FR Doc E9-15882

[Federal Register: July 20, 2009 (Volume 74, Number 137)]
[Proposed Rules]
[Page 35231-35724]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20jy09-19]

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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, 416, and 419

Medicare Program: Proposed Changes to the Hospital Outpatient
Prospective Payment System and CY 2010 Payment Rates; Proposed Changes
to the Ambulatory Surgical Center Payment System and CY 2010 Payment
Rates; Proposed Rule

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 416, and 419

[CMS-1414-P]
RIN 0938-AP41

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 (OPPS) 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, 2010.
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 set forth 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 2010 ASC
payment system. These proposed changes would be applicable to services
furnished on or after January 1, 2010.

DATES: To be assured consideration, comments on all sections 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 August 31, 2009.

ADDRESSES: In commenting, please refer to file code CMS-1414-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 file code 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-1414-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-1414-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.
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.
Michele Franklin, (410) 786-4533, and Jana Lindquist, (410) 786-
4533, Partial hospitalization and community mental health center
issues.
James Poyer, (410) 786-2261, Reporting of quality data issues.

SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this proposed rule to assist us in fully
considering issues and developing policies. You can assist us by
referencing file code CMS-1414-P for all issues on which you wish to
comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://
www.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
AMP Average manufacturer price
AOA American Osteopathic Association
APC Ambulatory payment classification
ASC Ambulatory Surgical Center
ASP Average sales price

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AWP Average wholesale price
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 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, Public Law 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
CKD Chronic kidney disease
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CORF Comprehensive outpatient rehabilitation facility
CPT [Physicians] Current Procedural Terminology, Fourth Edition,
2009, copyrighted by the American Medical Association
CR Cardiac rehabilitation
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, Public Law 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, Public Law 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,
Public Law 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
ICR Intensive cardiac rehabilitation
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
KDE Kidney disease education
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, Public Law 109-
432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 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
OIG [HHS] Office of the Inspector General
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
PR Pulmonary rehabilitation
PRA Paperwork Reduction Act
QAPI Quality Assessment and Performance Improvement
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, Public Law
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; we refer readers to
section XVIII.A. 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., XVI., and XVIII. through XXI. of this
proposed rule and in Addenda AA, BB, DD1, DD2, and EE to this proposed
rule. (Addendum EE is available on the Internet only; we refer readers
to section XVIII.B. of this proposed rule.)

Table of Contents

I. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule
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. 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. Proposed OPPS Nonrecurring Technical 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
(ASC) Payment System
15. Reporting Quality Data for Annual Payment Rate 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 Data Development Process and Calculation of Median
Costs
a. Claims Preparations
b. Splitting Claims and Creation of ``Pseudo'' Single Claims
(1) Splitting Claims
(2) 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

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(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)
(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) Other Service-Specific Packaging Issues
B. Proposed Conversion Factor Update
C. Proposed Wage Index Changes
D. Proposed Statewide Average Default CCRs
E. Proposed OPPS Payment to Certain Rural and Other Hospitals
1. Hold Harmless Transitional Payment Changes Made by Public Law
110-275 (MIPPA)
2. Proposed Adjustment for Rural SCHs Implemented in CY 2006
Related to Public Law 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 Copayment Policy
3. Proposed Calculation of an Adjusted Copayment Amount for an
APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes
1. Proposed Treatment of New Level II HCPCS Codes and Category I
CPT Vaccine Codes and Category III CPT Codes for Which We Are
Soliciting Public Comments in This Proposed Rule
2. Proposed Process for New Level II HCPCS Codes and Category I
and III CPT Codes for Which We Will Be Soliciting Public Comments in
the CY 2010 OPPS/ASC Final Rule With Comment Period
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/ASC Specific Policies: Insertion of Posterior
Spinous Process Distraction Device (APC 0052)
IV. Proposed OPPS Payment for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
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 Payment for No Cost/Full Credit
and Partial 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 2009
3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With
New or Continuing Pass-Through Status in CY 2010
4. Pass-Through Payments for Implantable Biologicals
a. Background
b. Proposed Policy for CY 2010
5. Definition of Pass-Through Payment Eligibility Period for New
Drugs and Biologicals
6. Proposed Provision for Reducing Transitional Pass-Through
Payments for Diagnostic Radiopharmaceuticals and Contrast Agents To
Offset Costs Packaged Into APC Groups
a. Background
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
c. Proposed Payment Offset Policy for Contrast Agents
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. Background
b. Proposed Cost Threshold for Packaging Payment for HCPCS Codes
That Describe Certain Drugs, Nonimplantable Biologicals, and
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
c. Proposed Packaging Determination for HCPCS Codes That
Describe the Same Drug or Biological But Different Dosages
d. Proposed Packaging of Payment for Diagnostic
Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals
(``Policy-Packaged'' Drugs and Devices)
3. Proposed Payment for Drugs and Biologicals Without Pass-
Through Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs
(SCODs) and Other Separately Payable and Packaged Drugs and
Biologicals
b. Proposed Payment Policy
4. Proposed Payment for Blood Clotting Factors
5. Proposed Payment for Therapeutic Radiopharmaceuticals
a. Background
b. Proposed Payment Policy
6. 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 for CY 2010
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. Proposed OPPS Nonrecurring Technical and Policy Changes and
Clarifications
A. Kidney Disease Education Services
1. Background
2. Proposed Payment for Services Furnished by Providers of
Services Located in a Rural Area
B. Pulmonary Rehabilitation and Cardiac Rehabilitation Services
1. Legislative Changes
2. Proposed Payment for Services Furnished to Hospital
Outpatients in a Pulmonary Rehabilitation Program
3. Proposed Payment for Services Furnished to Hospital
Outpatients Under a Cardiac Rehabilitation or an Intensive Cardiac
Rehabilitation Program
4. Physician Supervision for Pulmonary Rehabilitation, Cardiac
Rehabilitation, and Intensive Cardiac Rehabilitation Services
C. Stem Cell Transplants
D. Physician Supervision
1. Background
2. Issues Regarding the Physician Supervision of Hospital
Outpatient Services Raised by Hospitals and Other Stakeholders
3. Proposed Policies for Direct Supervision of Hospital and CAH
Outpatient Therapeutic Services

