Panel's recommendation, we are adopting the
recommendation and will provide data related to radiation oncology
guidance services to the Data Subcommittee at the next APC Panel
meeting. For CY 2009, we are proposing to maintain the packaged status
of radiation oncology guidance services. These services are ancillary
and dependent in relation to the radiation therapy services with which
they are most commonly furnished. Consistent with the principles of a
prospective payment system, in some cases payment in an individual case
exceeds the average cost, and in other cases payment is less than the
average cost, but on balance, payment should approximate the relative
cost of the average case. While we are aware that some of the radiation
oncology guidance codes describe relatively new technologies, we do not
believe that beneficiary access to care would be harmed by packaging
payment for radiation oncology guidance services. We believe that
packaging will create incentives for hospitals and their physician
partners to work together to establish appropriate protocols that will
eliminate unnecessary services where they exist and institutionalize
approaches to providing necessary services more efficiently. Therefore,
we see no basis for treating radiation oncology services differently
from other guidance services that are ancillary and dependent to the
procedures they facilitate.

Recommendation 2

For CY 2009, we are adopting the APC Panel recommendation and
proposing to treat CPT code 36592 (Collection of blood specimen using
established central or peripheral catheter, venous, not otherwise
specified) as an ``STVX-packaged code'' and assigning it to APC 0624
(Phlebotomy and Minor Vascular Access Device Procedures), the same APC
to which we are proposing to assign CPT 36591 code (Collection of blood
specimen from a completely implantable venous access device).
CPT code 36592 became effective January 1, 2008, and was assigned
interim status indicator ``N'' in the CY 2008 OPPS/ASC final rule with
comment period. Several members of the public requested that we change
the status of this code from unconditionally packaged to conditionally
packaged, thereby paying it identically to CPT code 36591. CPT code
36591 also became effective January 1, 2008, and was assigned interim
status indicator ``Q'' with treatment as an ``STVX-packaged code'' and
assignment to APC 0624. CPT code 36591 was a direct replacement for CPT
code 36540, which was deleted effective January 1, 2008, but was an
``STVX-packaged code'' with assignment to APC 0624 for CY 2007. These
members of the public stated that the resource costs associated with
drawing blood from an established central or peripheral catheter were
almost identical to the resources associated with drawing blood from an
implanted venous access device.
We agree that the resource costs associated with CPT code 36592 are
likely similar to the resource costs associated with CPT code 36591.
When cost data for CPT code 36592 are available for the CY 2010 OPPS
annual update, we will reevaluate whether assignment to APC 0624
continues to be appropriate.
In summary, for CY 2009, we are proposing to change the packaged
status of CPT code 36592 from unconditionally packaged to conditionally
packaged, as an ``STVX-packaged code,'' which is parallel to the
proposed treatment of CPT code 36591. This service would be paid
separately when it is provided in an encounter without a service
assigned status indicator ``S,'' ``T,'' ``V,'' or ``X.'' In all other
circumstances, its payment would be packaged.
As noted above, for CY 2009, we are proposing to further refine our
identification of the different types of conditionally packaged HCPCS
codes that were previously all assigned status indicator ``Q''
(Packaged Services Subject to Separate Payment under OPPS Payment
Criteria) under the OPPS. Therefore, we are proposing to assign status
indicator''Q1'' to CPT code 36592 for CY 2009, which indicates that it
is an ``STVX-packaged code.'' We refer readers to section XIII.A.1. for
a complete discussion of status indicators and our proposed status
indicator changes for CY 2009.
We note that we expect hospitals to follow the CPT guidance related
to CPT

[[Page 41455]]

codes 36591 and 36592 regarding when these services should be
appropriately reported.

Recommendation 3

For CY 2009, we are adopting the APC Panel's recommendation and
proposing to maintain the packaged status of HCPCS code A4306
(Disposable drug delivery system, flow rate of less than 50 mL per
hour).
HCPCS code A4306 describes a disposable drug delivery system with a
flow rate of less than 50 mL per hour. Beginning in CY 2007, HCPCS code
A4306 is payable under the OPPS with status indicator ``N,'' indicating
that its payment is unconditionally packaged. We packaged this code
because it is considered a supply, and under the OPPS it is standard to
package payment for all supplies, including implantable and non-
implantable supplies, into payment for the procedures in which the
supplies are used. In March 2007, we first discussed this code with the
APC Panel. A manufacturer noted in a presentation during the March 2007
APC Panel meeting that there is a particular disposable drug delivery
system that is reported with HCPCS code A4306 that is specifically used
to treat postoperative pain. The manufacturer requested that this code
be moved to its own APC for CY 2008 so that the service could receive
separate payment. During its September 2007 meeting, the APC Panel
recommended that this code remain packaged for CY 2008 and asked CMS to
present additional data to the APC Panel when available.
During the APC Panel's March 2008 meeting, we provided to the
Packaging Subcommittee additional cost data related to this code. Our
CY 2007 proposed rule claims data indicate that HCPCS code A4306 was
billed on OPPS claims approximately 2,400 times, yielding a line-item
median cost of approximately $4. The individual costs for this supply
range from $4 per unit to $2,056 per unit. The Packaging Subcommittee
suggested that this code may not always be correctly reported by
hospitals as the data also show that this code was frequently billed
together with computed tomography (CT) scans of various regions of the
body, without surgical procedures on the same date of service. 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. It was
also noted that hospitals may actually be appropriately reporting HCPCS
code A4306, which may be used to describe supplies used for purposes
other than postoperative pain relief.
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 unconditionally
packaged status of HCPCS code A4306 for CY 2009.

Recommendation 4

For CY 2009, we are adopting the APC Panel's recommendation and
proposing to treat CPT code 74305 (Cholangiography and/or
pancreatography; through existing catheter, radiological supervision
and interpretation) as a ``T-packaged code'' and assign it to APC 0263
(Level I Miscellaneous Radiology Procedures).
Effective January 1, 2008, CPT code 74305 is unconditionally
packaged and falls into the imaging supervision and interpretation
category of codes that we created as part of the CY 2008 packaging
approach. Several members of the public recently noted that CPT code
74305 may sometimes be provided in a single hospital encounter with CPT
code 47505 (Injection procedure for cholangiography through an existing
catheter (eg, percutaneous transepatic or T-tube)), which is
unconditionally packaged itself, when these are the only two services
reported on a claim. In the case where only these two services were
performed, the hospital would receive no separate payment. Our claims
data indicate that CPT code 74305 is infrequently provided without any
other separately payable services on the same date of service.
Therefore, for CY 2009, we are proposing to change the packaged
status of CPT code 74305 from unconditionally packaged to conditionally
packaged, as a ``T-packaged code,'' which is parallel to the treatment
of many other conditionally packaged imaging supervision and
interpretation codes. Hospitals would receive separate payment for this
service when it appears on a claim without a surgical procedure. The
payment for this service would be packaged into payment for a status
indicator ``T'' surgical procedure when it appears on the same date as
a surgical procedure. Hospitals that furnish this imaging supervision
and interpretation service on the same date as an independent surgical
procedure assigned status indicator ``T'' must bill both services on
the same claim.
As noted above, for CY 2009, we are proposing to further refine our
identification of the different types of conditionally packaged HCPCS
codes that were previously all assigned status indicator ``Q''
(Packaged Services Subject to Separate Payment under OPPS Payment
Criteria) under the OPPS. Therefore, we are proposing to assign status
indicator ``Q2'' to CPT code 74305 for CY 2009, which indicates that it
is a ``T-packaged code.'' We refer readers to section XIII.A.1. for a
complete discussion of status indicators and our proposed status
indicator changes for CY 2009.
In summary, for CY 2009, we are proposing to change the status
indicator for CPT code 74305 from ``N'' to ``Q2,'' with assignment to
APC 0263 (Level I Miscellaneous Radiology Procedures) when it would be
separately paid.

Recommendation 5

For CY 2009, we are proposing to maintain the packaged status of
CPT codes 37250 (Intravascular ultrasound (non-coronary vessel) during
diagnostic evaluation and/or therapeutic intervention; initial vessel);
37251 (Intravascular ultrasound (non-coronary vessel) during diagnostic
evaluation and/or therapeutic intervention; each additional vessel);
92978 (Intravascular ultrasound (coronary vessel or graft) during
diagnostic evaluation and/or therapeutic intervention including imaging
supervision, interpretation and report; initial vessel); 92979
(Intravascular ultrasound (coronary vessel or graft) during diagnostic
evaluation and/or therapeutic intervention including imaging
supervision, interpretation and report; each additional vessel); and
93662 (Intracardiac echocardiography during therapeutic/diagnostic
intervention, including imaging supervision and interpretation). We are
not adopting the APC Panel's recommendation to pay separately for these
intraoperative intravascular ultrasound (IVUS) and intracardiac
echocardiography (ICE) services for CY 2009.
These services were newly packaged for CY 2008 because they were
members of the intraoperative category of services that were included
in the CY 2008 packaging approach. The intraoperative category includes
those codes that are reported for supportive dependent diagnostic
testing or other minor procedures performed during surgical or other
independent procedures. Because these intraoperative IVUS and ICE
services support the performance of an independent procedure and they
are provided in the same operative session as the independent
procedure, we packaged their payment into the OPPS payment for the
independent procedure performed. We believe these IVUS and ICE services
are always integral to and dependent upon the independent

[[Page 41456]]

services that they support and, therefore, we believe their payment
would be appropriately packaged into the independent procedure.
A presenter at the March 2008 APC Panel meeting requested separate
payment for these services, noting that they are high cost and provided
with relatively low frequency compared to the services they typically
accompany. We continue to believe that these services are ancillary and
dependent in relation to the independent cardiac and vascular
procedures with which they are most commonly furnished. We note that
resource cost was not a factor we considered when deciding to package
intraoperative services. Packaging payment for items and services that
are directly related to performing a procedure, even when those
packaged items and services have variable resource costs or different
frequencies of use in relationship to one another or to the independent
services into which their payment is packaged, has been a principle of
the OPPS since the inception of that payment system. For example, once
an implantable device is no longer eligible for device pass-through
payment, our standard policy is to package the payment for the device
into the payment for the procedures with which the device was reported.
These former pass-through devices may be high or low cost in
relationship to the other costs of the associated surgical procedures,
or the devices may be implanted in a large or small proportion of those
surgical procedures, but the device payment is nevertheless packaged.
We do not believe that the fact that a procedure may be performed with
assorted technologies of varying resource costs is a sufficient reason
to pay separately for a particular technology that is clearly ancillary
and dependent in relationship to independent associated procedures. We
acknowledge that the costs associated with packaged services may
contribute more or less to the median cost of the independent service,
depending on how often the dependent service is billed with the
independent service. Consistent with the principles of a prospective
payment system, in some cases payment in an individual case exceeds the
average cost, and in other cases payment is less than the average cost,
but on balance, payment should approximate the relative cost of the
average case. While we understand that these services represent
technologies that are not commonly used in most institutions, we do not
believe that beneficiary access to care would be harmed by packaging
payment for IVUS and ICE services. We note that IVUS and ICE services
are existing, established technologies and that hospitals have provided
some of these services in the HOPD since the implementation of the OPPS
in CY 2000. We believe that packaging will create incentives for
hospitals and their physician partners to work together to establish
appropriate protocols that will eliminate unnecessary services where
they exist and institutionalize approaches to providing necessary
services more efficiently. Therefore, we see no basis for treating IVUS
and ICE services differently from other intraoperative services that
are ancillary and dependent to the procedure they facilitate.
In summary, we are proposing to maintain the unconditionally
packaged status of CPT codes 37250, 37251, 92978, 92979, and 93662 for
CY 2009.

Recommendation 6

For CY 2009, we are adopting the APC Panel recommendation and
proposing to maintain the packaged status of diagnostic
radiopharmaceuticals. This recommendation is discussed in detail in
section V.B.2.b. of this proposed rule.

Recommendation 7

In response to the APC Panel's recommendation for the Packaging
Subcommittee to remain active until the next APC Panel 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 by e-mail to
APCPanel@cms.hhs.gov with Packaging Subcommittee in the subject line.
(2) IVIG Preadministration-Related Services
We are proposing to package payment for HCPCS code G0332 (Services
for intravenous infusion of immunoglobulin prior to administration
(this service is to be billed in conjunction with administration of
immunoglobulin)) for CY 2009. Immune globulin is a complicated
biological product that is developed from human plasma obtained from
human plasma donors. Its purification is a complex process that occurs
along a very long timeline and, therefore, only a small number of
manufacturers provide commercially available products. In past years,
there have been issues reported with the supply of intravenous immune
globulin (IVIG) due to numerous factors, including decreased
manufacturing capacity, increased usage, more sophisticated processing
steps, and low demand for byproducts from IVIG fractionation.
Under the OPPS, the current CY 2008 payment methodology for IVIG
treatments consists of three components, which include payment for the
drug itself (described by a HCPCS J-code), administration of the IVIG
product (described by one or more CPT codes), and the
preadministration-related services (HCPCS code G0332). The CY 2009
proposed OPPS payment rates for IVIG products are established based on
the Part B ASP drug methodology, as discussed further in section V.B.3.
of this proposed rule. Under the OPPS, payment is made separately for
the administration of IVIG and those services are reported using the
CPT code for the first hour and, as needed, additional hour CPT
infusion codes. The CY 2009 proposed OPPS payments for drug
administration services are discussed in section VIII.B. of this
proposed rule. As explained in detail in the CY 2006 OPPS, CY 2007
OPPS/ASC, and CY 2008 OPPS/ASC final rules with comment period (70 FR
68648 to 68650, 71 FR 68092 to 68093, and 72 FR 66697 to 66698,
respectively), we temporarily paid separately for the IVIG
preadministration-related services in CY 2006 through CY 2008 because
of reported instability in the IVIG marketplace due, in part, to the
implementation of the new ASP payment methodology for IVIG drugs. Under
the CY 2006 and CY 2007 OPPS, HCPCS code G0332 was assigned to New
Technology APC 1502 (New Technology--Level II ($50-$100)), with a
payment rate of $75. For CY 2008, HCPCS code G0332 was reassigned to
APC 0430 (Drug Preadministration-Related Services), with a payment rate
of approximately $38 set prospectively based on robust CY 2006 claims
data for this code. In addition, a separate payment for HCPCS code
G0332 has been made under the MPFS during the same time period, CY 2006
to CY 2008.
We specifically indicated in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66697 through 66698) that we would consider
packaging payment for HCPCS code G0332 in future years and that we
intended to reevaluate the

[[Page 41457]]

appropriateness of separate payment for IVIG preadministration-related
services for the CY 2009 OPPS rulemaking cycle, especially as we
explore the potential for greater packaging under the OPPS. We note
that the Office of the Inspector General's (OIG's) study on the
availability and pricing of IVIG published in a report in April 2007
entitled, ``Intravenous Immune Globulin: Medicare Payment and
Availability (OEI-03-05-00404),'' found that for the third quarter of
CY 2006, just over half of the IVIG sales to hospitals and physicians
were at prices below Medicare payment amounts. Relative to the previous
three quarters, this represented a substantial increase in the
percentage of sales with prices below Medicare amounts. We have
reviewed national claims data for IVIG drug utilization, as well as
utilization of the preadministration-related services HCPCS code. These
data show modest increases in the utilization of IVIG drugs and the
preadministration-related services code, which suggest that IVIG
pricing and access may be improving.
IVIG preadministration-related services are dependent services that
are always provided in conjunction with other separately payable
services, such as drug administration services, and thus are well
suited for packaging into the payment for the separately payable
services that they usually accompany. The recent findings of the OIG
report suggest that stability in the IVIG market had improved in late
CY 2006. No other comprehensive studies have been presented to indicate
continued instability in market conditions or systematic problems with
patient access. In addition, beginning July 1, 2007, six new HCPCS
codes for specific IVIG products were adopted to implement separate
payment for these products, contributing to generally increased
payments for IVIG products and, we believe, improved market stability.
Therefore, consistent with our OPPS payment policy for the facility
resources expended to prepare for the administration of all other drugs
and biologicals under the OPPS, we now believe that payment for the
hospital resources required to locate and obtain the appropriate IVIG
products and to schedule patients' infusions should be made through the
OPPS payment for the associated drug administration services.
Furthermore, the cost data that we have gathered for the services
described by HCPCS code G0332 since CY 2006, including the line-item
median cost for the code of approximately $38 from CY 2007 claims data,
indicate that the cost of the services is relatively low. Therefore,
because HCPCS code G0332 meets our historical criteria for packaged
payment, because we paid separately for these services on a temporary
basis only, and because we believe that the reported transient market
conditions that led us to adopt the separate payment for IVIG
preadministration-related services have improved, we now believe that
packaged payment is more appropriate for the CY 2009 OPPS, consistent
with our ongoing efforts to expand the size of the OPPS payment
bundles. Therefore, we are proposing to assign status indicator ``N''
to HCPCS code G0332 for CY 2009. We will continue to work with
stakeholders of the IVIG industry to understand their concerns
regarding the pricing of IVIG and Medicare beneficiary access to this
important therapy.
The treatment of these services under the MPFS will be addressed
separately in the CY 2009 MPFS proposed rule.