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4. Proposed Policies for Direct Supervision of Hospital and CAH
Outpatient Diagnostic Services
5. Summary of CY 2010 Physician Supervision Proposals
E. Direct Referral for Observation Services
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 on Outpatient Claims
B. Proposed Comment Indicator Definitions
XIV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
B. APC Panel Recommendations
C. OIG Recommendations
XV. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment
System
A. Background
1. Legislative Authority for the ASC Payment System
2. Prior Rulemaking
3. Policies Governing Changes to the Lists of 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 2009
C. Proposed Update to the List 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. Proposed Covered Surgical Procedures Designated as Office-
Based
(1) Background
(2) Proposed Changes to Covered Surgical Procedures Designated
as Office-Based for CY 2010
c. Covered Surgical Procedures Designated as Device-Intensive
(1) Background
(2) Proposed Changes to List of Covered Surgical Procedures
Designated as Device-Intensive for CY 2010
d. ASC Treatment of Surgical Procedures Proposed for Removal
from the OPPS Inpatient List for CY 2010
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 2010
c. Proposed Adjustment to ASC Payments for No Cost/Full Credit
and Partial Credit Devices
2. Proposed Payment for Covered Ancillary Services
a. Background
b. Proposed Payment for Covered Ancillary Services for CY 2010
E. New Technology Intraocular Lenses (NTIOLs)
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 2010 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. ASC Policy and Payment Recommendations
H. Proposed Revision to Terms of Agreements for Hospital-
Operated ASCs
1. Background
2. Proposed Changes to the Terms of Agreements for ASCs Operated
by a Hospital
I. Calculation of the ASC Conversion Factor and ASC Payment
Rates
1. Background
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2010 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. Overview
2. Hospital Outpatient Quality Data Reporting Under Section
109(a) of Public Law 109-432
3. Reporting ASC Quality Data for Annual Payment Update
4. HOP QDRP Quality Measures for the CY 2009 Payment
Determinations
5. HOP QDRP Quality Measures for the CY 2010 Payment
Determination
a. Background
b. Maintenance of Technical Specifications for Quality Measures
c. Publication of HOP QDRP Data
B. Proposals Regarding Quality Measures
1. Considerations in Expanding and Updating Quality Measures
Under the HOP QRDP Program
2. Retirement of HOP QRDP Quality Measures
3. Proposed HOP QDRP Quality Measures for the CY 2011 Payment
Determination
C. Possible Quality Measures Under Consideration for FY 2012 and
Subsequent Years
D. Proposed Payment Reduction for Hospitals That Fail To Meet
the HOP QDRP Requirements for the CY 2010 Payment Update
1. Background
2. Proposed Reporting Ratio Application and Associated
Adjustment Policy for CY 2010
E. Proposed Requirements for HOPD Quality Data Reporting for CY
2011 and Subsequent Years
1. Administrative Requirements
2. Data Collection and Submission Requirements
a. General Data Collection and Submission Requirements
b. Extraordinary Circumstance Extension or Waiver for Reporting
Quality Data
3. HOP QDRP Validation Requirements
a. Proposed Data Validation Requirements for CY 2011
b. Proposed Data Validation Approach for CY 2012 and Subsequent
Years
c. Additional Data Validation Conditions Under Consideration for
CY 2012 and Subsequent Years
F. Proposed 2010 Publication of HOP QDRP Data
G. Proposed HOP QDRP Reconsideration and Appeals Procedures
H. Reporting of ASC Quality Data
I. Electronic Health Records
XVII. Healthcare-Associated Conditions
A. Background
1. Preventable Medical Errors and Hospital-Acquired Conditions
(HACs) Under the IPPS
2. Expanding the Principles of the IPPS HACs Payment Provision
to the OPPS
3. Discussion in the CY 2009 OPPS/ASC Final Rule With Comment
Period
B. Public Comments and Recommendations on Issues Regarding
Healthcare-Associated Conditions From the Joint IPPS/OPPS Listening
Session
C. CY 2010 Approach to Healthcare-Associated Conditions Under
the OPPS
XVIII. Files Available to the Public via the Internet
A. Information in Addenda Related to the Proposed CY 2010
Hospital OPPS
B. Information in Addenda Related to the Proposed CY 2010 ASC
Payment System
XIX. Collection of Information Requirements
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 of Our Analysis

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3. Estimated Effects of This Proposed Rule on Payments to 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 2010
Addendum AA--Proposed ASC Covered Surgical Procedures for CY 2010
(Including Surgical Procedures for Which Payment Is Packaged)
Addendum B--Proposed OPPS Payment by HCPCS Code for CY 2010
Addendum BB--Proposed ASC Covered Ancillary Services Integral to
Covered Surgical Procedures for CY 2010 (Including Ancillary
Services for Which Payment Is Packaged)
Addendum D1--Proposed OPPS Payment Status Indicators for CY 2010
Addendum DD1--Proposed ASC Payment Indicators for CY 2010
Addendum D2--Proposed OPPS Comment Indicators for CY 2010
Addendum DD2--Proposed ASC Comment Indicators for CY 2010
Addendum E--Proposed HCPCS Codes That Would Be Paid Only as
Inpatient Procedures for CY 2010
Addendum L--Proposed CY 2010 OPPS Out-Migration Adjustment
Addendum M--Proposed HCPCS Codes for Assignment to Composite APCs
for CY 2010

I. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule

A. Legislative and Regulatory Authority for the Hospital Outpatient
Prospective Payment System

When the Medicare statute was 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 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.
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 following Acts made
additional changes to the OPPS: the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act (BIPA) of 2000 (Pub. L. 106-
554); 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; the Medicare
Improvements and Extension Act under Division B of Title I of the Tax
Relief and Health Care Act (MIEA-TRHCA) of 2006 (Pub. L. 109-432),
enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP
Extension Act (MMSEA) of 2007 (Pub. L. 110-173), enacted on December
29, 2007; and the Medicare Improvements for Patients and Providers Act
(MIPPA) of 2008 (Pub. L. 110-275), enacted on July 15, 2008.
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 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 Public
Law 108-173 added provisions for coverage for 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 Public Law 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

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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. These rules can be viewed on the CMS Web site at: http://
www.cms.hhs.gov/HospitalOutpatientPPS/. We published in the Federal
Register on November 18, 2008 the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68502). 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 2009 OPPS on the basis of claims data
from January 1, 2007, through December 31, 2007, and to implement
certain provisions of Public Law 110-173 and Public Law 110-275. In
addition, in that final rule we also responded to public comments
received on the provisions of the November 27, 2007 final rule with
comment period (72 FR 66580) pertaining to the APC assignment of HCPCS
codes identified in Addendum B to that rule with the new interim
(``NI'') comment indicator, and to public comments received on the July
18, 2008 OPPS/ASC proposed rule for CY 2009 (73 FR 41416).
Subsequent to publication of the CY 2009 OPPS/ASC final rule with
comment period, we published in the Federal Register on January 26,
2009, a correction notice (74 FR 4343 through 4344) to correct certain
technical errors in the CY 2009 OPPS/ASC final rule with comment
period.

D. Advisory Panel on Ambulatory Payment Classification Groups

1. Authority of the APC Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law
106-113, 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 (currently employed full-time,
not as consultants, in their respective areas of expertise) subject to
the OPPS, reviews clinical data and advises CMS about the clinical
integrity of the APC groups and their payment weights. The APC Panel is
technical in nature, and it 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 four times: on
November 1, 2002; on November 1, 2004; on November 21, 2006; and on
November 2, 2008. 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 through March 1, 2001. Since
the initial meeting, the APC Panel has held 15 meetings, with the last
meeting taking place on February 18 and 19, 2009. 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. 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 February 2009 APC Panel meeting. At that meeting, the APC Panel
recommended that the work of these three subcommittees continue, and we
accept those recommendations of the APC Panel. All subcommittee
recommendations are discussed and voted upon by the full APC Panel.

[[Page 35238]]

Discussions of the other recommendations made by the APC Panel at
the February 2009 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/ASC proposed and final rules, the
CMS Web site mentioned earlier in this section, and the FACA database
at http://fido.gov/facadatabase/public.asp.

E. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule

In this proposed rule, we set forth proposed changes to the
Medicare hospital OPPS for CY 2010 to implement statutory requirements
and changes arising from our continuing experience with the system. In
addition, we are setting forth proposed changes to the revised Medicare
ASC payment system for CY2010, including proposed updated payment
weights and covered surgical ancillary services based on the proposed
OPPS update. Finally, we are setting forth proposed quality measures
for the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)
for reporting quality data for annual payment rate updates for CY 2011
and subsequent calendar years, the requirements for data collection and
submission for the annual payment update, and a proposed reduction in
the OPPS payment for hospitals that fail to meet the HOP QDRP
requirements for the CY 2010 payment update, in accordance with the
statutory requirement. These changes would be effective for services
furnished on or after January 1, 2010. 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
proposed 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 HCPCS codes to APCs.
Our proposals to establish a number of new APCs.
Our analyses of Medicare claims data and certain
recommendations of the APC Panel.
The application of the 2 times rule and proposed
exceptions to it.
Proposed changes to specific APCs.
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 2010
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
2010 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 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 coding and payment 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 data.
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 for payment under the OPPS.
11. Proposed OPPS Nonrecurring Technical and Policy Changes and
Clarifications
In section XII. of this proposed rule, we set forth our proposals
regarding nonrecurring technical issues and provide 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 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 March
2009 report to Congress, by the Office of Inspector General (OIG), and
by the APC Panel regarding the OPPS for CY 2010.
14. Proposed Ambulatory Surgical Center (ASC) Payment System
In section XV. of this proposed rule, we discuss the proposed
update of the revised ASC payment system covered surgical procedures
and covered ancillary services and payment rates for CY 2010.

[[Page 35239]]

15. Reporting Quality Data for Annual Payment Rate Updates
In section XVI. of this proposed rule: We discuss the proposed
quality measures for reporting hospital outpatient (HOP) quality data
for the annual payment update factor for CY 2012 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 Quality Data
Reporting Program (QDRP) requirements for CY 2010.
16. Healthcare-Associated Conditions
In section XVII. of this proposed rule, we discuss public responses
to a December 2008 CMS public listening session addressing the
potential extension of the principle of Medicare not paying more under
the IPPS for the care of preventable hospital-acquired conditions
experienced by a Medicare beneficiary during a hospital inpatient stay
to medical care in other settings that are paid under other Medicare
payment systems, including the OPPS, for those healthcare-associated
conditions that occur or result from care in those 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.
For CY 2010, 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, 2010, and before January 1, 2011 (CY
2010). That is, we are proposing to recalibrate the relative payment
weights for each APC based on claims and cost report data for hospital
outpatient department (HOPD) services. We are proposing to use the most
recent available data to construct the database for calculating APC
group weights. Therefore, for the purpose of recalibrating the proposed
APC relative payment weights for CY 2010, we used approximately 130
million final action claims for hospital outpatient department services
furnished on or after January 1, 2008, and before January 1, 2009. (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 2010 OPPS payment
rates for this proposed rule, approximately 100 million claims were 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 46 million claims 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). From the remaining 54
million claims, we created approximately 91 million single records, of
which approximately 61 million were ``pseudo'' single or ``single
session'' claims (created from 24 million multiple procedure claims
using the process we discuss later in this section). Approximately
622,000 claims were trimmed out on cost or units in excess of +/- 3
standard deviations from the geometric mean, yielding approximately 90
million single bills for median setting. As described in section
II.A.2. of this proposed rule, our data development process is designed
with the goal of using appropriate cost information in setting the APC
relative weights. The bypass process described in section II.A.1.b. of
this proposed rule discusses how we develop ``pseudo'' single claims,
with the intention of using more appropriate data from the available
claims. In some cases, the bypass process allows us to use some portion
of the submitted claim for cost estimation purposes, while the
remaining information on the claim continues to be unusable. Consistent
with the goal of using appropriate information in our data development
process, we only use claims (or portions of each claim) that are
appropriate for ratesetting purposes. Ultimately, we were able to use
for CY 2010 ratesetting some portion of 95 percent of the CY 2008
claims containing services payable under the OPPS.
The proposed APC relative weights and payments for CY 2010 in
Addenda A and B to this proposed rule were calculated using claims from
CY 2008 that were processed before January 1, 2009, 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 2010 payment rates.
b. Proposed Use of Single and Multiple Procedure Claims
For CY 2010, 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 in this
section. We generally use single procedure claims to set the median
costs for APCs because we believe that the OPPS relative weights on
which payment rates are based should be derived from the costs of
furnishing one procedure and because, in many circumstances, we are
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
were submitted as multiple procedure claims that 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. The history of our use of a bypass list to generate
``pseudo'' single claims is well documented, most recently in the CY
2009 OPPS/ASC final rule with comment period (73 FR 68512 through