B. Proposed Conversion Factor Update

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 2009, 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 2009 published in the IPPS proposed rule on April 30,
2008 is 3.0 percent (73 FR 23708). To set the proposed OPPS conversion
factor for CY 2009, we increased the CY 2008 conversion factor of
$63.694, as specified in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66677), by 3.0 percent. Hospitals that fail to meet the
reporting requirements of the Hospital Outpatient Quality Data
Reporting (HOP QDRP) program are subject to a reduction of 2.0
percentage points from the market basket update to the conversion
factor. For a complete discussion of the HOP QDRP program, we refer
readers to section XVI. of this proposed rule.
In accordance with section 1833(t)(9)(B) of the Act, we further
adjust the conversion factor annually to ensure that any revisions we
are proposing 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 1.0010 for wage index changes by comparing
total payments from our simulation model using the FY 2009 IPPS
proposed wage index values to those payments using the current (FY
2008) IPPS wage index values. For CY 2009, we are not proposing a
change to our rural adjustment policy. Therefore, the budget neutrality
factor for the rural adjustment is 1.000.
For CY 2009, in this proposed rule, we estimate that allowed pass-
through spending for both drugs and biologicals and devices would equal
approximately $19 million, which represents 0.07 percent of total
projected OPPS spending for CY 2009. Therefore, the conversion factor
was also adjusted by the difference between the 0.09 percent pass-
through dollars set aside for CY 2008 and the 0.07 percent estimate for
CY 2009 pass-through spending. Finally, proposed payments for outliers
remain at 1.0 percent of total OPPS payments for CY 2009.
The proposed market basket increase update factor of 3.0 percent
for CY 2009, the required wage index budget neutrality adjustment of
approximately 1.0010, and the proposed adjustment of 0.02 percent of
projected OPPS spending for the difference in the pass-through set
aside result in a proposed full market basket conversion factor for CY
2009 of $65.684. To calculate the CY 2009 reduced market basket
conversion factor for those hospitals that fail to meet the
requirements of the HOP QDRP for the full CY 2009 payment update, we
made all other adjustments discussed above, but used a reduced market
basket increase update factor of 1.0 percent. This results in a
proposed reduced market basket conversion factor for CY 2009 of
$64.409.

C. Proposed Wage Index Changes

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, which includes the
copayment standardized amount, that is attributable to labor and labor-
related cost. This adjustment must be made in a budget neutral manner
and budget neutrality is discussed in section II.B. of this proposed
rule.
The OPPS labor-related share is 60 percent of the national OPPS
payment. This labor-related share is based on a regression analysis
that determined that 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). Therefore, we are not proposing to revise this policy for the
CY 2009 OPPS. We refer readers to section II.G. of this

[[Page 41458]]

proposed rule for a description and example of how the wage index for a
particular hospital is used to determine the payment for the hospital.
As discussed in section II.A.2.c. of this proposed rule, for
estimating national median APC costs, we standardize 60 percent of
estimated claims costs for geographic area wage variation using the
same FY 2009 pre-reclassified wage indices that the IPPS uses to
standardize costs. This standardization process removes the effects of
differences in area wage levels from the determination of a national
unadjusted OPPS payment rate and the copayment amount.
As published in the original OPPS April 7, 2000 final rule with
comment period (65 FR 18545), the 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 acute short-stay 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 the OPPS is reasonable and logical, given the
inseparable, subordinate status of the HOPD within the hospital
overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS
wage index is updated annually. Therefore, in accordance with our
established policy, we are proposing to use the final FY 2009 version
of the IPPS wage indices used to pay IPPS hospitals to adjust the CY
2009 OPPS payment rates and copayment amounts for geographic
differences in labor cost for all providers that participate in the
OPPS, including providers that are not paid under the IPPS (referred to
in this section as ``non-IPPS'' providers).
We note that the proposed FY 2009 IPPS wage indices continue to
reflect a number of adjustments implemented over the past few years,
including revised Office of Management and Budget (OMB) standards for
defining geographic statistical areas (Core Based Statistical Areas or
CBSAs), reclassification to different geographic areas, rural floor
provisions and the accompanying budget neutrality adjustment, an
adjustment for out-migration labor patterns, an adjustment for
occupational mix, and a policy for allocating hourly wage data among
campuses of multicampus hospital systems that cross CBSAs. In addition,
our proposed changes to the FY 2009 IPPS wage index also included a
revision of the reclassification average hourly wage comparison
criteria and a state-level rural floor and imputed floor budget
neutrality adjustment applied to the wage index. We refer readers to
the FY 2009 IPPS proposed rule (73 FR 23617 through 23639) for a
detailed discussion of these proposed changes to the wage index. In
addition, we refer readers to the CY 2005 OPPS final rule with comment
period (69 FR 65842 through 65844) and subsequent OPPS rules for a
detailed discussion of the history of these wage index adjustments as
applied under the OPPS.
The IPPS wage index that we are proposing to adopt includes all
reclassifications that are approved by the Medicare Geographic
Classification Review Board (MGCRB) for FY 2009. We note that
reclassifications under section 508 of Pub. L. 108-173 were extended by
section 106(a) of the MIEA-TRHCA and were set to terminate September
30, 2007. However, section 117(a)(1) of the Medicare, Medicaid, and
SCHIP Extension Act (MMSEA) of 2007 (Pub. L. 110-173) further extended
geographic reclassifications under section 508 until September 30,
2008. In addition, section 117(a)(2) of the MMSEA extended certain
special exception reclassifications as well. On February 22, 2008, we
published a notice in the Federal Register (73 FR 9807) that indicated
how we are implementing section 117(a) of the MMSEA under the IPPS. We
also issued a joint signature memorandum on January 28, 2008, that
explained how section 117 of the MMSEA would apply to the OPPS. As we
stated in that memorandum, while most of the reclassifications extended
by the MMSEA would expire September 30, 2008, for both the IPPS and the
OPPS (with OPPS hospitals reverting to a previous reclassification or
home area wage index from October 1, 2008, to December 31, 2008),
special exception wage indices for certain hospitals would be extended
through December 31, 2008, under the OPPS in order to give these
hospitals the special exception wage index under the OPPS for the same
time period as under the IPPS. Because the MMSEA provisions expire in
2008, and are not applicable to FY 2009, we are not making any
proposals related to those provisions for the OPPS wage index for CY
2009.
For purposes of the OPPS, we are proposing to continue our policy
in CY 2009 to allow non-IPPS hospitals paid under the OPPS to qualify
for the out-migration adjustment if they are located in a section 505
out-migration county. We note that because non-IPPS hospitals cannot
reclassify, they are eligible for the out-migration wage adjustment.
Table 4J published in the Addendum to the FY 2009 IPPS proposed rule
identifies counties eligible for the out-migration adjustment and
providers receiving the adjustment. As we have done in prior years, we
are reprinting the Table 4J, as Addendum L to this proposed rule, with
the addition of non-IPPS hospitals that would receive the section 505
out-migration adjustment under the CY 2009 OPPS.
As stated earlier in this section, we continue to believe that
using the IPPS wage index as the source of an adjustment factor for the
OPPS is reasonable and logical, given the inseparable, subordinate
status of the HOPD within the hospital overall. Therefore, we are
proposing to use the final FY 2009 IPPS wage indices for calculating
the OPPS payments in CY 2009. With the exception of the out-migration
wage adjustment table (Addendum L to this proposed rule), which
includes non-IPPS hospitals paid under the OPPS, we are not reprinting
the proposed FY 2009 IPPS wage indices referenced in this discussion of
the wage index. We refer readers to the CMS Web site for the OPPS at:
http://www.cms.hhs.gov/providers/hopps. At this link, the reader will
find a link to the proposed FY 2009 IPPS wage indices tables.

D. Proposed Statewide Average Default CCRs

CMS uses CCRs to determine outlier payments, payments for pass-
through devices, and monthly interim transitional corridor payments
under the OPPS. Some hospitals do not have a CCR because there is no
cost report available. For these hospitals, CMS uses the statewide
average default CCRs to determine the payments mentioned above until a
hospital's Medicare contractor is able to calculate the hospital's
actual CCR from its most recently submitted Medicare cost report. These
hospitals include, but are not limited to, hospitals that are new, have
not accepted assignment of an existing hospital's provider agreement,
and have not yet submitted a cost report. CMS also uses the statewide
average default CCRs to determine payments for hospitals that appear to
have a biased CCR, that is, the CCR falls outside predetermined floor
and ceiling thresholds for a valid CCR, or for hospitals whose most
recent cost report reflects an all-inclusive rate status (Section
10.11, Chapter 4, Medicare Claims Processing Manual Pub. 100-04). In
this proposed rule, we are proposing to update the default ratios for
CY 2009 using the most recent cost report data, and we are proposing to
codify our

[[Page 41459]]

policies for using the default ratios for hospitals that do not have a
CCR for outlier payments specifically. We refer readers to section
II.F. of this proposed rule where we discuss this proposal for default
CCRs as part of our broader proposal to implement an outlier
reconciliation process similar to that implemented under the IPPS.
For CY 2009, we used our standard methodology of calculating the
statewide default CCRs using the same hospital overall CCRs that we use
to adjust charges to costs on claims data. Table 9 lists the proposed
CY 2009 default urban and rural CCRs by State and compares them to last
year's default CCRs. These CCRs are the ratio of total costs to total
charges from each provider's most recently submitted cost report, for
those cost centers relevant to outpatient services weighted by Medicare
Part B charges. We also adjusted ratios from submitted cost reports to
reflect final settled status by applying the differential between
settled to submitted costs and charges from the most recent pair of
final settled and submitted cost reports. We then weighted each
hospital's CCR by claims volume corresponding to the year of the
majority of cost reports used to calculate the overall CCR. We refer
readers to section II.E. of the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66680 through 66682) and prior OPPS rules for a
more detailed discussion of our established methodology for calculating
the statewide average default CCRs, including the hospitals used in our
calculations and trimming criteria.
For this proposed rule, approximately 38 percent of the submitted
cost reports represented data for cost reporting periods ending in CY
2005 and 60 percent were for cost reporting periods ending in CY 2006.
Table 9 lists the proposed CY 2009 default urban and rural CCRs by
State and compares them to last year's default CCRs. For Maryland, we
used an overall weighted average CCR for all hospitals in the nation as
a substitute for Maryland CCRs. Few providers in Maryland are eligible
to receive payment under the OPPS, which limits the data available to
calculate an accurate and representative CCR. In general, observed
changes between CY 2008 and CY 2009 are modest and the few significant
changes are associated with a small number of hospitals. The national
urban and rural CCRs observed for Maryland changed by less than 1
percent.

Table 9.--Proposed CY 2009 Statewide Average CCRs
------------------------------------------------------------------------
Previous
Proposed CY default CCR
State Urban/rural 2009 (CY 2008
default CCR OPPS final
rule)
------------------------------------------------------------------------
ALASKA....................... RURAL.......... 0.562 0.537
ALASKA....................... URBAN.......... 0.351 0.351
ALABAMA...................... RURAL.......... 0.223 0.228
ALABAMA...................... URBAN.......... 0.210 0.213
ARKANSAS..................... RURAL.......... 0.258 0.266
ARKANSAS..................... URBAN.......... 0.276 0.270
ARIZONA...................... RURAL.......... 0.269 0.264
ARIZONA...................... URBAN.......... 0.232 0.232
CALIFORNIA................... RURAL.......... 0.223 0.232
CALIFORNIA................... URBAN.......... 0.221 0.218
COLORADO..................... RURAL.......... 0.355 0.355
COLORADO..................... URBAN.......... 0.251 0.254
CONNECTICUT.................. RURAL.......... 0.394 0.391
CONNECTICUT.................. URBAN.......... 0.337 0.339
DISTRICT OF COLUMBIA......... URBAN.......... 0.329 0.346
DELAWARE..................... RURAL.......... 0.298 0.302
DELAWARE..................... URBAN.......... 0.368 0.400
FLORIDA...................... RURAL.......... 0.212 0.219
FLORIDA...................... URBAN.......... 0.194 0.198
GEORGIA...................... RURAL.......... 0.273 0.279
GEORGIA...................... URBAN.......... 0.262 0.269
HAWAII....................... RURAL.......... 0.371 0.373
HAWAII....................... URBAN.......... 0.345 0.317
IOWA......................... RURAL.......... 0.346 0.349
IOWA......................... URBAN.......... 0.317 0.325
IDAHO........................ RURAL.......... 0.434 0.445
IDAHO........................ URBAN.......... 0.419 0.414
ILLINOIS..................... RURAL.......... 0.286 0.286
ILLINOIS..................... URBAN.......... 0.272 0.271
INDIANA...................... RURAL.......... 0.306 0.313
INDIANA...................... URBAN.......... 0.299 0.301
KANSAS....................... RURAL.......... 0.317 0.318
KANSAS....................... URBAN.......... 0.241 0.240
KENTUCKY..................... RURAL.......... 0.240 0.244
KENTUCKY..................... URBAN.......... 0.264 0.262
LOUISIANA.................... RURAL.......... 0.280 0.271
LOUISIANA.................... URBAN.......... 0.268 0.277
MARYLAND..................... RURAL.......... 0.307 0.308
MARYLAND..................... URBAN.......... 0.283 0.284
MASSACHUSETTS................ URBAN.......... 0.342 0.338
MAINE........................ RURAL.......... 0.445 0.433
MAINE........................ URBAN.......... 0.425 0.424
MICHIGAN..................... RURAL.......... 0.326 0.331

[[Page 41460]]

MICHIGAN..................... URBAN.......... 0.328 0.318
MINNESOTA.................... RURAL.......... 0.497 0.499
MINNESOTA.................... URBAN.......... 0.340 0.342
MISSOURI..................... RURAL.......... 0.277 0.289
MISSOURI..................... URBAN.......... 0.282 0.292
MISSISSIPPI.................. RURAL.......... 0.265 0.267
MISSISSIPPI.................. URBAN.......... 0.216 0.217
MONTANA...................... RURAL.......... 0.444 0.453
MONTANA...................... URBAN.......... 0.452 0.450
NORTH CAROLINA............... RURAL.......... 0.284 0.286
NORTH CAROLINA............... URBAN.......... 0.305 0.321
NORTH DAKOTA................. RURAL.......... 0.363 0.379
NORTH DAKOTA................. URBAN.......... 0.357 0.378
NEBRASKA..................... RURAL.......... 0.345 0.347
NEBRASKA..................... URBAN.......... 0.292 0.290
NEW HAMPSHIRE................ RURAL.......... 0.374 0.375
NEW HAMPSHIRE................ URBAN.......... 0.311 0.337
NEW JERSEY................... URBAN.......... 0.272 0.276
NEW MEXICO................... RURAL.......... 0.270 0.275
NEW MEXICO................... URBAN.......... 0.344 0.353
NEVADA....................... RURAL.......... 0.311 0.329
NEVADA....................... URBAN.......... 0.200 0.200
NEW YORK..................... RURAL.......... 0.414 0.417
NEW YORK..................... URBAN.......... 0.396 0.402
OHIO......................... RURAL.......... 0.359 0.354
OHIO......................... URBAN.......... 0.263 0.268
OKLAHOMA..................... RURAL.......... 0.279 0.288
OKLAHOMA..................... URBAN.......... 0.241 0.245
OREGON....................... RURAL.......... 0.320 0.321
OREGON....................... URBAN.......... 0.374 0.366
PENNSYLVANIA................. RURAL.......... 0.285 0.298
PENNSYLVANIA................. URBAN.......... 0.232 0.241
PUERTO RICO.................. URBAN.......... 0.514 0.474
RHODE ISLAND................. URBAN.......... 0.295 0.308
SOUTH CAROLINA............... RURAL.......... 0.260 0.258
SOUTH CAROLINA............... URBAN.......... 0.245 0.244
SOUTH DAKOTA................. RURAL.......... 0.333 0.334
SOUTH DAKOTA................. URBAN.......... 0.269 0.289
TENNESSEE.................... RURAL.......... 0.253 0.256
TENNESSEE.................... URBAN.......... 0.229 0.241
TEXAS........................ RURAL.......... 0.268 0.271
TEXAS........................ URBAN.......... 0.246 0.242
UTAH......................... RURAL.......... 0.417 0.416
UTAH......................... URBAN.......... 0.433 0.406
VIRGINIA..................... RURAL.......... 0.268 0.268
VIRGINIA..................... URBAN.......... 0.275 0.275
VERMONT...................... RURAL.......... 0.409 0.416
VERMONT...................... URBAN.......... 0.408 0.340
WASHINGTON................... RURAL.......... 0.357 0.358
WASHINGTON................... URBAN.......... 0.360 0.368
WISCONSIN.................... RURAL.......... 0.399 0.384
WISCONSIN.................... URBAN.......... 0.357 0.362
WEST VIRGINIA................ RURAL.......... 0.295 0.298
WEST VIRGINIA................ URBAN.......... 0.361 0.360
WYOMING...................... RURAL.......... 0.421 0.449
WYOMING...................... URBAN.......... 0.333 0.351
------------------------------------------------------------------------

E. Proposed OPPS Payment to Certain Rural Hospitals

1. Hold Harmless Transitional Payment Changes Made by Pub. L. 109-171
(DRA)
When the OPPS was implemented, every provider was eligible to
receive an additional payment adjustment (called either transitional
corridor payment or transitional outpatient payment) if the payments it
received for covered outpatient department (OPD) services under the
OPPS were less than the payments it would have received for the same
services under the prior reasonable cost-based system. Section
1833(t)(7) of the Act provides that the transitional corridor payments
are temporary payments for most providers to ease their transition from
the prior reasonable cost-based payment system to the OPPS system.
There are two exceptions, cancer hospitals and