[[Page 35240]]

68519). In addition, for CY 2008, we increased packaging and created
the first composite APCs. This also increased the number of bills that
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. Further, for CY 2009, we expanded the composite APC model
to one additional clinical area, multiple imaging services (73 FR 68559
through 68569). 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 2010
OPPS. This process enabled us to create, for this proposed rule,
approximately 61 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), to add to
the approximately 30 million ``natural'' single bills. For this
proposed rule, ``pseudo'' single and ``single session'' procedure bills
represent 67 percent of all single bills used to calculate median
costs.
For CY 2010, we are proposing to bypass 438 HCPCS codes for CY 2010
that are identified in Table 1 of this proposed rule. 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 2010, data
available for the February 2009 APC Panel meeting from CY 2008 claims
processed through September 30, 2008) to determine whether it would be
appropriate to propose to add additional codes to the previous year's
bypass list. For CY 2010, we are proposing to continue to bypass all of
the HCPCS codes on the CY 2009 OPPS bypass list. We also are proposing
to add to the bypass list for CY 2010 all HCPCS codes not on the CY
2009 bypass list that, using both CY 2009 final rule and February 2009
APC Panel data, meet the same previously established empirical criteria
for the bypass list that are summarized below. The entire list proposed
for CY 2010 (including the codes that remain on the bypass list from
prior years) is open to public comment. We assume that the
representation of packaging in the ``natural'' 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 ``natural'' 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 ``natural'' 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 ``natural''
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 continue to include on the bypass
list HCPCS codes that CMS medical advisors believe have minimal
associated packaging based on their clinical assessment of the complete
CY 2010 OPPS proposal. Some of these codes were identified by CMS
medical advisors and some were identified in prior years by commenters
with specialized knowledge of the services that they requested be added
to the bypass list. We also are proposing to continue to include on the
bypass list certain HCPCS codes in order to purposefully direct the
assignment of packaged costs where codes always appear together and
there would otherwise be few single claims available for ratesetting.
For example, we have previously discussed our reasoning for adding
HCPCS code G0390 (Trauma response team associate with hospital critical
care service) and the CPT codes for additional hours of drug
administration to the bypass list (73 FR 68513 and 71 FR 68117 through
68118).
As a result of the multiple imaging composite APCs that we
established in CY 2009, we note that the program logic for creating
``pseudo'' singles from bypassed codes that are also members of
multiple imaging composite APCs changed. 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, were identified first.
These HCPCS codes were then processed to create multiple imaging
composite ``single session'' 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''
were retained on the bypass list because, at the end of the ``pseudo''
single processing logic, we reassessed the claims without suppression
of the ``overlap bypass codes'' under our longstanding ``pseudo''
single process to determine whether we could convert additional claims
to ``pseudo'' single claims. (We refer readers to section II.A.2.b. of
this proposed rule for further discussion of the treatment of ``overlap
bypass codes.'') This process also created multiple imaging composite
``single session'' bills that could be used for calculating composite
APC median costs. ``Overlap bypass codes'' that are members of the
proposed multiple imaging composite APCs are identified by asterisks
(*) in Table 1 below.
At the February 2009 APC Panel Meeting, the APC Panel recommended
that CMS place CPT code 76098 (Radiological examination, surgical
specimen) on the bypass list and reassign the code to APC 0260 (Level I
Plain Film Except Teeth) in response to a public presentation
requesting that CMS makes these changes. Although CPT code 76098 would
not be eligible for addition to the bypass list because the frequency
and magnitude of packaged costs in its ``natural'' single claims exceed
the empirical criteria, the presenter suggested that the ``natural''
single claims represented aberrant billing with inappropriate packaged
services and pointed out that the packaged services support the
surgical procedures that commonly are also reported on claims for CPT
code 76098. The presenter suggested that bypassing CPT code 76098 would
properly allocate packaged costs to surgical procedures on these
claims, and would increase the number of single claims available for
ratesetting for both CPT code 76098 and the associated surgical breast
procedures. The APC Panel indicated that the issues raised by the
presenter appeared to be consistent with clinical practice and
subsequently made the recommendation to bypass CPT code 76098 and
reassign the code to APC 0260 based on its revised cost.
Based on the APC Panel's specific recommendation for CPT code
76098, we studied the billing patterns for the code in the ``natural''
single and multiple major claims in the CY 2008 claims data available
for the February 2009 APC Panel. The presenter asserted that CPT code
76098 is commonly billed with surgical breast procedures and our claims
data from the multiple procedure