[[Page 41461]]

children's hospitals, to this provision and those hospitals receive the
transitional corridor payments on a permanent basis. Section
1833(t)(7)(D)(i) of the Act originally provided for transitional
corridor payments to rural hospitals with 100 or fewer beds for covered
OPD services furnished before January 1, 2004. However, section 411 of
Pub. L. 108-173 amended section 1833(t)(7)(D)(i) of the Act to extend
these payments through December 31, 2005, for rural hospitals with 100
or fewer beds. Section 411 also extended the transitional corridor
payments to sole community hospitals (SCHs) located in rural areas for
services furnished during the period that begins with the provider's
first cost reporting period beginning on or after January 1, 2004, and
ended on December 31, 2005. Accordingly, the authority for making
transitional corridor payments under section 1833(t)(7)(D)(i) of the
Act, as amended by section 411 of Pub. L. 108-173, for rural hospitals
having 100 or fewer beds and SCHs located in rural areas expired on
December 31, 2005.
Section 5105 of Pub. L. 109-171 reinstituted the hold harmless
transitional outpatient payments (TOPs) for covered OPD services
furnished on or after January 1, 2006, and before January 1, 2009, for
rural hospitals having 100 or fewer beds that are not SCHs. When the
OPPS payment is less than the payment the provider would have received
under the previous reasonable cost-based system, the amount of payment
is increased by 95 percent of the amount of the difference between the
two payment systems for CY 2006, by 90 percent of the amount of that
difference for CY 2007, and by 85 percent of the amount of that
difference for CY 2008.
For CY 2006, we implemented section 5105 of Pub. L. 109-171 through
Transmittal 877, issued on February 24, 2006. We did not specifically
address whether TOPs apply to essential access community hospitals
(EACHs), which are considered to be SCHs under section
1886(d)(5)(D)(iii)(III) of the Act. Accordingly, under the statute,
EACHs are treated as SCHs. Therefore, we believed and continue to
believe that EACHs are not currently eligible for TOPs under Pub. L.
109-171. However, they are eligible for the adjustment for rural SCHs.
In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and
68228), we updated Sec. 419.70(d) to reflect the requirements of Pub.
L. 109-171.
Effective for services provided on or after January 1, 2009, rural
hospitals having 100 or fewer beds that are not SCHs will no longer be
eligible for hold harmless TOPs, in accordance with section 5105 of
Pub. L. 109-171.
2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to
Pub. L. 108-173 (MMA)
In the CY 2006 OPPS final rule with comment period (70 FR 68556),
we finalized a payment increase for rural SCHs of 7.1 percent for all
services and procedures paid under the OPPS, excluding drugs,
biologicals, brachytherapy seeds, and services paid under pass-through
payment policy in accordance with section 1833(t)(13)(B) of the Act, as
added by section 411 of Pub. L. 108-173. Section 411 gave the Secretary
the authority to make an adjustment to OPPS payments for rural
hospitals, effective January 1, 2006, if justified by a study of the
difference in costs by APC between hospitals in rural and urban areas.
Our analysis showed a difference in costs for rural SCHs. Therefore, we
implemented a payment adjustment for only those hospitals beginning
January 1, 2006.
In CY 2007, we became aware that we did not specifically address
whether the adjustment applies to EACHs, which are considered to be
SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the
statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC
final rule with comment period (71 FR 68010 and 68227), for purposes of
receiving this rural adjustment, we revised Sec. 419.43(g) to clarify
that EACHs are also eligible to receive the rural SCH adjustment,
assuming these entities otherwise meet the rural adjustment criteria.
Currently, fewer than 10 hospitals are classified as EACHs and as of CY
1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer
become newly classified as an EACH.
This adjustment for rural SCHs is budget neutral and applied before
calculating outliers and copayment. As stated in the CY 2006 OPPS final
rule with comment period (70 FR 68560), we would not reestablish the
adjustment amount on an annual basis, but we note that we may review
the adjustment in the future and, if appropriate, would revise the
adjustment.
For CY 2009, we are proposing to continue our current policy of a
budget neutral 7.1 percent payment increase for rural SCHs, including
EACHs, for all services and procedures paid under the OPPS, excluding
drugs, biologicals, and services paid under the pass-through payment
policy in accordance with section 1833(t)(13)(B) of the Act. This
adjustment is in accordance with section 411 of the MMA, which gave the
Secretary the authority to make an adjustment to OPPS payments for
rural hospitals, if justified by a study of the difference in costs by
APC between hospitals in rural and urban areas. Our past analysis
showed a difference in costs only for rural SCHs, and we implemented a
payment adjustment for those hospitals beginning January 1, 2006. For
CY 2009, we also are proposing to continue to include brachytherapy
sources in the group of services eligible for the 7.1 percent payment
increase because we are proposing to pay them at prospective rates
based on their median costs as calculated from historical claims data.
We intend to reassess the 7.1 percent adjustment in the near future by
examining differences between urban and rural hospitals' costs using
updated claims, cost, and provider information. In that process, we
will include brachytherapy sources in each hospital's mix of services.

F. Proposed Hospital Outpatient Outlier Payments

1. Background
Currently, the OPPS pays outlier payments on a service-by-service
basis. For CY 2008, the outlier threshold is met when the cost of
furnishing a service or procedure by a hospital exceeds 1.75 times the
APC payment amount and exceeds the APC payment rate plus a $1,575
fixed-dollar threshold. We introduced a fixed-dollar threshold in CY
2005 in addition to the traditional multiple threshold in order to
better target outliers to those high cost and complex procedures where
a very costly service could present a hospital with significant
financial loss. If a hospital meets both of these conditions, the
multiple threshold and the fixed-dollar threshold, the outlier payment
is calculated as 50 percent of the amount by which the cost of
furnishing the service exceeds 1.75 times the APC payment rate. This
outlier payment has historically been considered a final payment by
longstanding OPPS policy.
It has been our policy for the past several years to report the
actual amount of outlier payments as a percent of total spending in the
claims being used to model the proposed OPPS. An accounting error for
CY 2005, CY 2006, and CY 2007 inflated CMS' estimates of OPPS
expenditures, which led us to underestimate outlier payment as a
percentage of total OPPS spending in prior rules. Total OPPS
expenditures have been revised downward, and we have accordingly
revised our outlier payment estimates. We further note that the CY 2005
outlier payment estimate included in the CY 2007 OPPS/ASC

[[Page 41462]]

final rule with comment period (71 FR 68010) has not changed based on
revised spending estimates. However, we previously stated that CY 2006
outlier payment was equal to 1.1 percent of OPPS expenditures for CY
2006 (72 FR 66685), but based on our revised numbers, actual outlier
payments are equal to approximately 1.3 percent of CY 2006 OPPS
expenditures. Our current estimate of total outlier payments as a
percent of total CY 2007 OPPS payment, using available CY 2007 claims
and the revised OPPS expenditure estimate, is approximately 0.9
percent. For CY 2007, the estimated outlier payment was set at 1.0
percent of the total aggregated OPPS payments. Therefore, for CY 2007
we estimate that we paid approximately 0.1 percent less than the CY
2007 outlier target of 1.0 percent of total aggregated OPPS payments.
We will update our estimate of CY 2007 outlier spending in the CY 2009
OPPS/ASC final rule with comment period.
As explained in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66685), we set our projected target for aggregate outlier
payments at 1.0 percent of aggregate total payments under the OPPS for
CY 2008. The outlier thresholds were set so that estimated CY 2008
aggregate outlier payments would equal 1.0 percent of aggregate total
payments under the OPPS. Using the same set of CY 2007 claims and CY
2008 payment rates, we currently estimate that outlier payments for CY
2008 would be approximately 0.8 percent of total CY 2008 OPPS payments.
The difference between 1.0 percent and 0.8 percent is reflected in the
regulatory impact analysis in section XXI.B. of this proposed rule. We
note that we provide estimated CY 2009 outlier payments for hospitals
and CMHCs with claims included in the claims data that we used to model
impacts on the CMS Web site in the Hospital-Specific Impacts--Provider-
Specific Data file on the CMS Web site at: http://www.cms.hhs.gov/
HospitalOutpatientPPS/.
2. Proposed Outlier Calculation
For CY 2009, we are proposing to continue our policy of setting
aside 1.0 percent of aggregate total payments under the OPPS for
outlier payments. We are proposing that a portion of that 1.0 percent,
specifically 0.07 percent, would be allocated to CMHCs for partial
hospitalization program outlier payments. This is the amount of
estimated outlier payments that would result from the proposed CMHC
outlier threshold of 3.40 times the CY 2009 PHP APC payment rates, as a
proportion of all payments dedicated to outlier payments. For further
discussion of CMHC outlier payments, we refer readers to section X.B.4.
of this proposed rule.
To ensure that estimated CY 2009 aggregate outlier payments would
equal 1.0 percent of estimated aggregate total payments under the OPPS,
we are proposing that the hospital outlier threshold be set so that
outlier payments would be triggered when the cost of furnishing a
service or procedure by a hospital exceeds 1.75 times the APC payment
amount and exceeds the APC payment rate plus an $1,800 fixed-dollar
threshold. This proposed threshold reflects the methodology discussed
below, as well as proposed APC recalibration for CY 2009.
We calculated the fixed-dollar threshold for this proposed rule
using largely the same methodology as we did in CY 2008. For purposes
of estimating outlier payments for this proposed rule, we used the CCRs
available in the April 2008 update to the OPSF.
The claims that we use to model each OPPS update lag by 2 years.
For this proposed rule, we used CY 2007 claims to model the CY 2009
OPPS. In order to estimate CY 2009 hospital outlier payments for this
proposed rule, we inflated the charges on the CY 2007 claims using the
same inflation factor of 1.1204 that we used to estimate the IPPS
fixed-dollar outlier threshold for the FY 2009 IPPS proposed rule. For
1 year, the inflation factor is 1.0585. The methodology for determining
this charge inflation factor was discussed in the FY 2009 IPPS proposed
rule (73 FR 23710 through 23711). As we stated in the CY 2005 OPPS
final rule with comment period (69 FR 65845), we believe that the use
of this charge inflation factor is appropriate for the OPPS because,
with the exception of the routine service cost centers, hospitals use
the same cost centers to capture costs and charges across inpatient and
outpatient services.
As noted in the CY 2007 OPPS/ASC final rule with comment period (71
FR 68011), we are concerned that we may systematically overestimate the
OPPS hospital outlier threshold if we did not apply a CCR inflation
adjustment factor. Therefore, we are proposing to apply the same CCR
inflation adjustment factor that we proposed to apply for the FY 2009
IPPS outlier calculation to the CCRs used to simulate the CY 2009 OPPS
outlier payments that determined the fixed-dollar threshold.
Specifically, for CY 2009, we are proposing to apply an adjustment of
0.9920 to the CCRs that are currently in the April 2008 OPSF to trend
them forward from CY 2008 to CY 2009. The methodology for calculating
this adjustment is discussed in the FY 2009 IPPS proposed rule (73 FR
23710 through 23711).
Therefore, to model hospital outliers for this proposed rule, we
applied the overall CCRs from the April 2008 OPSF file after adjustment
(using the proposed CCR inflation adjustment factor of 0.9920 to
approximate CY 2009 CCRs) to charges on CY 2007 claims that were
adjusted (using the proposed charge inflation factor of 1.1204 to
approximate CY 2009 charges). We simulated aggregated CY 2009 hospital
outlier payments using these costs for several different fixed-dollar
thresholds, holding the 1.75 multiple constant and assuming that
outlier payment would continue to be made at 50 percent of the amount
by which the cost of furnishing the service would exceed 1.75 times the
APC payment amount, until the total outlier payments equaled 1.0
percent of aggregated estimated total CY 2009 OPPS payments. We
estimate that a proposed fixed-dollar threshold of $1,800, combined
with the proposed multiple threshold of 1.75 times the APC payment
rate, would allocate 1.0 percent of aggregated total OPPS payments to
outlier payments. We are proposing to continue to make an outlier
payment that equals 50 percent of the amount by which the cost of
furnishing the service exceeds 1.75 times the APC payment amount when
both the 1.75 multiple threshold and the fixed-dollar $1,800 threshold
are met. For CMHCs, if a CMHC's cost for partial hospitalization
exceeds 3.40 times the payment rate for APC 0172 (Level I Partial
Hospitalization (3 services)) or APC 0173 (Level II Partial
Hospitalization (4 or more services)), the outlier payment is
calculated as 50 percent of the amount by which the cost exceeds 3.40
times the APC payment rate.
New section 1833(t)(17)(A) of the Act, which applies to hospitals
as defined under section 1886(d)(1)(B) of the Act, requires that
hospitals that fail to report data required for the quality measures
selected by the Secretary, in the form and manner required by the
Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point
reduction to their OPD fee schedule increase factor, that is, the
annual payment update factor. The application of a reduced OPD fee
schedule increase factor results in reduced national unadjusted payment
rates that will apply to certain outpatient items and services
performed by hospitals that are required to report outpatient quality
data and that fail to meet the HOP QDRP requirements. For hospitals
that fail to meet the HOP

[[Page 41463]]

QDRP quality data reporting requirements, we are proposing that the
hospitals' costs would be compared to the reduced payments for purposes
of outlier eligibility and payment calculation. We believe no changes
in the regulation text would be necessary to implement this policy
because using the reduced payment for these outlier eligibility and
payment calculations is contemplated in the current regulations at
Sec. 419.43(d). This proposal conforms to current practice under the
IPPS in this regard. Specifically, under the IPPS, for purposes of
determining the hospital's eligibility for outlier payments, the
hospital's estimated operating costs for a discharge are compared to
the outlier cost threshold based on the hospital's actual DRG payment
for the case. For more information on the HOP QDRP, we refer readers to
section XVI. of this proposed rule.
3. Outlier Reconciliation
As provided in section 1833(t)(5) of the Act, and described in the
CY 2001 final rule with comment period (65 FR 18498), we initiated the
use of a provider-specific overall CCR to estimate a hospital's or
CMHC's costs from billed charges on a claim to determine whether a
service's cost was significantly higher than the APC payment to qualify
for outlier payment. Currently, these facility-specific overall CCRs
are determined using the most recent settled or tentatively settled
cost report for each facility. At the end of the cost reporting period,
the hospital or CMHC submits a cost report to its Medicare contractor,
who then calculates the overall CCR that is used to determine outlier
payments for the facility. We believe the intent of the statute is that
outlier payments would be made only in situations where the cost of a
service provided is extraordinarily high. For example, under our
existing outlier methodology, a hospital's billed current charges may
be significantly higher than the charges included in the hospital's
overall CCR that is used to calculate outlier payments, while the
hospital's costs are more similar to the costs included in the overall
CCR. In this case, the hospital's overall CCR used to calculate outlier
payments is not representative of the hospital's current charge
structure. The overall CCR applied to the hospital's billed charges
would estimate an inappropriately high cost for the service, resulting
in inappropriately high outlier payments. This is contrary to the goal
of outlier payments, which are intended to reduce the hospital's
financial risk associated with services that have especially high
costs. The reverse could be true as well, if a hospital significantly
lowered its current billed charges in relationship to its costs, which
would result in inappropriately low outlier payments.
For CY 2009, we are proposing to address vulnerabilities in the
OPPS outlier payment system that lead to differences between billed
charges and charges included in the overall CCR used to estimate cost.
Our proposal would apply to all hospitals and CMHCs paid under the
OPPS. The main vulnerability in the OPPS outlier payment system is the
time lag between the CCRs from the latest settled cost report and
current charges that create the potential for hospitals and CMHCs to
set their own charges to exploit the delay in calculating new CCRs. A
facility can increase its outlier payments during this time lag by
increasing its charges significantly in relation to its cost increases.
The time lag may lead to inappropriately high CCRs relative to billed
charges that overestimate cost, and as a result, greater outlier
payments. Therefore, we are taking steps to ensure that outlier
payments appropriately account for financial risk when providing an
extraordinarily costly and complex service, while only being made for
services that legitimately qualify for the additional payment.
We believe that some CMHCs may have historically increased and
decreased their charges in response to Medicare outlier payment
policies. The HHS Office of the Inspector General (OIG) has published
several reports that found that CMHCs took advantage of vulnerabilities
in the outpatient outlier payment methodology by increasing their
billed charges after their CCRs were established to garner greater
outlier payments (DHHS OIG June 2007, A-07-06-0459, page 2). We discuss
the OIG's most recent report and accompanying recommendations in
section XIV.C. of this proposed rule. We similarly noted in the CY 2004
OPPS final rule with comment period (68 FR 63470) that some CMHCs
manipulated their charges in order to inappropriately receive outlier
payments.
To address these vulnerabilities in the area of the OPPS outlier
payment methodology, we are proposing to update our regulations to
codify two existing longstanding OPPS policies, as discussed in further
detail below. For the CY 2009 OPPS, we are also proposing to
incorporate outlier policies comparable to those that have been
included in several Medicare prospective payment systems, in particular
the IPPS (68 FR 34494). Specifically, we are proposing to allow
Medicare contractors to use a different CCR in certain circumstances to
estimate costs, and we are proposing to require reconciliation of
outlier payments in certain circumstances. We believe that all these
proposed changes would address most of the current vulnerabilities
present in the OPPS outlier payment system.
First, we are proposing to update the regulations to codify two
existing outlier policies. These policies are currently stated in Pub
100-04, Chapter 4, section 10.11.1 of the Internet-Only Manual, as
updated via Transmittal 1445, Change Request 5946, dated February 8,
2008. To be consistent with our manual instructions, for CY 2009, we
are proposing to revise 42 CFR 419.43 to add two new paragraphs
(d)(5)(ii) and (d)(5)(iii). Specifically, we are proposing to add new
paragraph (d)(5)(ii) to incorporate rules governing the overall
ancillary CCR applied to processed claims and new paragraph (d)(5)(iii)
to incorporate existing policy governing when a statewide average CCR
may be used instead of an overall ancillary CCR. We note that use of a
statewide average CCR in the specified cases is to ensure that the most
appropriate CCR possible is used for outlier payment calculations. For
purposes of this discussion and OPPS payment policy in general, we
treat ``overall CCR'' and ``overall ancillary CCR'' as synonymous terms
that refer to the overall CCR that is calculated based on cost report
data, which for hospitals, pertains to a specific set of ancillary cost
centers.
We are proposing new Sec. 419.43(d)(5)(ii) to specify use of the
hospital's or CMHC's most recently updated overall CCR for purposes of
calculating outlier payments. Our ability to identify true outlier
cases depends on the accuracy of the CCRs. To the extent some
facilities may be motivated to maximize outlier payments by taking
advantage of the time lag in updating the CCRs, the payment system
remains vulnerable to overpayments to individual hospitals or CMHCs.
This proposed provision specifies that the overall CCR applied at the
time a claim is processed is based on either the most recently settled
or tentatively settled cost report, whichever is from the latest cost
reporting period. We are also proposing new Sec. 419.43(d)(5)(iii) to
describe several circumstances in which a Medicare contractor may
substitute a statewide average CCR for a hospital's or CMHC's CCR. In
the CY 2007 OPPS/ASC final rule with comment period (71 FR 68006), we
finalized this policy but inadvertently did not update our regulations.
We refer readers to section II.D. of this proposed rule for a more

[[Page 41464]]

detailed discussion of statewide average CCRs. In summary, Medicare
contractors can use a statewide CCR for new hospitals or CMHCs that
have not accepted assignment of the existing provider agreement and who
have not yet submitted a cost report; for hospitals or CMHCs whose
Medicare contractor is unable to obtain accurate data with which to
calculate the overall ancillary CCR; and for facilities whose actual
CCR is more than 3 standard deviations above the geometric mean of
other overall CCRs. For CY 2009, we estimate this upper threshold to be
1.3. While this existing policy minimizes the use of CCRs that are
significantly above the mean for cost estimation, facilities with CCRs
that fall significantly below the mean would continue to have their
actual CCRs utilized, instead of the statewide default CCR. We also are
proposing to reevaluate the upper threshold and propose a new upper
threshold, if appropriate, through rulemaking each year.
These improvements somewhat mitigate, but do not fully eliminate, a
hospital's or CMHC's ability to significantly increase its charges in
relation to its cost increases each year, thereby receiving significant
outlier payments because of the inflated CCR. Therefore, we also are
proposing two new policies to more fully address the vulnerabilities
described above. Specifically, we are proposing new Sec.
419.43(d)(5)(i) that states that for hospital outpatient services
performed on or after January 1, 2009, CMS may specify an alternative
CCR or the facility may request an alternative CCR under certain
circumstances. The alternative CCR in either case may be either higher
or lower than the otherwise applicable CCR. In addition, we are
proposing to allow a facility to request that its CCR be prospectively
adjusted if the facility presents substantial evidence that the overall
CCR that is currently used to calculate outlier payments is inaccurate.
Such an alternative CCR may be appropriate if a facility's charges have
increased at an excessive rate, relative to the rate of increase among
other hospitals or CMHCs. CMS would have the authority to direct the
Medicare contractor to calculate a CCR from the cost report that
accounts for the increased charges. As explained in greater detail
below, we are also proposing new Sec. 419.43(d)(5)(iv) to allow
Medicare contractors the administrative discretion to reconcile
hospital or CMHC cost reports under certain circumstances.
We are proposing to implement a reconciliation process similar to
that implemented by the IPPS in FY 2003 (68 FR 34494). This proposed
policy would subject certain outlier payments to reconciliation when a
hospital or CMHC cost report is settled. While the existing policies
described above partially address the vulnerabilities in the OPPS
outlier payment system, the proposed reconciliation process would more
fully ensure accurate outlier payments for those facilities whose CCRs
fluctuate significantly, relative to the CCRs of other facilities. We
are proposing that this reconciliation process would only apply to
those services provided on or after January 1, 2009. We considered
proposing that this reconciliation process would become effective
beginning with services provided during the hospital's first cost
reporting period beginning in CY 2009 but believe effectuating this
policy based upon date of service would be less burdensome for
hospitals. We are specifically soliciting public comment related to the
effective date for the reconciliation process that would be most
administratively feasible for hospitals and CMHCs. We note this
reconciliation process would be done on a limited basis in order to
ease the administrative burden on Medicare contractors, as well as to
focus on those facilities that appear to have improperly manipulated
their charges to receive excessive outlier payments. We are proposing
to set reconciliation thresholds in the manual, reevaluate them
annually, and modify them as necessary. Following current IPPS outlier
policy, these thresholds would include a measure of acceptable percent
change in a hospital's or CMHC's CCR and an amount of outlier payment
involved. We are further proposing that when the cost report is
settled, reconciliation of outlier payments would be based on the
overall CCR calculated based on the ratio of costs and charges computed
from the cost report at the time the cost report coinciding with the
service dates is settled. Reconciling these outlier payments would
ensure that the outlier payments made are appropriate and that final
outlier payments reflect the most accurate cost data. Because
reconciliation entails evaluating claims for outlier payments using a
revised CCR, this process would not apply to services and items not
otherwise subject to outlier payments, including items and services
paid at charges reduced to cost.
This reconciliation process would require recalculating outlier
payments for individual claims. We understand that the aggregate change
in a facility's outlier payments cannot be determined because changes
in the CCR would affect the eligibility and amount of outlier payment.
For example, if a CCR declined, some services may no longer qualify for
any outlier payments while other services may qualify for lower outlier
payments. Therefore, the only way to accurately determine the net
effect of a decrease in an overall CCR on a facility's total outlier
payments is to assess the impact on a claim-by-claim basis. At this
time, CMS is developing a method for reexamining claims to calculate
outlier payments using a revised CCR.
Similar to the IPPS, we also are proposing to adjust the amount of
final outlier payments determined during reconciliation for the time
value of money. A second vulnerability remaining after reconciliation
is related to the same issue of the ability of hospitals and CMHCs to
manipulate the system by significantly increasing charges in the year
the service is performed, and obtaining excessive outlier payments as a
result. Even though under the proposal the excess money would be
refunded at the time of reconciliation, the facility would have access
to excess payments from the Medicare Trust Fund on a short-term basis.
In cases of underpayment, the facility would not have had access to
appropriate outlier payment for that time period.
Accordingly, we believe it is necessary to adjust the amount of the
final outlier payment to reflect the time value of the funds for that
time period. Therefore, we are proposing to add section Sec.
419.43(d)(6) to provide that when the cost report is settled, outlier
payments would be subject to an adjustment to account for the value of
the money for the time period in which the money was inappropriately
held by the hospital or CMHC. This would also apply where outlier
payments were underpaid. In those cases, the adjustment would result in
additional payments to hospitals or CMHCs. Any adjustment would be made
based on a widely available index to be established in advance by the
Secretary, and would be applied from the midpoint of the cost reporting
period to the date of reconciliation (or when additional payments are
issued, in the case of underpayments). This adjustment to reflect the
time value of a facility's outlier payments would ensure that the
outlier payment finalized at the time its cost report is settled
appropriately reflects the hospital's or CMHC's approximate marginal
costs in excess of the APC payments for services, taking into
consideration the applicable outlier thresholds.

[[Continued on page 41465]]

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

[[pp. 41465-41514]] Medicare Program: Proposed Changes to the Hospital Outpatient
Prospective Payment System and CY 2009 Payment Rates; Proposed Changes
to the Ambulatory Surgical Center Payment System and CY 2009 Payment
Rates

[[Continued from page 41464]]

[[Page 41465]]

Despite the fact that each individual facility's outlier payments
may be subject to adjustment when the cost report is settled, we
continue to believe that the hospital multiple and fixed-dollar outlier
thresholds should be based on projected payments using the latest
available historical data, without retroactive adjustments, to ensure
that actual outlier payments are equal to the target spending
percentage of total anticipated hospital outpatient spending. The
proposed reconciliation process and ability to change overall CCRs are
intended only to adjust actual outlier payments so that they most
closely reflect true costs rather than artificially inflated costs.
These adjustments would be made irrespective of whether total outlier
spending targets are met or not.
We are not proposing to make any changes to the method that we use
to calculate outlier thresholds for CY 2009. The multiple and fixed-
dollar outlier thresholds are an important aspect of the prospective
nature of the OPPS and key to their importance is their predictability
and stability for the prospective payment year. The outlier payment
policy is designed to alleviate any financial disincentive hospitals
may have in providing any medically necessary care their patients may
require, even to those patients who are very sick and would be likely
more costly to treat. Preset and publicized OPPS outlier thresholds
allow hospitals and CMHCs to approximate their Medicare payment for an
individual patient while that patient is still in the hospital. Even
though we are proposing to make outlier payments susceptible to a
reconciliation based on the facility's actual CCRs during the
contemporaneous cost reporting period, the facility should still be in
a position to make this approximation. Hospitals and CMHCs have
immediate access to the information needed to determine what their CCR
will be for a specific time period when their cost report is settled.
Even if the final CCR is likely to be different from the ratio used
initially to process and pay the claim, hospitals and CMHCs not only
have the information available to estimate their CCRs, but they also
have the ability to control those CCRs, through the structure and
levels of their charges. If we were to make retroactive adjustments to
hospital outlier payments to ensure that we met total OPPS outlier
spending targets, we would undermine the critical predictability aspect
of the prospective nature of the OPPS. Making such an across-the-board
adjustment would lead to either more or less outlier payments for all
hospitals that would, therefore, be unable to immediately approximate
the payment they would receive for especially costly services at the
time those services were provided. We believe that it is neither
necessary nor appropriate to make such an aggregate retroactive
adjustment.
For the corresponding proposed regulation text changes, we refer
readers to Sec. 419.43(d)(5) and Sec. 419.43(d)(6) of this proposed
rule.

G. Proposed Calculation of an Adjusted Medicare Payment From the
Proposed National Unadjusted Medicare Payment

The basic methodology for determining prospective payment rates for
HOPD services under the OPPS is set forth in existing regulations at
Sec. 419.31, Sec. 419.32, Sec. 419.43 and Sec. 419.44. The payment
rate for most services and procedures for which payment is made under
the OPPS is the product of the conversion factor calculated in
accordance with section II.B. of this proposed rule and the relative
weight determined under section II.A. of this proposed rule. Therefore,
the national unadjusted payment rate for most APCs contained in
Addendum A to this proposed rule and for most HCPCS codes, to which
separate payment under the OPPS has been assigned in Addendum B to this
proposed rule, was calculated by multiplying the proposed CY 2009
scaled weight for the APC by the proposed CY 2009 conversion factor. We
note that section 1833(t)(17)(A) of the Act, which applies to hospitals
as defined under section 1886(d)(1)(B) of the Act, requires that
hospitals that fail to report data required for the quality measures
selected by the Secretary, in the form and manner required by the
Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point
reduction to their OPD fee schedule increase factor, that is, the
annual payment update factor. The application of a reduced OPD fee
schedule increase factor results in reduced national unadjusted payment
rates that will apply to certain outpatient items and services provided
by hospitals that are required to report outpatient quality data and
that fail to meet the HOP QDRP requirements. For further discussion of
the proposed payment reduction for hospitals that fail to meet the HOP
QDRP data reporting requirements, we refer readers to section XVI.D. of
this proposed rule.
We demonstrate in the steps below how to determine the APC payment
that would be made in a calendar year under the OPPS to a hospital that
fulfills the HOP QDRP data reporting requirements and to a hospital
that fails to meet the HOP QDRP data reporting requirements for a
service that has any of the status indicator assignments: ``P,''
``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X'' (as
defined in Addendum D1 to this proposed rule), in a circumstance in
which the multiple procedure discount does not apply and the procedure
is not bilateral.
Individual providers interested in calculating the proposed payment
amount that they specifically would receive for a specific service from
the proposed national unadjusted payment rates presented in Addenda A
and B to this proposed rule, should follow the formulas presented in
the following steps. For purposes of the payment calculations below, we
refer to the national unadjusted payment rate for hospitals that meet
their HOP QDRP reporting requirements as the ``full'' national
unadjusted payment rate. We refer to the national unadjusted payment
rate for hospitals that fail to meet their HOP QDRP reporting
requirements as the ``reduced'' national unadjusted payment rate. The
``reduced'' national unadjusted payment rate is calculated by
multiplying the proposed reporting ratio of 0.981 times the ``full''
national unadjusted payment rate. The national unadjusted payment rate
used in the calculations below is either the ``full'' national
unadjusted payment rate or the ``reduced'' national unadjusted payment
rate, depending on whether the hospital met its HOP QDRP reporting
requirements in order to receive the full CY 2009 OPPS increase factor.
Step 1. Calculate 60 percent (the labor-related portion) of the
national unadjusted payment rate. Since the initial implementation of
the OPPS, we have used 60 percent to represent our estimate of that
portion of costs attributable, on average, to labor. We refer readers
to the April 7, 2000 final rule with comment period (65 FR 18496
through 18497) for a detailed discussion of how we derived this
percentage. We confirmed that this labor-related share for hospital
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).
The formula below is a mathematical representation of Step 1
discussed above and identifies the labor-related portion of a specific
payment rate for the specific service.

[[Page 41466]]

x - Labor-related portion of the national unadjusted payment rate

x = .60 * (national unadjusted payment rate)

Step 2. Determine the wage index area in which the hospital is
located and identify the wage index level that applies to the specific
hospital. The wage index values assigned to each area reflect the new
geographic statistical areas as a result of revised OMB standards
(urban and rural) to which hospitals are assigned for FY 2009 under the
IPPS, reclassifications through the Medicare Geographic
Reclassification Review Board (MCGRB), section 1886(d)(8)(B) ``Lugar''
hospitals, and section 401 of Pub. L. 108-173. We note that the
reclassifications of hospitals under the section 508 of Pub. L. 108-173
are scheduled to expire on September 30, 2008 and will not be
applicable to FY 2009. The wage index values include the occupational
mix adjustment described in section II.C. of this proposed rule that
was developed for the proposed FY 2009 IPPS payment rates published in
the Federal Register on April 30, 2008 (73 FR 23624 through 23632).
Step 3. Adjust the wage index of hospitals located in certain
qualifying counties that have a relatively high percentage of hospital
employees who reside in the county, but who work in a different county
with a higher wage index, in accordance with section 505 of Pub. L.
108-173. Addendum L to this proposed rule contains the qualifying
counties and the proposed wage index increase developed for the FY 2009
IPPS and published in the FY 2009 IPPS proposed rule as Table 4J (73 FR
23810 through 23819). This step is to be followed only if the hospital
has chosen not to accept reclassification under Step 2 above.
Step 4. Multiply the applicable wage index determined under Steps 2
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
The formula below is a mathematical representation of Step 4
discussed above and adjusts the labor-related portion of the national
payment rate for the specific service by the wage index.

xa - Labor-related portion of the national unadjusted payment rate
(wage adjusted)

xa = .60 * (national unadjusted payment rate) * applicable wage index.

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

y - Nonlabor-related portion of the national unadjusted payment rate

y = .40 * (national unadjusted payment rate)

Adjusted Medicare Payment = y + xa

Step 6. If a provider is a SCH, as defined in the regulations at
Sec. 412.92, or an EACH, which is considered to be a SCH under section
1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as
defined in Sec. 412.64(b), or is treated as being located in a rural
area under Sec. 412.103, multiply the wage index adjusted payment rate
by 1.071 to calculate the total payment.
The formula below is a mathematical representation of Step 6
discussed above and applies the rural adjustment for rural SCHs.
Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment
x 1.071
We have provided examples below of the calculation of both the full
and reduced national unadjusted payment rates that will apply to
certain outpatient items and services performed by hospitals that meet
and that fail to meet the HOP QDRP requirements, using the steps
outlined above. For purposes of this example, we will use a provider
that is located in Brooklyn, New York that is assigned to CBSA 35644.
This provider bills one service that is assigned to APC 0019 (Level I
Excision/Biopsy). The proposed CY 2009 full national unadjusted payment
rate for APC 0019 is $288.20. The reduced national unadjusted payment
rate for a hospital that fails to meet the HOP QDRP requirements would
be $282.72. This reduced rate is calculated by multiplying the
reporting ratio of 0.981 by the full unadjusted payment rate for APC
0019.
The FY 2009 wage index for a provider located in CBSA 35644 in New
York is 1.3043. The labor portion of the proposed full national
unadjusted payment is $225.54 (.60 x 288.20 x 1.3043). The labor
portion of the reduced national unadjusted payment is $221.25 (.60 x
282.72 x 1.3043). The nonlabor portion of the proposed full national
unadjusted payment is $115.28 (.40 x $288.20). The nonlabor portion of
the reduced national unadjusted payment is $113.08 (.40 x $282.72). The
sum of the labor and nonlabor portions of the proposed full national
adjusted payment is $340.82 ($225.54 + $115.28). The sum of the reduced
national adjusted payment is $334.33 ($221.25 + $113.08).

H. Proposed Beneficiary Copayments

1. Background
Section 1833(t)(3)(B) of the Act requires the Secretary to set
rules for determining copayment amounts to be paid by beneficiaries for
covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies
that the Secretary must reduce the national unadjusted copayment amount
for a covered OPD service (or group of such services) furnished in a
year in a manner so that the effective copayment rate (determined on a
national unadjusted basis) for that service in the year does not exceed
a specified percentage. As specified in section 1833(t)(8)(C)(ii)(V) of
the Act, for all services paid under the OPPS in CY 2009, and in
calendar years thereafter, the percentage is 40 percent of the APC
payment rate. Section 1833(t)(3)(B)(ii) of the Act provides that, for a
covered OPD service (or group of such services) furnished in a year,
the national unadjusted copayment amount cannot be less than 20 percent
of the OPD fee schedule amount. Sections 1834(d)(2)(C)(ii) and
(d)(3)(C)(ii) of the Act further require that the copayment for
screening flexible sigmoidoscopies and screening colonoscopies be equal
to 25 percent of the payment amount. Since the beginning of the OPPS,
we have applied the 25-percent copayment to screening flexible
sigmoidoscopies and screening colonoscopies.