[[Page 35241]]

claims confirm this observation. However, as noted above, there are
also a significant number of ``natural'' single bills in those data
(1,303), and these ``natural'' single claims include packaged services,
such as CPT code 19290 (Preoperative placement of needle localization
wire, breast) and CPT 77032 code (Mammographic guidance for needle
placement, breast (e.g., for wire localization or for injection), each
lesion, radiological supervision and interpretation). We have received
anecdotal information that hospitals may place guidance wires prior to
surgery in the hospital's radiology department and then examine the
surgical specimen in the radiology department after its surgical
removal. This information, along with the number of observed
``natural'' single claims, suggests that the packaged costs might
appropriately be associated with the radiological examination of the
breast specimen. Although bypassing CPT code 76098 would allow for the
creation of more ``pseudo'' single claims for ratesetting, it would
also require the assumption that all packaging on the claim would be
correctly assigned to the remaining major procedure where it exists and
that on ``natural'' single bills no packaging would be appropriately
associated with CPT code 76098. Given the number of ``natural'' single
bills for CPT code 76098 and the significant packaged costs on these
claims, we are not confident that placement on the bypass list is
appropriate.
While we are not proposing to place CPT code 76098 on the bypass
list, and we want to continue to provide separate payment for this
procedure when appropriate, we do believe that CPT code 76098 is
generally ancillary and supportive to surgical breast procedures. In CY
2008 we established a group of conditionally packaged codes, called
``T-packaged codes,'' whose payment is packaged when one or more
separately paid surgical procedures with status indicator ``T'' are
provided during a hospital encounter. In order to provide separate
payment for CPT code 76098 when not provided with a separately payable
surgical procedure, and also to recognize its ancillary and supportive
nature when it accompanies separately payable procedures, we are
proposing to conditionally package CPT code 76098 as a ``T-packaged
code'' for CY 2010, identified with status indicator ``Q2'' in Addendum
B to this proposed rule. As a ``T-packaged code,'' CPT code 76098 would
receive separate payment except where it appears with a surgical
procedure, in which case its payment would be packaged. Designating CPT
76098 in this way allows the separate payment to appropriately account
for the packaged costs that appear on the code's ``natural'' single
bills, while also allowing us to use more multiple procedure claims
that include both a surgical procedure and CPT code 76098 to set the
payment rates for the related surgical procedures. The code-specific
median cost of CPT code 76098 is approximately $346, consistent with
its CY 2009 assignment to APC 0317 (Level II Miscellaneous Radiology
Procedures) which has an APC median cost of approximately $339. In
contrast, the median cost of APC 0260, the APC reassignment recommended
by the APC Panel, is much lower at approximately $46. Therefore, we are
not accepting the APC Panel's recommendation to reassign CPT code
76098. Instead, we are proposing to continue its assignment to APC 0317
for CY 2010 in those cases where CPT code 76098 is separately paid.
Table 1 includes the proposed list of bypass codes for CY 2010.
This list contains bypass codes that are appropriate to claims for
services in CY 2008 and, therefore, includes codes that were deleted
for CY 2009. We retain these deleted bypass codes on the bypass list
because these codes existed in CY 2008, the year of our claims data.
Using these deleted bypass codes for bypass purposes allows us to
potentially create more ``pseudo'' single claims for ratesetting
purposes. ``Overlap bypass codes'' that are members of the proposed
multiple imaging composite APCs are identified by asterisks (*) in
Table 1 below.
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c. Proposed Calculation of CCRs
(1) Development of the CCRs
We calculated hospital-specific overall ancillary CCRs and
hospital-specific departmental CCRs for each hospital for which we had
CY 2008 claims data from the most recent available hospital cost
reports, in most cases, cost reports beginning in CY 2007. For the CY
2010 OPPS proposed rates, we used the set of claims processed during CY
2008. 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

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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.
For a discussion of the hospital-specific overall ancillary CCR
calculation, we refer readers to the CY 2007 OPPS/ASC final rule with
comment period (71 FR 67983 through 67985).
For CY 2010, we are proposing to continue using the hospital-
specific overall ancillary and departmental CCRs to convert charges on
the claims reported under specific revenue codes to estimated costs
through application of a revenue code-to-cost center crosswalk.
(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. We discuss our CCR calculation in section
II.A.1.c. of this proposed rule and how we use these CCRs to estimate
cost on hospital outpatient claims in detail in section II.A.2.a. of
this proposed rule. As a result, the cost-based weights incorporate
aggregation bias, undervaluing high cost items and overvaluing low cost
items when 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 CMS began setting 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 capture better the variation in cost and charges
for individual services when calculating costs for the IPPS relative
weights across services in the same cost center. 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 revenue codes associated with the
cost center in the claims data. 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 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).
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 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 or, at least, similar approaches
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 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. The RTI final 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_200807_Final.pdf. For a complete discussion of the RTI
recommendations, public comments, and our responses, we refer readers
to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519
through 68527).
In the FY 2009 IPPS final rule, we finalized our proposal for both
the OPPS and IPPS to add one cost center to the cost report so that, in
general, the costs and charges for relatively inexpensive medical
supplies would be reported separately from the costs and charges for
more expensive implantable devices (such as pacemakers and other
implantable devices). Specifically, we said that we would create one
cost center for ``Medical Supplies Charged to Patients'' and one cost
center ``Implantable Devices Charged to Patients.'' This change
ultimately will split the current CCR for Medical Supplies and
Equipment into one CCR for medical supplies and another CCR for
implantable devices. In response to the majority of commenters on the
proposal set forth in the FY 2009 IPPS proposed rule, we finalized a
definition of the Implantable Devices Charged to Patients cost center
as capturing the costs and charges billed with the following UB-04
revenue codes: 0275 (Pacemaker), 0276 (Intraocular lens), 0278 (Other
implants), and 0624 (FDA investigational devices). This change to the
cost report form will be made and will be reflected in cost reports for
cost reporting periods beginning in the spring of 2009. Because there
is generally a 3-year lag between the availability of cost report data
for IPPS and OPPS ratesetting purposes in a given calendar year, we
believe we will be able to use data from the revised cost report form
to estimate costs from charges associated with UB-04 revenue codes
0275, 0276, 0278, and 0624 for implantable devices in order to more
accurately estimate the costs of device-related procedures for the CY
2013 OPPS relative weights. For a complete discussion of the proposal,
public comments, and our responses, we refer readers to the FY2009 IPPS
final rule (73 FR 48458 through 48467).
For the CY 2009 OPPS/ASC proposed rule, we made a similar proposal
for drugs, proposing to split the Drugs Charged to Patients cost center
into two cost centers: One for drugs with high pharmacy overhead costs
and one for drugs with low pharmacy overhead costs (73 FR 41492). We
noted that we expected that CCRs from the proposed new cost centers
would be available in 2 to 3 years to refine OPPS drug cost