[[Page 41467]]

2. Proposed Copayment
For CY 2009, we are proposing to determine copayment amounts for
new and revised APCs using the same methodology that we implemented for
CY 2004. We refer readers to the November 7, 2003 OPPS final rule with
comment period (68 FR 63458). In addition, we are proposing to use the
same rounding methodology implemented in CY 2008 in instances where the
application of our standard copayment methodology would result in a
copayment amount that is less than 20 percent and cannot be rounded,
under standard rounding principles, to 20 percent. (We refer readers to
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687).) The
proposed national unadjusted copayment amounts for services payable
under the OPPS that would be effective January 1, 2009 are shown in
Addendum A and Addendum B to this proposed rule. As discussed in
section XVI.D. of this proposed rule, we are proposing that the
Medicare beneficiary's minimum unadjusted copayment and national
unadjusted copayment for a service to which a reduced national
unadjusted payment rate applies would equal the product of the
reporting ratio and the national unadjusted copayment, or the product
of the reporting ratio and the minimum unadjusted copayment,
respectively, for the service.
3. Calculation of a Proposed Adjusted Copayment Amount for an APC Group
Individuals interested in calculating their proposed national
copayment liability for a given service provided by a hospital that met
or failed to meet its HOP QDRP reporting requirements should follow the
formulas presented in the following steps.
Step 1. Calculate the beneficiary payment percentage for the APC by
dividing the APC's national unadjusted copayment by its payment rate.
For example, using APC 0019, $71.87 is 24.938 percent of the proposed
full national unadjusted payment rate of $288.20.
The formula below is a mathematical representation of Step 1
discussed above and calculates national copayment as a percentage of
national payment for a given service.

b = Beneficiary payment percentage
b = national unadjusted copayment for APC/national unadjusted payment
rate for APC

Step 2. Calculate the appropriate wage-adjusted payment rate for
the APC for the provider in question, as indicated in section II.G. of
this proposed rule. Calculate the rural adjustment for eligible
providers as indicated in section II.G. of this proposed rule.
Step 3. Multiply the percentage calculated in Step 1 by the payment
rate calculated in Step 2. The result is the wage-adjusted copayment
amount for the APC.
The formula below is a mathematical representation of Step 3
discussed above and applies the beneficiary percentage to the adjusted
payment rate for a service calculated under II.G. above, with and
without the rural adjustment, to calculate the proposed adjusted
beneficiary copayment for a given service.

Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment
* b
Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted
Medicare Payment * 1.071)* b
Step 4. For a hospital that failed to meet its HOP QDRP reporting
requirements, multiply the copayment calculated in Step 3 by the
reporting ratio of 0.981.
The proposed unadjusted copayments for services payable under the
OPPS that would be effective January 1, 2009 are shown in Addenda A and
B to this proposed rule. Please note that the proposed national
unadjusted payment rates and copayment rates shown in Addenda A and B
to this proposed rule reflect the full market basket conversion factor
increase as discussed in section XVI.D. of this proposed rule.

III. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies

A. Proposed OPPS 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 2008
During the April and July quarters of CY 2008, we created a total
of 11 new Level II HCPCS codes that were not addressed in the CY 2008
OPPS/ASC final rule with comment period that updated the CY 2008 OPPS.
For the April quarter of CY 2008, we recognized for separate payment a
total of four new Level II HCPCS codes, specifically C9241 (Injection,
doripenem, 10 mg); Q4096 (Injection, von willebrand factor complex,
human, ristocetin cofactor (not otherwise specified), per i.u.
VWF:RCO); Q4097 (Injection, immune globulin (Privigen), intravenous,
non-lyophilized (e.g., liquid), 500 mg); and Q4098 (Injection, iron
dextran, 50 mg). For the July quarter of CY 2008, we recognized a total
of seven new Level II HCPCS codes, specifically C9242 (Injection,
fosaprepitant, 1 mg); C9356 (Tendon, porous matrix of cross-linked
collagen and glycosaminoglycan matrix (TenoGlide Tendon Protector
Sheet), per square centimeter); C9357 (Dermal substitute, granulated
cross-linked collagen and glycosaminoglycan matrix (Flowable Wound
Matrix), 1 cc); C9358 (Dermal substitute, native, non-denatured
collagen (SurgiMend Collagen Matrix), per 0.5 square centimeters);
G0398 (Home sleep study test (HST) w/type II portable monitor,
unattended; minimum of 7 channels: EEG, EOG, EMG, ECG/heart rate,
airflow, respiratory effort and oxygen saturation); G0399 (Home sleep
test (HST) with type III portable monitor, unattended; minimum of 4
channels: 2 respiratory movement/airflow, 1 ECG/heart rate and 1 oxygen
saturation); and G0400 (Home sleep test (HST) with type IV portable
monitor, unattended; minimum of 3 channels). We designated the payment
status of these codes and added them either through the April update
(Transmittal 1487, Change Request 5999, dated April 8, 2008) or the
July update of the CY 2008 OPPS.
In this proposed rule, we are soliciting public comment on the
status indicators, APC assignments, and payment rates of these codes,
which are listed in Table 10 and Table 11 of this proposed rule.
Because of the timing of this proposed rule, the codes implemented
through the July 2008 OPPS update are not included in Addendum B to
this proposed rule. We

[[Page 41468]]

are proposing to assign these new HCPCS codes for CY 2009 to APCs with
the proposed payment rates as displayed in Table 11 and incorporate
them into Addendum B to our final rule with comment period for CY 2009,
which is consistent with our annual APC updating policy. The HCPCS
codes implemented through the April 2008 OPPS update and displayed in
Table 10 are included in Addendum B to this proposed rule, where their
proposed payment rates can also be found.

Table 10.--New HCPCS Codes Implemented in April 2008
----------------------------------------------------------------------------------------------------------------
Proposed CY 2009 status Proposed CY
HCPCS code Long descriptor indicator 2009 APC
----------------------------------------------------------------------------------------------------------------
C9241................................... Injection, doripenem, 10 mg.... G 9241
Q4096................................... Injection, von willebrand K 1213
factor complex, human,
ristocetin cofactor (not
otherwise specified), per i.u.
VWF:RCO.
Q4097................................... Injection, immune globulin K 1214
(Privigen), intravenous, non-
lyophilized (e.g., liquid),
500 mg.
Q4098................................... Injection, iron dextran, 50 mg. K 1215
----------------------------------------------------------------------------------------------------------------

Table 11.--New HCPCS Codes Implemented in July 2008
----------------------------------------------------------------------------------------------------------------
Proposed CY
Proposed CY 2009 Proposed CY 2009
HCPCS code Long descriptor status indicator 2009 APC payment
rate
----------------------------------------------------------------------------------------------------------------
C9242 *............................ Injection, fosaprepitant, 1 G 9242 $1.61
mg.
C9356 *............................ Tendon, porous matrix of G 9356 16.92
cross-linked collagen and
glycosaminoglycan matrix
(TenoGlide Tendon
Protector Sheet), per
square centimeter.
C9357 *............................ Dermal substitute, G 9357 883.33
granulated cross-linked
collagen and
glycosaminoglycan matrix
(Flowable Wound Matrix), 1
cc.
C9358 *............................ Dermal substitute, native, G 9358 10.38
non-denatured collagen
(SurgiMend Collagen
Matrix), per 0.5 square
centimeters.
G0398.............................. Home sleep study test (HST) S 0213 152.52
with type II portable
monitor, unattended;
minimum of 7 channels:
EEG, EOG, EMG, ECG/heart
rate, airflow, respiratory
effort and oxygen
saturation.
G0399.............................. Home sleep test (HST) with S 0213 152.52
type III portable monitor,
unattended; minimum of 4
channels: 2 respiratory
movement/airflow, 1 ECG/
heart rate and 1 oxygen
saturation.
G0400.............................. Home sleep test (HST) with S 0213 152.52
type IV portable monitor,
unattended; minimum of 3
channels.
----------------------------------------------------------------------------------------------------------------
* The drug payment rates displayed in Table 11 reflect the July 2008 ASP data.

2. Proposed Treatment of New Category I and III CPT Codes and Level II
HCPCS Codes
As has been our practice in the past, we implement new Category I
and III CPT codes and new Level II HCPCS codes through program
transmittals, which are released in the summer through the fall of each
year for annual updating, effective January 1, in the final rule
updating the OPPS for the following calendar year. These codes are
flagged with comment indicator ``NI'' in Addendum B to the OPPS/ASC
final rule with comment period to indicate that we are assigning them
an interim payment status which is subject to public comment.
Specifically, the status indicator, the APC assignment, or both, for
all such codes flagged with comment indicator ``NI'' will be open to
public comment in the CY 2009 OPPS/ASC final rule with comment period.
We are proposing to continue this recognition and process for CY 2009.
New Category I and III CPT codes, as well as new Level II HCPCS codes,
effective January 1, 2009, will be listed in Addendum B to the CY 2009
OPPS/ASC final rule with comment period and designated using comment
indicator ``NI.'' We will respond to all comments received concerning
these codes in a subsequent final rule for the next calendar year's
OPPS/ASC update.
In addition, we are proposing to continue our policy of the last 3
years of recognizing new mid-year CPT codes, generally Category III CPT
codes, that the American Medical Association (AMA) releases in January
for implementation the following July through the OPPS quarterly update
process. Therefore, for CY 2009, we are proposing to include in
Addendum B to the CY 2009 OPPS/ASC final rule with comment period the
new Category III CPT codes released in January 2008 for implementation
on July 1, 2008 (through the OPPS quarterly update process), and the
new Category III codes released in July 2008 for implementation on
January 1, 2009. However, only those new Category III CPT codes
implemented effective January 1, 2009, will be flagged with comment
indicator ``NI'' in Addendum B to the CY 2009 OPPS/ASC final rule with
comment period, to indicate that we have assigned them an interim
payment status which is subject to public comment. Category III CPT
codes implemented in July 2008, which appear in Table 12 below, are
subject to comment through this proposed rule, and we are proposing to
finalize their status in the CY 2009 OPPS/ASC final rule with comment
period.

[[Page 41469]]

TABLE 12.--Category III CPT Codes Implemented in July 2008
----------------------------------------------------------------------------------------------------------------
Proposed CY 2009
CPT code Long descriptor status indicator Proposed CY 2009 APC
----------------------------------------------------------------------------------------------------------------
0188T............................... Remote real-time interactive M Not applicable.
videoconferenced critical
care, evaluation and
management of the
critically ill or
critically injured patient;
first 30-74 minutes.
0189T............................... Remote real-time interactive M Not applicable.
videoconferenced critical
care, evaluation and
management of the
critically ill or
critically injured patient;
each additional 30 minutes.
0190T............................... Placement of intraocular T 0237.
radiation source applicator.
0191T............................... Insertion of anterior T 0234.
segment aqueous drainage
device, without extraocular
reservoir; internal
approach.
0192T............................... Insertion of anterior T 0234.
segment aqueous drainage
device, without extraocular
reservoir; external
approach.
----------------------------------------------------------------------------------------------------------------

B. Proposed OPPS Changes--Variations Within APCs

1. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient services.
Section 1833(t)(2)(B) of the Act provides that this classification
system may be composed of groups of services, so that services within
each group are comparable clinically and with respect to the use of
resources. In accordance with these provisions, we developed a grouping
classification system, referred to as APCs, as set forth in Sec.
419.31 of the regulations. We use Level I and Level II HCPCS codes and
descriptors to identify and group the services within each APC. The
APCs are organized such that each group is homogeneous both clinically
and in terms of resource use. Using this classification system, we have
established distinct groups of similar services, as well as medical
visits. We also have developed separate APC groups for certain medical
devices, drugs, biologicals, therapeutic radiopharmaceuticals, and
brachytherapy devices.
We have packaged into payment for each procedure or service within
an APC group the costs associated with those items or services that are
directly related to and supportive of performing the main independent
procedures or furnishing the services. Therefore, we do not make
separate payment for these packaged items or services. For example,
packaged items and services include: (1) Use of an operating,
treatment, or procedure room; (2) use of a recovery room; (3)
observation services; (4) anesthesia; (5) medical/surgical supplies;
(6) pharmaceuticals (other than those for which separate payment may be
allowed under the provisions discussed in section V. of this proposed
rule); (7) incidental services such as venipuncture; and (8) guidance
services, image processing services, intraoperative services, imaging
supervision and interpretation services, diagnostic
radiopharmaceuticals, and contrast media. Further discussion of
packaged services is included in section II.A.4. of this proposed rule.
In CY 2008, we implemented composite APCs to provide a single
payment for groups of services that are typically performed together
during a single clinical encounter and that result in the provision of
a complete service. Under current CY 2008 OPPS policy, we provide
composite APC payment for certain extended assessment and management
services, low dose rate prostate brachytherapy, cardiac
electrophysiologic evaluation and ablation, and mental health services.
We also are proposing for CY 2009 a composite APC payment methodology
for multiple imaging services. Further discussion of composite APCs is
included in section II.A.2.e. of this proposed rule.
Under the OPPS, we generally pay for hospital outpatient services
on a rate-per-service basis, where the service may be reported with one
or more HCPCS codes. Payment varies according to the APC group to which
the independent service or combination of services is assigned. Each
APC weight represents the hospital median cost of the services included
in that APC relative to the hospital median cost of the services
included in APC 0606 (Level 3 Hospital Clinic Visits). The APC weights
are scaled to APC 0606 because it is the middle level clinic visit APC
(that is, where the level 3 clinic visit CPT code of five levels of
clinic visits is assigned), and because middle level clinic visits are
among the most frequently furnished services in the hospital outpatient
setting.
Section 1833(t)(9)(A) of the Act requires the Secretary to review
the components of the OPPS not less than annually and to revise the
groups and relative payment weights and make other adjustments to take
into account changes in medical practice, changes in technology, and
the addition of new services, new cost data, and other relevant
information and factors. Section 1833(t)(9)(A) of the Act, as amended
by section 201(h) of the BBRA, also requires the Secretary, beginning
in CY 2001, to consult with an outside panel of experts to review the
APC groups and the relative payment weights (the APC Panel
recommendations for specific services for the CY 2009 OPPS and our
responses to them are discussed in the relevant specific sections
throughout this proposed rule).
Finally, section 1833(t)(2) of the Act provides that, subject to
certain exceptions, the items and services within an APC group cannot
be considered comparable with respect to the use of resources if the
highest median cost, or mean cost as elected by the Secretary, for an
item or service in the group is more than 2 times greater than the
lowest median cost for an item or service within the same group
(referred to as the ``2 times rule''). We use the median cost of the
item or service in implementing this provision. The statute authorizes
the Secretary to make exceptions to the 2 times rule in unusual cases,
such as low-volume items and services.
2. Application of the 2 Times Rule
In accordance with section 1833(t)(2) of the Act and Sec. 419.31
of the regulations, we annually review the items and services within an
APC group to determine, with respect to comparability of the use of
resources, if the median cost of the highest cost item or service
within an APC group is more than 2 times greater than the median of the
lowest cost item or service within that same group (``2 times rule'').
We are proposing to make exceptions to this limit on the variation of
costs within each APC group in unusual cases such as low-volume items
and services.

[[Page 41470]]

During the APC Panel's March 2008 meeting, we presented median cost
and utilization data for services furnished during the period of
January 1, 2007 through September 30, 2007, about which we had concerns
or about which the public had raised concerns regarding their APC
assignments, status indicator assignments, or payment rates. The
discussions of most service-specific issues, the APC Panel
recommendations, if any, and our proposals for CY 2009 are contained
principally in sections III.C. and III.D. of this proposed rule.
In addition to the assignment of specific services to APCs that we
discussed with the APC Panel, we also identified APCs with 2 times
violations that were not specifically discussed with the APC Panel but
for which we are proposing changes to their HCPCS codes' APC
assignments in Addendum B to this proposed rule. In these cases, to
eliminate a 2 times violation or to improve clinical and resource
homogeneity, we are proposing to reassign the codes to APCs that
contain services that are similar with regard to both their clinical
and resource characteristics. We also are proposing to rename existing
APCs, discontinue existing APCs, or create new clinical APCs to
complement proposed HCPCS code reassignments. In many cases, the
proposed HCPCS code reassignments and associated APC reconfigurations
for CY 2009 included in this proposed rule are related to changes in
median costs of services that are observed in the CY 2007 claims data
newly available for CY 2009 ratesetting. We also are proposing changes
to the status indicators for some codes that are not specifically and
separately discussed in this proposed rule. In these cases, we are
proposing to change the status indicators for some codes because we
believe that another status indicator would more accurately describe
their payment status from an OPPS perspective based on the policies
that we are proposing for CY 2009 or because we are proposing new
status indicators to differentiate a related group of services from
other services that previously shared the same status indicator.
Addendum B to this proposed rule identifies with comment indicator
``CH'' those HCPCS codes for which we are proposing a change to the APC
assignment or status indicator as assigned in the April 2008 Addendum B
update (via Transmittal 1487, Change Request 5999, dated April 8,
2008). HCPCS codes with proposed CY 2009 changes in status indicator
assignments from ``Q'' to ``Q1,'' from ``Q'' to ``Q2,'' or from ``Q''
to ``Q3'' are an exception to this identification practice because they
are not flagged with comment indicator ``CH'' in Addendum B to this
proposed rule. These proposed changes in status indicators are to
facilitate policy transparency and operational logic rather than
reflect changes in OPPS payment policy for these services, hence we
believe that identifying these HCPCS codes with ``CH'' could be
confusing to the public.
3. Proposed Exceptions to the 2 Times Rule
As discussed earlier, we may make exceptions to the 2 times limit
on the variation of costs within each APC group in unusual cases such
as low-volume items and services. Taking into account the APC changes
that we are proposing for CY 2009 based on the APC Panel
recommendations discussed mainly in sections III.C. and III.D. of this
proposed rule, the other proposed changes to status indicators and APC
assignments as identified in Addendum B to this proposed rule, and the
use of CY 2007 claims data to calculate the median costs of procedures
classified in the APCs, we reviewed all the APCs to determine which
APCs would not satisfy the 2 times rule. We used the following criteria
to decide whether to propose exceptions to the 2 times rule for
affected APCs:
Resource homogeneity
Clinical homogeneity
Hospital outpatient setting
Frequency of service (volume)
Opportunity for upcoding and code fragments.
For a detailed discussion of these criteria, we refer readers to
the April 7, 2000 OPPS final rule with comment period (65 FR 18457).
Table 13 below lists the APCs that we are proposing to exempt from
the 2 times rule for CY 2009 based on the criteria cited above. For
cases in which a recommendation by the APC Panel appeared to result in
or allow a violation of the 2 times rule, we generally accepted the APC
Panel's recommendation because those recommendations were based on
explicit consideration of resource use, clinical homogeneity, hospital
specialization, and the quality of the CY 2007 claims data used to
determine the APC payment rates that we are proposing for CY 2009. The
median costs for hospital outpatient services for these and all other
APCs that were used in the development of this proposed rule can be
found on the CMS Web site at: http://www.cms.hhs.gov/
HospitalOutpatientPPS/01_overview.asp.

Table 13.--Proposed APC Exceptions to the 2 Times Rule for CY 2009
------------------------------------------------------------------------
APC APC title
------------------------------------------------------------------------
0060...................................... Manipulation Therapy.
0080...................................... Diagnostic Cardiac
Catheterization.
0093...................................... Vascular Reconstruction/
Fistula Repair without
Device.
0105...................................... Repair/Revision/Removal of
Pacemakers, AICDs, or
Vascular Devices.
0141...................................... Level I Upper GI Procedures.
0245...................................... Level I Cataract Procedures
without IOL Insert.
0303...................................... Treatment Device
Construction.
0330...................................... Dental Procedures.
0409...................................... Red Blood Cell Tests.
0426...................................... Level II Strapping and Cast
Application.
0432...................................... Health and Behavior
Services.
0604...................................... Level 1 Hospital Clinic
Visits.
------------------------------------------------------------------------

C. New Technology APCs

1. Background
In the November 30, 2001 final rule (66 FR 59903), we finalized
changes to the time period a service was eligible for payment under a
New Technology APC. Beginning in CY 2002, we retain services within New
Technology APC groups until we gather sufficient claims data to enable
us to assign the service to a clinically appropriate APC. This policy
allows us to move a service from a New Technology APC in less than 2
years if sufficient data are available. It also allows us to retain a
service in a New Technology APC for more than 2 years if sufficient
data upon which to base a decision for reassignment have not been
collected.
We note that the cost bands for New Technology APCs range from $0
to $50 in increments of $10, from $50 to $100 in increments of $50,
from $100 through $2,000 in increments of $100, and from $2,000 through
$10,000 in increments of $500. These increments, which are in two
parallel sets of New Technology APCs, one with status indicator ``S''
and the other with status indicator ``T,'' allow us to price new
technology services more appropriately and consistently.
2. Proposed Movement of Procedures from New Technology APCs to Clinical
APCs
As we explained in the November 30, 2001 final rule (66 FR 59897),
we generally keep a procedure in the New Technology APC to which it is
initially assigned until we have collected data sufficient to enable us
to move the procedure to a clinically appropriate

[[Page 41471]]

APC. However, in cases where we find that our original New Technology
APC assignment was based on inaccurate or inadequate information, or
where the New Technology APCs are restructured, we may, based on more
recent resource utilization information (including claims data) or the
availability of refined New Technology APC cost bands, reassign the
procedure or service to a different New Technology APC that most
appropriately reflects its cost.
Consistent with our current policy, for CY 2009 we are proposing to
retain services within New Technology APC groups until we gather
sufficient claims data to enable us to assign the service to a
clinically appropriate APC. The flexibility associated with this policy
allows us to move a service from a New Technology APC in less than 2
years if sufficient data are available. It also allows us to retain a
service in a New Technology APC for more than 2 years if sufficient
hospital claims data upon which to base a decision for reassignment
have not been collected. HCPCS codes C9725 (Placement of endorectal
intracavitary applicator for high intensity brachytherapy), C9726
(Placement and removal (if performed) of applicator into breast for
radiation therapy), and C9727 (Insertion of implants into the soft
palate; minimum of three implants), which are presented below in Table
14 of this proposed rule, represent services assigned to New Technology
APCs for CY 2008 for which we believe we have sufficient claims data to
propose their reassignment to clinically appropriate APCs for CY 2009.
These 3 procedures have been assigned to their New Technology APCs for
at least 3 years, thereby providing us with sufficient data from at
least 2 years of hospital claims upon which to base our proposed
reassignments. In addition, these three procedures are clinically
similar to other services currently paid through clinical APCs under
the OPPS and for which we have substantial claims data regarding
hospital costs. Therefore, for CY 2009, we are proposing to reassign
these procedures to clinically appropriate APCs, applying their CY 2007
claims data to develop their clinical APC median costs upon which
payments would be based. These procedures and their proposed APC
assignments are displayed in Table 14 below.
HCPCS code C9723 (Dynamic infrared blood perfusion imaging (diri))
was assigned to New Technology APC 1502 (New Technology--Level II ($50-
$100)) when it was implemented in April 2005. However, based on our
claims data for the past 3 years, which have shown no utilization for
this code, we are proposing to delete HCPCS code C9723 on December 31,
2008.

Table 14.--Proposed CY 2009 APC Reassignments of New Technology Procedures to Clinical APCs
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
HCPCS code Short descriptor CY 2008 SI CY 2008 APC 2009 APC 2009 SI
----------------------------------------------------------------------------------------------------------------
C9725.......................... Placement of S 1507 0164 T
endorectal
intracavitary
applicator for
high intensity
brachytherapy.
C9726.......................... Placement and S 1508 0028 T
removal (if
performed) of
applicator into
breast for
radiation therapy.
C9727.......................... Insertion of S 1510 0252 T
implants into the
soft palate;
minimum of three
implants.
----------------------------------------------------------------------------------------------------------------

D. Proposed OPPS APC-Specific Policies

1. Trauma Response Associated With Hospital Critical Care Services (APC
0618)
In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68133
through 68134), we discussed the creation of HCPCS code G0390 (Trauma
response team activation associated with hospital critical care
service), which became effective January 1, 2007. HCPCS code G0390 is
reported by hospitals when providing critical care services in
association with trauma response team activation. HCPCS code G0390 has
been assigned to APC 0618 (Trauma Response with Critical Care) since CY
2007, with payment rates of approximately $495 and $330, for CYs 2007
and 2008, respectively. The creation of HCPCS code G0390 enables us to
pay differentially for critical care when trauma response team
activation is associated with critical care services and when there is
no trauma response team activation. We instructed hospitals to continue
to report CPT codes 99291 (Critical care, evaluation and management of
the critically ill or critically injured patient; first 30-74 minutes)
and 99292 (Critical care, evaluation and management of the critically
ill or critically injured patient; each additional 30 minutes (List
separately in addition to code for primary service)) for critical care
services when they also report HCPCS code G0390.
For CY 2007 and CY 2008, we calculated the median cost for APC 0617
(Critical Care) to which CPT code 99291 is assigned using the subset of
single claims for CPT code 99291 that did not include charges under
revenue code 068x, the trauma revenue code, reported on the same day.
We established the median cost for APC 0618 (Trauma Response with
Critical Care) by calculating the difference in median costs between
the two subsets of single claims for CPT code 99291 representing the
reporting of critical care services with and without revenue code 068x
charges reported on the same day. For a complete description of the
history of the policy and development of the payment methodology for
these services, we refer readers to the CY 2007 OPPS/ASC final rule
with comment period (71 FR 68133 through 68134). We provided billing
guidance in CY 2006 in Transmittal 1139, Change Request 5438, issued on
December 22, 2006, specifically clarifying when it would be appropriate
to report HCPCS code G0390. The I/OCE logic only accepts HCPCS code
G0390 when it is reported with revenue code 068x and CPT code 99291 on
the same claim and on the same date of service.
For CY 2009, we are proposing a median cost for APC 0617 of
approximately $488 and a median cost for APC 0618 of approximately
$989. For CY 2009 OPPS ratesetting, we are using claims data from CY
2007 that also include claims for HCPCS code G0390, as CY 2007 is the
initial year that we established OPPS payment for HCPCS code G0390. We
are proposing to use the line-item median cost for HCPCS code G0390 in
the CY 2007 claims to set the median cost for APC 0618, as HCPCS code
G0390 is the only code assigned to that APC. As discussed in section
II.A.1.b. of this proposed rule, we are proposing to add HCPCS code
G0390 to the CY 2009 bypass list to isolate the line-item cost for
HCPCS code G0390 and ensure that the critical

[[Page 41472]]

care claims for CPT code 99291 that are reported with HCPCS code G0390
are available to set the medians for APC 0617 and composite APC 8003.
The costs of packaged revenue code charges and HCPCS codes for services
with status indicator ``N'' on a claim with HCPCS code G0390 would be
associated with CPT code 99291 for ratesetting, if the claim for CPT
code 99291 is a single or ``pseudo'' single bill.
For APC 0617, we are proposing to calculate the median cost using
our standard methodology that excludes those single claims for critical
care services that are eligible for payment through the Level II
extended assessment and management composite APC, that is APC 8003, as
described in section II.A.2.e.(1) of this proposed rule. We believe
that these proposed refinements in median cost calculations would
result in more accurate cost estimates and payments for APCs 0617 and
0618 for CY 2009.
2. Suprachoroidal Delivery of Pharmacologic Agent (APC 0236)
CPT code 0186T (Suprachoroidal delivery of pharmacologic agent
(does not include supply of medication)) is a new code for CY 2008. It
was released on the AMA CPT Web site on July 1, 2007, and implemented
on January 1, 2008. In the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66997), we assigned this code to APC 0236 (Level II
Posterior Segment Eye Procedures) with a CY 2008 payment rate of
approximately $1,161. We also assigned this code comment indicator
``NI'' in Addendum B to the CY 2008 OPPS/ASC final rule with comment
period to indicate that it is a new code for CY 2008 with an interim
payment status subject to public comment following publication of that
rule.
As has been our practice in the past, we implement new HCPCS codes
in the OPPS/ASC final rule with comment period, at which time we invite
public comment on our interim treatment of the new codes. We
subsequently respond to those comments in the final rule with comment
period for the following year's OPPS update.
In its March 2008 presentation to the APC Panel, a presenter
requested the reassignment of CPT code 0186T from APC 0236 to APC 0237
(Level III Posterior Segment Eye Procedures), which has a CY 2008
payment rate of approximately $1,774. The presenter indicated that CPT
code 0186T is analogous to CPT code 67027 (Implantation of intravitreal
drug delivery system (e.g., ganciclovir implant), includes concomitant
removal of vitreous), which is assigned to APC 0672 (Level IV Posterior
Segment Eye Procedures) with a CY 2008 payment rate of about $2,370.
Although the presenter stated that both procedures share similar
clinical characteristics and resource costs, the presenter believed
that CPT code 0186T would be most appropriately assigned to APC 0237
based on the procedure's estimated hospital cost. The APC Panel noted
that because the CPT code is new and there are no claims data for this
procedure, the APC Panel would not make a specific CY 2009 APC
assignment recommendation to CMS at this time. However, the APC Panel
recommended that CMS share with the APC Panel the claims data for CPT
code 0186T at the first CY 2009 APC Panel meeting, and that CMS
reevaluate the assignment of CPT code 0186T to APC 0236 on the basis of
those data. We are accepting the recommendation of the APC Panel and
will provide the initial OPPS claims data available for this CPT code,
based on CY 2008 claims data, for the first CY 2009 APC Panel meeting.
These data will not be available until the CY 2010 OPPS update
rulemaking cycle.
Under the OPPS, we generally assign a new Category III CPT code to
an APC if we believe that the procedure, if covered, would be
appropriate for separate payment under the OPPS. A specific assignment
to a clinical APC where HCPCS codes with comparable clinical and
resource characteristics also reside is based on a variety of types of
information including, but not limited to: Advice from our medical
advisors, information from specialty societies, review of resource
costs for related services from historical hospital claims data,
consideration of the clinical similarity of the service to existing
procedures, and review of any other information available to us.
Based upon our further review and analysis of the clinical
characteristics and resource costs associated with CPT code 0186T, we
agree with the presenter that the most appropriate CY 2009 APC
assignment for this procedure is APC 0237. We believe that the other
procedures also assigned to APC 0237 are similar to the procedure
described by CPT code 0186T. Therefore, for CY 2009, we are proposing
to reassign CPT code 0186T from APC 0236 to APC 0237, which has a
proposed median cost of approximately $1,447. We also note that because
CPT code 0186T describes a specific drug administration service, the
drug itself would be separately reported under the appropriate Level II
HCPCS drug code.
3. Closed Treatment of Fracture of Finger/Toe/Trunk (APC 0043)
We received a comment to the CY 2008 OPPS/ASC proposed rule on the
variety of procedures assigned to APC 0043 (Closed Treatment Fracture
Finger/Toe/Trunk). The commenter did not agree with the placement of
various procedures in APC 0043 as many of the procedures vary in
resource costs. In particular, the commenter asserted that the costs
associated with finger treatments, hip dislocations, and spinal
fractures vary significantly, and further stated that the costs of
treating spinal fractures are significantly greater than the costs
associated with finger or toe fractures. The commenter also expressed
concern that grouping all of the approximately 150 procedures in one
clinical APC violated the 2 times rule, and that continuing to exempt
APC 0043 from the 2 times rule was not appropriate. The commenter
recommended that CMS pay appropriately for these procedures, and stated
that this could be achieved by dividing the procedures currently
assigned to APC 0043 into several APCs. However, the commenter did not
make any specific recommendations regarding alternative APC
configurations. Because APC 0043 contains so many different fracture
treatment procedures with low volume, we were concerned that any
restructuring for CY 2008 without the benefit of public comment could
result in the reconfiguration of APCs that did not reflect improved
clinical and resource homogeneity over the proposed configuration.
Therefore, we did not reconfigure APC 0043 for CY 2008, and we
finalized a payment rate for APC 0043 of about $113.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66723), we stated that we agreed with the commenter that grouping all
of the closed fracture treatment procedures in one APC may not
accurately distinguish the more expensive from the less resource-
intensive fracture treatment procedures. However, we also explained
that we found that there were only 13 procedures that were significant
procedures with the frequency necessary to assess the APC's alignment
with the 2 times rule. The other procedures were all very low volume
and, therefore, not significant procedures for purposes of evaluating
the APC with respect to the 2 times rule. We noted that APC 0043 has
been exempted from the 2 times rule for the past 7 years under the
OPPS, and we had not previously received public comments regarding the
structure of this APC. In that same rule (72 FR 66723) we

[[Page 41473]]

specifically invited public recommendations on potential alternative
APC configurations for the services currently assigned to APC 0043 for
the CY 2009 APC review process. We received no public comments on this
APC issue.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66723), we also stated that we would bring this APC issue to the
attention of the APC Panel at its March 2008 meeting and requested
input as to how to most appropriately categorize the procedures in APC
0043. Based on the updated CY 2007 hospital outpatient claims data
available for the March 2008 APC Panel meeting, we presented a possible
reconfiguration of APC 0043 for the APC Panel's consideration. In
particular, the potential reconfiguration reviewed and discussed by the
APC Panel would delete APC 0043 and replace it with three new APCs,
configured based on the hospital resource data from the CY 2007 claims
data, as well as the clinical characteristics of the procedures
currently assigned to APC 0043. The APC Panel recommended that CMS
adopt the approach that CMS described to the APC Panel to reconfigure
APC 0043 into three new APCs, and we are accepting the APC Panel's
recommendation for CY 2009. Therefore, for CY 2009, we are proposing
three new APCs to replace APC 0043, with proposed configurations as
displayed in Table 15 below.
Based on these configurations, proposed new APC 0129 (Level I
Closed Treatment Fracture Finger/Toe/Trunk) has a proposed APC median
cost of approximately $104, with the HCPCS code-specific median costs
of the significant procedures ranging from approximately $74 to $124.
Proposed new APC 0138 (Level II Closed Treatment Fracture Finger/Toe/
Trunk) has a proposed APC median cost of approximately $397, with only
one significant procedure with a HCPCS code-specific median cost of
approximately $399. Proposed new APC 0139 (Level III Closed Treatment
Fracture Finger/Toe/Trunk) has a proposed APC median cost of
approximately $1,340, with only one significant volume HCPCS code whose
median cost is approximately $1,574.
While all three proposed APCs contain many procedures that are very
low in volume, this reconfiguration reflects an attempt to realign the
procedures previously assigned to APC 0043 based on their clinical
characteristics and resource costs into APC groups that are more
homogeneous. Therefore, for CY 2009, we are proposing to reconfigure
APC 0043 by deleting APC 0043 and reassigning the HCPCS codes
previously assigned to APC 0043 to proposed new APCs 0129, 0138, and
0139.