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estimates by accounting for differential hospital markup practices for
drugs with high and low pharmacy overhead costs. However, after
consideration of the public comments received and the APC Panel
recommendations, we did not finalize our proposal to split the single
standard Drugs Charged to Patients cost center into two cost centers,
and instead indicated in the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68659) that we would continue to explore other potential
approaches to improve our drug cost estimation methodology. Unlike
implantable devices, we do not currently have a policy to address
charge compression in our cost estimation for expensive drugs and
biologicals. In section V.B.3.of this proposed rule, we are proposing
an adjustment to our cost estimation methodology for drugs and
biologicals in CY 2010 to address charge compression by proposing to
shift a portion of the pharmacy overhead cost associated with packaged
drugs and biologicals from those packaged drugs and biologicals to
separately payable drugs and biologicals; proposing payment for
separately payable drugs and biologicals at ASP +4 percent; and
proposing a proportional reduction in the total amount of pharmacy
overhead cost associated with packaged drugs and biologicals prior to
our estimating the total resource costs of individual OPPS services.
Finally, in the CY 2009 OPPS/ASC final rule with comment period, we
indicated that we would be making some OPPS-specific changes in
response to the RTI report recommendations. With regard to modifying
the cost reporting preparation software in order to impose fixed
descriptions for nonstandard cost centers, we indicated that the change
would be made for the next release of the cost report software. We
anticipate that these changes will be made to the cost reporting
software in CY 2010 and will act as a quality check for hospitals to
review their choice of nonstandard cost center code to ensure that the
reporting of nonstandard cost centers is accurate, while not
significantly increasing provider burden. In addition to improving the
reporting mechanism for the nonstandard cost centers, we indicated in
the CY 2009 final rule with comment period that we also planned to add
the new nonstandard cost centers for Cardiac Rehabilitation, Hyperbaric
Oxygen Therapy, and Lithotripsy. We expect that changes to add these
nonstandard cost centers will be proposed for cost reports beginning in
CY 2011 as part of a larger effort to update the Medicare cost report.
We noted in the FY 2009 IPPS final rule (73 FR 48467 through 48468)
that we are updating the cost report form to eliminate outdated
requirements, in conjunction with the Paperwork Reduction Act, and that
we planned to propose actual changes to the cost reporting form, the
attending cost reporting software, and the cost report instructions in
Chapter 36 of the PRM-II. We believe that improved cost report
software, the incorporation of new nonstandard cost centers, and
elimination of outdated requirements will improve the accuracy of the
cost data contained in the electronic cost report data files and,
therefore, the accuracy of our cost estimation processes for the OPPS
relative weights. As has been described above, CMS has taken steps to
address charge compression in the IPPS and OPPS, and continues to
examine ways in which it can improve the accuracy of its cost
estimation process.
2. Proposed Data Development Process and 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 2010. 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 payment 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 2010 proposed rule. That accounting provides
additional detail regarding the number of claims derived at each stage
of the process. In addition, below in this section we discuss the file
of claims that comprise the data set that is available for purchase
under a CMS data use agreement. Our CMS Web site, http://
www.cms.hhs.gov/HospitalOutpatientPPS, includes information about
purchasing the ``OPPS Limited Data Set,'' which will now include the
additional variables previously available only in the OPPS Identifiable
Data Set, including ICD-9-CM diagnosis codes and revenue code payment
amounts. This file is derived from the CY 2008 claims that were used to
calculate the proposed payment rates for the CY2010 OPPS.
We used the following methodology to establish the relative weights
used in calculating the proposed OPPS payment rates for CY 2010 shown
in Addenda A and B to this proposed rule.
a. Claims Preparation
We used the CY 2008 hospital outpatient claims processed before
January 1, 2009 to calculate the median costs of APCs, which in turn
are used to set the proposed relative weights for CY 2010. To begin the
calculation of the relative weights for CY 2010, we pulled all claims
for outpatient services furnished in CY 2008 from the national claims
history file. This is not the population of claims paid under the OPPS,
but all outpatient claims (including, for example, critical access
hospital (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),
14X (laboratory specimen bill types), or 76X (CMHC bill types). Other
bill types are not paid under the OPPS and, therefore, these claims
were not used to set OPPS payment.
2. Claims that were bill types 12X, 13X or 14X. Claims with bill
types 12X and 13X are hospital outpatient claims. Claims with bill type
14X are laboratory specimen claims, of which we use a subset for the
limited number of services in these claims that are paid under the
OPPS.
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 rates determined through a
separate process.)
To convert charges on the claims to estimated cost, we needed to
multiply those charges by the CCR associated with each revenue code as
discussed in section II.A.1.c.(1) of this proposed rule. For the CCR
calculation process, we used the same general approach that we used in
developing the final APC rates