Table 15.--Proposed New APCs for Closed Treatment Fracture of Finger/Toe/Trunk
----------------------------------------------------------------------------------------------------------------
Proposed CY
Proposed CY 2009 new APC HCPCS code SI Short descriptor 2009 APC
median cost
----------------------------------------------------------------------------------------------------------------
0129................................ 21800 T Treatment of rib fracture... $103.52
21820 T Treat sternum fracture......
22305 T Treat spine process fracture
23500 T Treat clavicle fracture.....
23540 T Treat clavicle dislocation..
23570 T Treat shoulder blade fx.....
23600 T Treat humerus fracture......
23620 T Treat humerus fracture......
23650 T Treat shoulder dislocation..
23675 T Treat dislocation/fracture..
23929 T Shoulder surgery procedure..
24500 T Treat humerus fracture......
24505 T Treat humerus fracture......
24530 T Treat humerus fracture......
24560 T Treat humerus fracture......
24565 T Treat humerus fracture......
24576 T Treat humerus fracture......
24600 T Treat elbow dislocation.....
24640 T Treat elbow dislocation.....
24650 T Treat radius fracture.......
24670 T Treat ulnar fracture........
24675 T Treat ulnar fracture........
24999 T Upper arm/elbow surgery.....
25500 T Treat fracture of radius....
25530 T Treat fracture of ulna......
25535 T Treat fracture of ulna......
25560 T Treat fracture radius & ulna
25600 T Treat fracture radius/ulna..
25622 T Treat wrist bone fracture...
25630 T Treat wrist bone fracture...
25650 T Treat wrist bone fracture...
25660 T Treat wrist dislocation.....
25675 T Treat wrist dislocation.....
25680 T Treat wrist fracture........
25999 T Forearm or wrist surgery....
26600 T Treat metacarpal fracture...
26605 T Treat metacarpal fracture...
26641 T Treat thumb dislocation.....
26670 T Treat hand dislocation......
26700 T Treat knuckle dislocation...
26705 T Treat knuckle dislocation...

[[Page 41474]]

26720 T Treat finger fracture, each.
26725 T Treat finger fracture, each.
26740 T Treat finger fracture, each.
26742 T Treat finger fracture, each.
26750 T Treat finger fracture, each.
26755 T Treat finger fracture, each.
26770 T Treat finger dislocation....
26989 T Hand/finger surgery.........
27193 T Treat pelvic ring fracture..
27200 T Treat tail bone fracture....
27220 T Treat hip socket fracture...
27230 T Treat thigh fracture........
27250 T Treat hip dislocation.......
27256 T Treat hip dislocation.......
27265 T Treat hip dislocation.......
27267 T Cltx thigh fx...............
27299 T Pelvis/hip joint surgery....
27501 T Treatment of thigh fracture.
27503 T Treatment of thigh fracture.
27508 T Treatment of thigh fracture.
27516 T Treat thigh fx growth plate.
27517 T Treat thigh fx growth plate.
27520 T Treat kneecap fracture......
27530 T Treat knee fracture.........
27538 T Treat knee fracture(s)......
27550 T Treat knee dislocation......
27560 T Treat kneecap dislocation...
27599 T Leg surgery procedure.......
27750 T Treatment of tibia fracture.
27760 T Cltx medial ankle fx........
27767 T Cltx post ankle fx..........
27768 T Cltx post ankle fx w/mnpj...
27780 T Treatment of fibula fracture
27786 T Treatment of ankle fracture.
27788 T Treatment of ankle fracture.
27808 T Treatment of ankle fracture.
27816 T Treatment of ankle fracture.
27824 T Treat lower leg fracture....
27830 T Treat lower leg dislocation.
27899 T Leg/ankle surgery procedure.
28400 T Treatment of heel fracture..
28430 T Treatment of ankle fracture.
28435 T Treatment of ankle fracture.
28450 T Treat midfoot fracture, each
28455 T Treat midfoot fracture, each
28470 T Treat metatarsal fracture...
28475 T Treat metatarsal fracture...
28490 T Treat big toe fracture......
28495 T Treat big toe fracture......
28510 T Treatment of toe fracture...
28515 T Treatment of toe fracture...
28530 T Treat sesamoid bone fracture
28540 T Treat foot dislocation......
28600 T Treat foot dislocation......
28605 T Treat foot dislocation......
28630 T Treat toe dislocation.......
28660 T Treat toe dislocation.......
28899 T Foot/toes surgery procedure.
0138................................ 20660 T Apply, rem fixation device.. 397.39
22310 T Treat spine fracture........
23520 T Treat clavicle dislocation..
23525 T Treat clavicle dislocation..
23545 T Treat clavicle dislocation..
23575 T Treat shoulder blade fx.....
23665 T Treat dislocation/fracture..
24535 T Treat humerus fracture......
24577 T Treat humerus fracture......
24655 T Treat radius fracture.......
25505 T Treat fracture of radius....

[[Page 41475]]

25520 T Treat fracture of radius....
25565 T Treat fracture radius & ulna
25605 T Treat fracture radius/ulna..
25624 T Treat wrist bone fracture...
25635 T Treat wrist bone fracture...
26340 T Manipulate finger w/anesth..
26645 T Treat thumb fracture........
26675 T Treat hand dislocation......
27238 T Treat thigh fracture........
27246 T Treat thigh fracture........
27500 T Treatment of thigh fracture.
27510 T Treatment of thigh fracture.
27810 T Treatment of ankle fracture.
27818 T Treatment of ankle fracture.
27840 T Treat ankle dislocation.....
28570 T Treat foot dislocation......
0139................................ 22315 T Treat spine fracture........ 1,339.53
23505 T Treat clavicle fracture.....
23605 T Treat humerus fracture......
23625 T Treat humerus fracture......
24620 T Treat elbow fracture........
25259 T Manipulate wrist w/anesthes.
25690 T Treat wrist dislocation.....
26607 T Treat metacarpal fracture...
26706 T Pin knuckle dislocation.....
27502 T Treatment of thigh fracture.
27532 T Treat knee fracture.........
27752 T Treatment of tibia fracture.
27762 T Cltx med ankle fx w/mnpj....
27781 T Treatment of fibula fracture
27825 T Treat lower leg fracture....
27831 T Treat lower leg dislocation.
28405 T Treatment of heel fracture..
28575 T Treat foot dislocation......
----------------------------------------------------------------------------------------------------------------

4. Individual Psychotherapy (APCs 0322 and 0323)
APC 0323 (Extended Individual Psychotherapy) had a 2 times rule
violation for CYs 2007 and 2008, and was exempted from the 2 times rule
during those years. APC 0323 would continue to have a 2 times rule
violation in CY 2009 if its configuration is not adjusted. In the CY
2008 OPPS/ASC final rule with comment period (72 FR 66739), we agreed
to review APC 0323 at the next APC Panel meeting and seek the APC
Panel's guidance in reconfiguring this APC for CY 2009.
It was brought to our attention that a handful of CPT codes
describe psychotherapy services that could be appropriately provided
and reported as part of a partial hospitalization program, but would
not otherwise be appropriately reported by a HOPD for those
psychotherapy services. Specifically, the category heading in the 2008
CPT book specifies that the CPT codes listed in Table 16 below are to
be reported for services provided in an ``inpatient hospital, partial
hospital, or residential care facility.'' These CPT codes have been
assigned to APCs 0322 (Brief Individual Psychotherapy) and 0323 since
the implementation of the OPPS.

Table 16.--Inpatient Hospital, Partial Hospital, or Residential Care
Facility Psychotherapy Codes
------------------------------------------------------------------------
CPT code Long descriptor
------------------------------------------------------------------------
90816........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an inpatient hospital,
partial hospital or residential care
setting, approximately 20 to 30 minutes
face-to-face with the patient;
90817........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an inpatient hospital,
partial hospital or residential care
setting, approximately 20 to 30 minutes
face-to-face with the patient; with
medical evaluation and management
services.
90818........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an inpatient hospital,
partial hospital or residential care
setting, approximately 45 to 50 minutes
face-to-face with the patient;
90819........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an inpatient hospital,
partial hospital or residential care
setting, approximately 45 to 50 minutes
face-to-face with the patient; with
medical evaluation and management.
90821........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an inpatient hospital,
partial hospital or residential care
setting, approximately 75 to 80 minutes
face-to-face with the patient;

[[Page 41476]]

90822........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an inpatient hospital,
partial hospital or residential care
setting, approximately 75 to 80 minutes
face-to-face with the patient; with
medical evaluation and management
services.
90823........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an inpatient hospital, partial
hospital or residential care setting,
approximately 20 to 30 minutes face-to-
face with the patient;
90824........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an inpatient hospital, partial
hospital or residential care setting,
approximately 20 to 30 minutes face-to-
face with the patient; with medical
evaluation and management services.
90826........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an inpatient hospital, partial
hospital or residential care setting,
approximately 45 to 50 minutes face-to-
face with the patient;
90827........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an inpatient hospital, partial
hospital or residential care setting,
approximately 45 to 50 minutes face-to-
face with the patient; with medical
evaluation and management services.
90828........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an inpatient hospital, partial
hospital or residential care setting,
approximately 75 to 80 minutes face-to-
face with the patient;
90829........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an inpatient hospital, partial
hospital or residential care setting,
approximately 75 to 80 minutes face-to-
face with the patient; with medical
evaluation and management services.
------------------------------------------------------------------------

The 2008 CPT book also includes a parallel set of CPT codes whose
category heading in the CPT book specifies that these codes are to be
reported for services provided in the office or other outpatient
facilities. These CPT codes are listed in Table 17. These CPT codes
have also been assigned to APCs 0322 and 0323 since the implementation
of the OPPS.

Table 17.--Office or Other Outpatient Facility Psychotherapy Codes
------------------------------------------------------------------------
CPT code Long descriptor
------------------------------------------------------------------------
90804........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an office or outpatient
facility, approximately 20 to 30 minutes
face-to-face with the patient;
90805........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an office or outpatient
facility, approximately 20 to 30 minutes
face-to-face with the patient; with
medical evaluation and management
services.
90806........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an office or outpatient
facility, approximately 45 to 50 minutes
face-to-face with the patient;
90807........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an office or outpatient
facility, approximately 45 to 50 minutes
face-to-face with the patient; with
medical evaluation and management.
90808........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an office or outpatient
facility, approximately 75 to 80 minutes
face-to-face with the patient;
90809........................ Individual psychotherapy, insight
oriented, behavior modifying and/or
supportive, in an office or outpatient
facility, approximately 75 to 80 minutes
face-to-face with the patient; with
medical evaluation and management
services.
90810........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an office or outpatient facility,
approximately 20 to 30 minutes face-to-
face with the patient;
90811........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an office or outpatient facility,
approximately 20 to 30 minutes face-to-
face with the patient; with medical
evaluation and management services.
90812........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an office or outpatient facility,
approximately 45 to 50 minutes face-to-
face with the patient;
90813........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an office or outpatient facility,
approximately 45 to 50 minutes face-to-
face with the patient; with medical
evaluation and management services.
90814........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an office or outpatient facility,
approximately 75 to 80 minutes face-to-
face with the patient;
90815........................ Individual psychotherapy, interactive,
using play equipment, physical devices,
language interpreter, or other
mechanisms of non-verbal communication,
in an office or outpatient facility,
approximately 75 to 80 minutes face-to-
face with the patient; with medical
evaluation and management services.
------------------------------------------------------------------------

Our CY 2007 claims data for this proposed rule (excluding all
claims for partial hospitalization services) include approximately
10,000 OPPS claims for CPT codes 90816 through 90829, compared with
approximately 500,000 claims for CPT codes 90804 through 90815. We are
unclear as to what HOPD services these claims for CPT codes 90816
through 90829 represent and believe that these may be miscoded claims.
We do not believe that CPT codes 90816 through 90829 could be
appropriately reported for hospital outpatient services that are not
part of a partial hospitalization program. Therefore, for CY 2009, we
are proposing to assign status indicator ``P'' to CPT codes 90816
through 90829, indicating that these services may be billed
appropriately and paid under the

[[Page 41477]]

OPPS only when they are part of a partial hospitalization program.
Partial hospitalization services are not included in our ratesetting
process for nonpartial hospitalization OPPS services. Under this
proposal, hospitals would continue to report CPT codes 90804 through
90815 for individual psychotherapy services provided in the HOPD that
are not part of partial hospitalization services, consistent with CPT
instructions.
We recalculated the median costs for APCs 0322 and 0323, after
assigning status indicator ``P'' to CPT codes 90816 through 90829. As
partial hospitalization services only, the claims data for these codes
would only be considered for ratesetting with respect to partial
hospitalization services paid through the two proposed CY 2009 partial
hospitalization APCs, specifically APC 0172 (Level I Partial
Hospitalization (3 services)) and APC 0173 (Level II Partial
Hospitalization (4 or more services)), and no historical hospital
claims data would continue to map to APCs 0322 and 0323. We refer
readers to section X.B. of this proposed rule for a complete discussion
of the proposed CY 2009 partial hospitalization payment policy. The CY
2009 proposed median costs for APCs 0322 and 0323 are approximately $88
and $108, respectively. This new configuration for APC 0323 eliminates
the longstanding 2 times violation for this APC, although the median
cost remains approximately the same as it was for CYs 2007 and 2008.
During its March 2008 APC Panel meeting, the APC Panel recommended
that CMS restructure APC 0323 as described above, and that a similar
restructuring be considered for APC 0322. For CY 2009, we are adopting
the APC Panel's recommendation and, therefore, we are proposing to
assign status indicator ``P'' to CPT codes 90816 through 90829.
5. Implant Injection for Vesicoureteral Reflex (APC 0162)
Following publication of the CY 2008 OPPS/ASC final rule with
comment period, several members of the public contacted us to express
their concerns regarding decreased access to and inadequate payment for
CPT code 52327 (Cystourethroscopy, including ureteral catheterization,
with subureteric injection of implant material). The CY 2008 OPPS
payment for this procedure, which is assigned to APC 0162 (Level III
Cystourethroscopy and other Genitourinary Procedures), is approximately
$1,578. This procedure is primarily performed on pediatric patients to
correct an anatomical defect that causes urine to reflux back to the
kidneys (vesicoureteral reflux disease or VUR). From the perspective of
these stakeholders, the assignment of this procedure to APC 0162
provides inadequate payment to cover the hospital's cost for the
procedure, which they asserted requires expensive implant material.
Specifically, they stated that the currently available CPT and Level II
HCPCS coding lacks the specificity needed to properly account for the
cost of the ureteral implant, resulting in inadequate payment for this
procedure. In addition to receiving several letters on this subject, we
also met with several stakeholders about the concerns of pediatric
urologists regarding decreased access to and inadequate payment for
performance of this procedure.
At the March 2008 APC Panel meeting, a presenter requested that the
APC Panel recommend reassignment of CPT code 52327 from APC 0162 to APC
0385 (Level I Prosthetic Urological Procedures), which has a CY 2008
payment rate of approximately $5,327. The presenter indicated that
while CPT code 52327 is clinically similar to other procedures assigned
to APC 0162, it is not similar in terms of resource utilization. The
presenter stated that CPT code 52327 is the only procedure assigned to
APC 0162 that uses a high cost implant, yet it is paid the same as
procedures that do not. The APC Panel recommended that CMS consider
reassigning CPT code 52327 to a more appropriate APC.
Based upon our further review and analysis of the clinical
characteristics and resource costs associated with the procedure, we
are accepting the APC Panel's recommendation and proposing to reassign
CPT code 52327 to APC 0163 (Level IV Cystourethroscopy and other
Genitourinary Procedures) for CY 2009. The median cost of CPT code
52327 is approximately $2,030 based on 246 single claims available for
this proposed rule. The proposed median cost of APC 0163 is
approximately $2,388, and the median costs of significant procedures in
this APC range from approximately $1,951 to $2,526. A number of the
procedures assigned to APC 0163 are clinically similar to CPT code
52327, involving the use of a cystoscope and the implantation of
devices. Based on our review of its clinical and resource
characteristics, we believe the most appropriate CY 2009 APC assignment
for CPT code 52327 is APC 0163. Therefore, for CY 2009, we are
proposing to reassign CPT code 52327 from APC 0162 to APC 0163, with a
proposed median cost of approximately $2,388.