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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 2008 before determining whether the CCRs for
such hospitals were valid.
We then calculated the CCRs for each cost center and the overall
ancillary CCR for each hospital for which we had claims data. We did
this using hospital-specific data from the Hospital Cost Report
Information System. We used the most recent available cost report data,
in most cases, cost reports beginning in CY 2007. 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 2010 OPPS
payment 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 ancillary CCR,
and we then adjusted the most recent available submitted but not
settled cost report using that ratio. We calculated both an overall
ancillary CCR and cost center-specific CCRs for each hospital. We used
the overall ancillary CCR referenced in section II.A.1.c.(1) of this
proposed rule for all purposes that require use of an overall ancillary
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 ancillary 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,
the revenue code-to-cost center crosswalk, to match a cost center to
every possible revenue code appearing in the outpatient claims that is
relevant to OPPS services, 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 ancillary 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 ancillary CCR to
the clinic revenue code. The revenue code-to-cost center crosswalk is
available for inspection and comment on the CMS Web site: http://
www.cms.hhs.gov/HospitalOutpatientPPS. Revenue codes not used to set
medians or to model impacts are identified with an ``N'' in the revenue
code-to-cost center crosswalk.
We are proposing to update the revenue code-to-cost center
crosswalk to more accurately reflect the current use of revenue codes.
We indicated in the CY 2009 OPPS/ASC final rule with comment period (73
FR 68531) that we intended to assess the National Uniform Billing
Committee (NUBC) revenue codes to determine whether any changes to the
list of packaged revenue codes should be proposed for the CY 2010 OPPS.
We expanded this evaluation to review all revenue codes in the revenue
code-to-cost center crosswalk that we have used for OPPS ratesetting
purposes in recent years against the CY 2008 NUBC definitions of
revenue codes in place for CY 2008. As a result of that review we are
proposing to revise the revenue code-to-cost center crosswalk as
described in Table 2 below to update the revenue codes for which we
would estimate costs on each claim and incorporate the costs for those
revenue codes into APC median cost estimates. In Table 2, Column A
provides the 2008 revenue code and description. Column B indicates
whether the charges reported with the revenue code would be converted
to cost and incorporated into median cost estimates for CY 2010. Column
C indicates whether the charges reported with the revenue code were
converted to cost and incorporated into median cost estimates for the
CY 2009 OPPS. In both columns, a ``Y'' indicates that the charges would
be converted to cost in CY 2010 (or were converted for CY 2009), and an
``N'' indicates that charges reported under the revenue code would not
be converted to cost and incorporated into median cost estimates.
Finally, Column D provides our rationale for the proposed CY 2010
change.
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Also, as a result of our comprehensive review of the revenue codes
included in the revenue code-to-cost center crosswalk, we are proposing
to add revenue codes to the hierarchy of primary, secondary, and
tertiary hospital cost report cost centers that result in the
departmental CCRs that we use to estimate cost from charges for some
revenue codes or to revise the applicable cost centers associated with
a given revenue code. Table below lists the revenue codes for which we
are proposing changes to the revenue code-to-cost center crosswalk and
our rationale for each proposed change. With the exception of revenue
code 0942 (Other Therapeutic Services; Education/Training), the revenue
codes for which we are proposing changes to the designated departmental
CCRs are those identified in our comprehensive review that are also
listed above in Table 2.

Table 3--Proposed Changes to CY 2010 OPPS Hierarchy of Cost Centers in
the Revenue Code-to-Cost Center Crosswalk
------------------------------------------------------------------------
2008 Revenue code and
description Rationale for proposed CY 2010 change
------------------------------------------------------------------------
0392--Administration, We are proposing to crosswalk charges
Processing and Storage for under revenue code 0392 to cost center
Blood and Blood Components; 4700 (Blood Storing, Processing, &
Processing and Storage. Transfusing) because we believe that
cost center 4700 is the most likely
departmental cost center to which
hospitals would assign the costs of
blood processing and storage. We are
proposing no secondary or tertiary cost
centers because we believe that no other
departmental cost centers are
appropriate.
0623--Medical Surgical We are proposing to crosswalk the charges
Supplies--Extension of 027X; reported under revenue code 0623 to cost
Surgical Dressings. center 5500 (Medical Supplies Charged to
Patients) as the primary cost center
because we believe that the costs
associated with the charges for surgical
dressings are most likely to be assigned
by hospitals to cost center 5500. We are
proposing no secondary or tertiary cost
centers because we believe that no other
departmental cost centers are
appropriate.
0931--Medical Rehabilitation We are proposing to crosswalk charges
Day Program; Half Day. reported under revenue codes 0931 and
0932 to cost center 6000 (Clinic) as the
primary cost center. We are proposing no
secondary or tertiary cost centers
because we believe that no other
departmental cost centers are
appropriate.
0932--Medical Rehabilitation
Day Program; Full Day
0942--Other Therapeutic We are proposing to crosswalk the charges
Services (also see 095x, an under revenue code 0942 to cost center
extension of 094x); Educ/ 6000 (Clinic) as the primary cost
Training. center. Currently, the charges under
revenue code 0942 are crosswalked to the
overall ancillary CCR. We believe that
cost center 6000 is a more appropriate
primary cost center. We are proposing no
secondary or tertiary cost centers
because we believe that no other
departmental cost centers are
appropriate.
0948--Other Therapeutic We are proposing to crosswalk the charges
Services (also see 095x, an under revenue code 0948 to cost center
extension of 094x); 4900 (Respiratory Therapy) as primary
Pulmonary Rehabilitation. and to cost center 6000 (Clinic) as
secondary because we believe that
hospitals are most likely to assign the
costs of these services to these cost
centers. We are proposing no tertiary
cost center.
------------------------------------------------------------------------

Having revised the revenue code-to-cost center crosswalk, 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. 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, 13X, or 14X, excluding all claims from CAHs and hospitals in
Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the
Northern Mariana Islands and