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
Section 1833(t)(6)(B)(iii) of the Act requires that, under the
OPPS, a category of devices be eligible for transitional pass-through
payments for at least 2, but not more than 3, years. This period begins
with the first date on which a transitional pass-through payment is
made for any medical device that is described by the category. We may
establish a new device category for pass-through payment in any
quarter. Under our established policy, we base the expiration dates for
the category codes on the date on which a category was first eligible
for pass-through payment. We propose and finalize the dates for
expiration of pass-through payments for device categories as part of
the OPPS annual update.
Two currently eligible categories, C1821 (Interspinous process
distraction device (implantable)) and L8690 (Auditory osseointegrated
device, includes all internal and external components), were
established for pass-through payment as of January 1, 2007. These two
device categories will be eligible for pass-through payment for 2 years
through December 31, 2008. In the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66751), we finalized our policy to expire these
two categories from pass-through device payment after December 31,
2008.
We also have an established policy to package the costs of the
devices no longer eligible for pass-through payments into the costs of
the procedures with which the devices are reported in the claims data
used to set the payment rates (67 FR 66763). Brachytherapy sources,
which are now separately paid in accordance with section 1833(t)(2)(H)
of the Act, are an exception to this established policy.
b. Proposed Policy
For CY 2009, we are implementing the final decisions that we
discussed in the CY 2008 OPPS/ASC final rule with comment period that
finalizes the expiration date of pass-through status for device
categories C1821 and L8690. Therefore, as of January 1, 2009, we will
discontinue pass-through payment for device category codes C1821 and
L8690. In accordance with our established policy, we will package the
costs of the devices assigned to these device categories into the costs
of the procedures with which the devices were

[[Page 41478]]

billed in CY 2007, the year of hospital claims data used for this OPPS
update.
We currently have no established device categories eligible for
pass-through payment that are continuing into CY 2009. We continue to
evaluate applications for devices pass-through payment on an ongoing
basis. We may establish a new device category in any quarter, and we
will advise the public of our decision to establish a new device
category in a subsequent quarter in CY 2008 through the transmittal
that implements the OPPS update for the applicable quarter. We would
then propose an expiration date for such new categories in future OPPS
annual updates.
2. Proposed Provisions for Reducing Transitional Pass-Through Payments
To Offset Costs Packaged Into APC Groups
a. Background
We have an established policy to estimate the portion of each APC
payment rate that could reasonably be attributed to the cost of the
associated devices that are eligible for pass-through payments (66 FR
59904). We deduct from the pass-through payments for identified device
categories eligible for pass-through payments an amount that reflects
the portion of the APC payment amount that we determine is associated
with the cost of the device, defined as the APC offset amount, as
required by section 1833(t)(6)(D)(ii) of the Act. We have consistently
employed an established methodology to estimate the portion of each APC
payment rate that could reasonably be attributed to the cost of an
associated device eligible for pass-through payment, using claims data
from the period used for the most recent recalibration of the APC rates
(72 FR 66751 through 66752). We establish and update the applicable APC
offset amounts for eligible pass-through device categories through the
transmittals that implement the quarterly OPPS updates.
b. Proposed Policy
We are proposing to continue our established policies for
calculating and setting the APC offset amounts for each device category
eligible for pass-through payment. We are also proposing to continue to
review each new device category on a case-by-case basis, to determine
whether device costs associated with the new category are packaged into
the existing APC structure. If device costs packaged into the existing
APC structure are associated with the new category, we would deduct the
APC offset amount from the pass-through payment for the device
category.

B. Proposed Adjustment to OPPS Payment for Partial or Full Credit
Devices

1. Background
In recent years there have been several field actions and recalls
as a result of implantable device failures. In many of these cases, the
manufacturers have offered devices without cost to the hospital or with
credit for the device being replaced if the patient required a more
expensive device. In order to ensure that payment rates for procedures
involving devices reflect only the full costs of those devices, our
standard rate-setting methodology for device-dependent APCs uses only
claims that contain the correct device code for the procedure, do not
contain token charges, and do contain the ``FB'' modifier signifying
that the device was furnished without cost or with a full credit.
To ensure equitable payment when the hospital receives a device
without cost or with full credit, in CY 2007 we implemented a policy to
reduce the payment for specified device-dependent APCs by the estimated
portion of the APC payment attributable to device costs (that is, the
device offset) when the hospital receives a specified device at no cost
or with full credit. Hospitals are instructed to report such full
credit/no cost cases using the ``FB'' modifier on the line with the
procedure code in which the free device is used. In cases in which the
device is furnished without cost, the hospital is to report a token
device charge of less than $1.01. In cases in which the device being
inserted is an upgrade (either of the same type of device or to a
different type of device) with a full credit for the device being
replaced, the hospital is to report as the device charge the difference
between its usual charge for the replacement device being implanted and
its usual charge for the replaced device for which it received full
credit. In CY 2008, we expanded this payment adjustment policy to
include cases in which hospitals receive partial credits of 50 percent
or more of the cost of a specified device. Hospitals are instructed to
append the ``FC'' modifier to the procedure code that reports the
service provided to furnish the device when they receive a partial
credit of 50 percent or more of the cost of the new device. In CY 2008,
OPPS payment for the implantation procedure is reduced by 100 percent
of the device offset for full credit/no cost cases when both a
specified device code is present on the claim and the procedure code
maps to a specified APC. Payment for the implantation procedure is
reduced by 50 percent of the device offset for partial credit cases
when both a specified device code is present on the claim and the
procedure code maps to a specified APC. Beneficiary copayment is based
on the reduced payment amount when either the ``FB'' or ``FC'' modifier
is billed and the procedure and device codes appear on the lists of
procedures and devices to which this policy applies. We refer readers
to the CY 2008 OPPS/ASC final rule with comment period for more
background information on the ``FB'' and ``FC'' payment adjustment
policy (72 FR 66743 through 66749).
2. Proposed APCs and Devices Subject to the Adjustment Policy
For CY 2009, we are proposing to continue the policy of reducing
OPPS payment by 100 percent of the device offset amount when a hospital
furnishes a specified device without cost or with a full credit and by
50 percent of the device offset amount when the hospital receives
partial credit in the amount of 50 percent or more of the cost for the
device. Because the APC payments for the related services are
specifically constructed to ensure that the full cost of the device is
included in the payment, we continue to believe that it is appropriate
to reduce the APC payment in cases in which the hospital receives a
device without cost, with full credit, or with partial credit, in order
to provide equitable payment in these cases (we refer readers to
section II.A.2.d.(1) of this proposed rule for a description of our
standard ratesetting methodology for device-dependent APCs). Moreover,
the payment for these devices comprises a large part of the APC payment
on which the beneficiary copayment is based, and we continue to believe
it is equitable that the beneficiary cost sharing reflect the reduced
costs in these cases.
We also are proposing to continue using the three criteria
established in the CY 2007 OPPS/ASC final rule with comment period for
determining the APCs to which this policy applies (71 FR 68072 through
68077). Specifically, (1) all procedures assigned to the selected APCs
must require implantable devices that would be reported if device
insertion procedures were performed, (2) the required devices must be
surgically inserted or implanted devices that remain in the patient's
body after the conclusion of the procedures (at least temporarily), and
(3) the device offset amount must be significant, which for purposes of
this policy is defined as exceeding 40 percent of the APC cost. We also
are proposing to continue to restrict the devices to which

[[Page 41479]]

the APC payment adjustment would apply to a specific set of costly
devices to ensure that the adjustment would not be triggered by the
implantation of an inexpensive device whose cost would not constitute a
significant proportion of the total payment rate for an APC. We
continue to believe that these criteria are appropriate because free
devices and credits are likely to be associated with particular cases
only when the device must be reported on the claim and is of a type
that is implanted and remains in the body when the beneficiary leaves
the hospital. We believe that the reduction in payment is appropriate
only when the cost of the device is a significant part of the total
cost of the APC into which the device cost is packaged, and that the 40
percent threshold is a reasonable definition of a significant cost.
We examined the offset amounts calculated from the CY 2009 proposed
rule data and the clinical characteristics of APCs to determine whether
the APCs to which the full credit/no cost and partial credit device
adjustment policy applies in CY 2008 continue to meet the criteria for
CY 2009, and to determine whether other APCs to which the policy does
not apply in CY 2008 would meet the criteria for CY 2009. Table 18
below lists the proposed APCs to which the payment reduction policy for
full credit/no cost and partial credit devices would apply in CY 2009
and displays the proposed payment reduction percentages for both full
credit/no cost and partial credit circumstances. Table 19 lists the
proposed devices to which this policy would apply in CY 2009. As
reflected in the tables, we are proposing to add APC 0425 (Level II
Arthroplasty or Implantation with Prosthesis) and APC 0648 (Level IV
Breast Surgery) and their associated devices that would not otherwise
be on the device list for CY 2009 because the device offset percentages
for these two APCs are above the 40 percent threshold based on the CY
2007 claims data available for the proposed rule. We also are proposing
to remove APC 0106 (Insertion/Replacement of Pacemaker Leads and/or
Electrodes) and device HCPCS codes associated only with procedures
assigned to this APC because the proposed device offset percentage for
that APC is less than 40 percent. We will update the lists of APCs and
devices to which the full credit/no cost and partial credit device
adjustment policy would apply in CY 2009 based on the final CY 2007
claims data available for the CY 2009 OPPS/ASC final rule with comment
period.

Table 18.--Proposed APC Adjustments in Cases of Devices Furnished at No Cost or With Full or Partial Credit
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
2009 2009
reduction reduction
APC SI APC title for full for partial
credit case credit case
(percent) (percent)
----------------------------------------------------------------------------------------------------------------
0039............................... S Level I Implantation of 83 42
Neurostimulator.
0040............................... S Percutaneous Implantation 56 28
of Neurostimulator
Electrodes, Excluding
Cranial Nerve.
0061............................... S Laminectomy, Laparoscopy, 61 30
or Incision for
Implantation of
Neurostimulator
Electrodes, Excluding
Cranial Nerve.
0089............................... T Insertion/Replacement of 72 36
Permanent Pacemaker and
Electrodes.
0090............................... T Insertion/Replacement of 73 36
Pacemaker Pulse Generator.
0107............................... T Insertion of Cardioverter- 89 44
Defibrillator.
0108............................... T Insertion/Replacement/ 88 44
Repair of Cardioverter-
Defibrillator Leads.
0222............................... S Level II Implantation of 84 42
Neurostimulator.
0225............................... S Implantation of 61 30
Neurostimulator
Electrodes, Cranial Nerve.
0227............................... T Implantation of Drug 81 40
Infusion Device.
0259............................... T Level VII ENT Procedures... 83 42
0315............................... S Level III Implantation of 88 44
Neurostimulator.
0385............................... S Level I Prosthetic 57 29
Urological Procedures.
0386............................... S Level II Prosthetic 64 32
Urological Procedures.
0418............................... T Insertion of Left 70 35
Ventricular Pacing Elect.
0425............................... T Level II Arthroplasty or 46 23
Implantation with
Prosthesis.
0648............................... T Level IV Breast Surgery.... 41 21
0654............................... T Insertion/Replacement of a 77 38
permanent dual chamber
pacemaker.
0655............................... T Insertion/Replacement/ 75 37
Conversion of a permanent
dual chamber pacemaker.
0680............................... S Insertion of Patient 71 35
Activated Event Recorders.
0681............................... T Knee Arthroplasty.......... 74 37
----------------------------------------------------------------------------------------------------------------

Table 19.--Proposed Devices for Which the ``FB'' or ``FC'' Modifier Must
Be Reported With the Procedure Code When Furnished at No Cost or With
Full or Partial Credit
------------------------------------------------------------------------
Device HCPCS code Short descriptor
------------------------------------------------------------------------
C1721............................. AICD, dual chamber.
C1722............................. AICD, single chamber.
C1728............................. Cath, brachytx seed adm.
C1764............................. Event recorder, cardiac.
C1767............................. Generator, neurostim, imp.
C1771............................. Rep dev, urinary, w/sling.
C1772............................. Infusion pump, programmable.
C1776............................. Joint device (implantable).
C1778............................. Lead, neurostimulator.

[[Page 41480]]

C1779............................. Lead, pmkr, transvenous VDD.
C1785............................. Pmkr, dual, rate-resp.
C1786............................. Pmkr, single, rate-resp.
C1789............................. Prosthesis, breast, imp.
C1813............................. Prosthesis, penile, inflatab.
C1815............................. Pros, urinary sph, imp.
C1820............................. Generator, neuro rechg bat sys.
C1881............................. Dialysis access system.
C1882............................. AICD, other than sing/dual.
C1891............................. Infusion pump, non-prog, perm.
C1897............................. Lead, neurostim, test kit.
C1898............................. Lead, pmkr, other than trans.
C1900............................. Lead coronary venous.
C2619............................. Pmkr, dual, non rate-resp.
C2620............................. Pmkr, single, non rate-resp.
C2621............................. Pmkr, other than sing/dual.
C2622............................. Prosthesis, penile, non-inf.
C2626............................. Infusion pump, non-prog, temp.
C2631............................. Rep dev, urinary, w/o sling.
L8600............................. Implant breast silicone/eq.
L8614............................. Cochlear device/system.
L8690............................. Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

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

A. Proposed OPPS Transitional Pass-Through Payment for Additional Costs
of Drugs, Biologicals, and Radiopharmaceuticals

1. Background
Section 1833(t)(6) of the Act provides for temporary additional
payments or ``transitional pass-through payments'' for certain drugs
and biological agents. As originally enacted by the Medicare, Medicaid,
and SCHIP Balanced Budget Refinement Act (BBRA) of 1999 (Pub. L. 106-
113), this provision requires the Secretary to make additional payments
to hospitals for current orphan drugs, as designated under section 526
of the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current
drugs and biological agents and brachytherapy sources used for the
treatment of cancer; and current radiopharmaceutical drugs and
biological products. For those drugs and biological agents referred to
as ``current,'' the transitional pass-through payment began on the
first date the hospital OPPS was implemented (before enactment of the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
(BIPA) of 2000 (Pub. L. 106-554), on December 21, 2000).
Transitional pass-through payments are also provided for certain
``new'' drugs and biological agents that were not being paid for as an
HOPD service as of December 31, 1996, and whose cost is ``not
insignificant'' in relation to the OPPS payments for the procedures or
services associated with the new drug or biological. For pass-through
payment purposes, radiopharmaceuticals are included as ``drugs.'' Under
the statute, transitional pass-through payments can be made for at
least 2 years but not more than 3 years. Proposed CY 2009 pass-through
drugs and biologicals and their APCs are assigned status indicator
``G'' as indicated in Addenda A and B to this proposed rule.
Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through
payment amount, in the case of a drug or biological, is the amount by
which the amount determined under section 1842(o) of the Act (or, if
the drug or biological is covered under a competitive acquisition
contract under section 1847B of the Act, an amount determined by the
Secretary equal to the average price for the drug or biological for all
competitive acquisition areas and year established under such section
as calculated and adjusted by the Secretary) for the drug or biological
exceeds the portion of the otherwise applicable Medicare OPD fee
schedule that the Secretary determines is associated with the drug or
biological. This methodology for determining the pass-through payment
amount is set forth in Sec. 419.64 of the regulations, which specifies
that the pass-through payment equals the amount determined under
section 1842(o) of the Act minus the portion of the APC payment that
CMS determines is associated with the drug or biological. Section 1847A
of the Act, as added by section 303(c) of Pub. L. 108-173, establishes
the use of the average sales price (ASP) methodology as the basis for
payment for drugs and biologicals described in section 1842(o)(1)(C) of
the Act that are furnished on or after January 1, 2005. The ASP
methodology, as applied under the OPPS, uses several sources of data as
a basis for payment, including the ASP, wholesale acquisition cost
(WAC), and average wholesale price (AWP). In this proposed rule, the
term ``ASP methodology'' and ``ASP-based'' are inclusive of all data
sources and methodologies described therein. Additional information on
the ASP methodology can be found on the CMS Web site at: http://
www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01_overview.asp#TopOfPage.
As noted above, section 1833(t)(6)(D)(i) of the Act also states
that if a drug or biological is covered under a competitive acquisition
contract under section 1847B of the Act, the payment rate is equal to
the average price for the drug or biological for all competitive
acquisition areas and the year established as calculated and adjusted
by the Secretary. Section 1847B of the Act, as added by section 303(d)
of Pub. L. 108-173, establishes the payment methodology for Medicare
Part B drugs and biologicals under the competitive acquisition program
(CAP). The Part B drug CAP was implemented July 1, 2006, and includes
approximately 190 of the most common Part B drugs provided in the
physician's office setting. The list of drugs and biologicals covered
under the Part B drug CAP, their associated payment rates, and the Part
B drug CAP pricing methodology can be found on the CMS Web site at:
http://www.cms.hhs.gov/CompetitiveAcquisforBios.
For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through
payment amount for drugs and biologicals to be zero based on our
interpretation that the ``otherwise applicable Medicare OPD fee
schedule'' amount was equivalent to the amount to be paid for pass-
through drugs and biologicals under section 1842(o) of the Act (or
section 1847B of the Act, if the drug or biological is covered under a
competitive acquisition contract). We concluded for those years that
the resulting difference between these two rates would be zero. For CY
2008, we estimated the OPPS pass-through payment amount for drugs and
biologicals to be $6.6 million. Our proposed OPPS pass-through payment
estimate for drugs and biologicals in CY 2009 is $8.9 million, which is
discussed in section VI.B. of this proposed rule.
The pass-through application and review process for drugs and
biologicals is explained on the CMS Web site at: http://
www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in
CY 2008
Section 1833(t)(6)(C)(i) of the Act specifies that the duration of
transitional pass-through payments for drugs and biologicals must be no
less than 2 years and no longer than 3 years. We are proposing that the
pass-through status of 15 drugs and biologicals expire on December 31,
2008, as listed in Table 20 below. Our standard methodology for
providing payment for drugs and biologicals with expiring pass-through
status in an upcoming calendar year is to determine the product's
estimated per day cost and compare it with the OPPS drug packaging
threshold for that

[[Page 41481]]

calendar year (proposed at $60 for CY 2009). If the estimated per day
cost is less than or equal to the applicable OPPS drug packaging
threshold, we would package payment for the drug or biological into the
payment for the associated procedure in the upcoming calendar year. If
the estimated per day cost is greater than the OPPS drug packaging
threshold, we would provide separate payment at the applicable relative
ASP-based payment amount (proposed at ASP + 4 percent for CY 2009). For
drugs and biologicals that are currently covered under the CAP, we are
proposing to use the payment rates calculated under that program that
are in effect as of April 1, 2008, for purposes of packaging decisions
and for Addenda A and B to this proposed rule. We are proposing to
update these payment rates for purposes of the CY 2009 OPPS/ASC final
rule with comment period.
Three of the products with expiring pass-through status for CY 2009