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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 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 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 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. These line-items are used to calculate a per unit
mean and median cost and a per day mean and median cost for drugs,
therapeutic radiopharmaceutical agents, and brachytherapy sources, as
well as other information used to set payment rates, such as a unit-to-
day ratio for drugs.
To implement our proposal to redistribute some portion of total
cost for packaged drugs and biologicals to separately payable drugs and
biologicals as acquisition and pharmacy overhead and handling costs
discussed in section V.B.3. of this proposed rule, we used the line-
item cost data for drugs and biologicals for which we had a HCPCS code
with ASP pricing information to calculate the ASP+X values first for
all drugs and biologicals, and then for separately payable drugs and
biologicals and for packaged drugs and biologicals, respectively, by
taking the ratio of total claim cost for each group relative to total
ASP dollars (per unit of each drug or biological HCPCS code's April
2009 ASP amount multiplied by total units for each drug or biological
in the CY 2008 claims data). These values are ASP+13 percent, ASP-2
percent, and ASP+247 percent, respectively. As we discuss in greater
detail in section V.B.3. of this proposed rule, we believe that between
one-third and one-half of the total cost in our claims data in excess
of ASP dollars for packaged drugs and biologicals, about $150 million,
is currently allocated to packaged drugs and biologicals due to the
combined effects of charge compression and our choice of a drug
packaging threshold but should instead be allocated to separately
payable drugs and biologicals as acquisition and pharmacy overhead and
handling cost. The $150 million is between one-third and one-half of
the difference of $395 million between the total cost of packaged drugs
and biologicals in our CY 2008 claims data ($555 million) and ASP
dollars for the same drugs and biologicals ($160 million). Removing
$150 million in pharmacy overhead cost from packaged drugs and
biologicals reduces the $555 million to $405 million, a 27 percent
reduction. To implement our CY 2010 proposal to redistribute $150
million in claim cost from packaged drugs and biologicals to separately
payable drugs and biologicals, we multiplied the cost of each packaged
drug or biological with a HCPCS code and ASP pricing information in our
CY 2008 claims data by 0.73. We also added the redistributed $150
million to the total cost of separately payable drugs and biologicals
in our CY 2008 claims data, which increased the relationship between
the total cost for separately payable drugs and biologicals and ASP
dollars for the same drugs and biologicals to ASP+4 percent.
For CY 2010, we added an additional trim in our claims preparation
to remove line-items that were not paid during claim processing,
presumably for a line-item rejection or denial. The number of edits for
valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and
elsewhere has grown significantly in the past few years, especially
with the implementation of the full spectrum of National Correct Coding
Initiative (NCCI) edits. To ensure that we are using valid claims that
represent the cost of payable services to set payment rates, we removed
line-items with an OPPS status indicator for the claim year (CY 2008)
and a status indicator of ``S,'' ``T,'' ``V,'' or ``X'' when separately
paid under the proposed CY 2010 payment system. This logic preserves
charges for services that would not have been paid in the claim year
but for which some estimate of cost is needed for the prospective year,
such as services newly proposed to come off the inpatient list for CY
2010 which were assigned status indicator ``C'' in the claim year.
Using February 2009 APC Panel data, we estimate that the impact of
removing line-items with valid status indicators that received no CY
2008 payment was limited to approximately 1.4 percent of all line-items
for separately paid services. This additional trim reduced the number
of single bills available for ratesetting by 1.5 percent. For
approximately 92 percent of procedural APCs, we observed a change in
the APC median cost of less than 1 percent. A handful of APCs
experienced greater changes in median cost. For example, APC 0618
(Trauma Response with Critical Care) experienced declines in both the
number of single bills used to set the median cost and the estimated
median cost itself. This occurred because the I/OCE has an edit to
ensure that HCPCS code G0390 (Trauma response team activation
associated with hospital critical care service), which is assigned to
APC 0618, receives payment only when one unit of G0390 appears with
both a revenue code in the 68x series and CPT code 99291 (Critical
care, evaluation and management of the critically ill or critically
injured patient; first 30-74 minutes) on the claim for the same date of
service, as described in the CY 2007 OPPS/ASC final rule with comment
period (71 FR 68134). If the I/OCE criteria are not met, HCPCS code
G0390 is not separately paid, and we found that a number of CY2008
claims including HCPCS code G0390 did not meet the criteria for
payment. On the other hand, a few APCs had greater estimated median
costs and greater numbers of single bills as a result of this
additional trim, presumably because removing lines from the claim
allowed us to identify more single bills. We believe that removing
lines with valid status indicators that were edited and not paid during
claims processing increases the accuracy of the single bills used to
determine the APC median costs for ratesetting.
b. Splitting Claims and Creation of ``Pseudo'' Single Claims
(1) Splitting 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
HCPCS code 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 2010,
we are proposing to continue assigning status indicator ``R'' to blood
and blood products; status indicator ``U'' to brachytherapy sources;
status indicator ``Q1'' to all ``STVX-packaged codes''; status
indicator ``Q2'' to all ``T-packaged codes''; and status indicator
``Q3'' to all codes that may be paid through a

[[Page 35263]]

composite APC based on composite-specific criteria or paid separately
through single code APCs when the criteria are not met. As discussed in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we
established status indicators ``Q1,'' ``Q2,'' and ``Q3'' 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 2010
as we have treated them since 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. As discussed earlier
in this section, because we are proposing to treat CPT code 76098 as
conditionally packaged, this logic now includes the addition of CPT
code 76098 as a ``Q2'' code. 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 a code for a separately payable or
packaged OPPS service. Non-OPPS claims include claims for therapy
services 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 file that can be purchased as described above. Claims that
contain codes to which we have assigned 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
have assigned status indicator ``Q3'' (composite APC members) appear in
the data of both the single and multiple major files used in this
proposed rule, depending on the specific composite calculation.
(2) Creation of ``Pseudo'' Single Claims
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
payable 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. As discussed above, we
ignore the ``overlap bypass codes,'' that is, those HCPCS codes that
are both on the bypass list and are members of the multiple imaging
composite APCs, in this initial assessment for ``pseudo'' single
claims. The proposed CY 2010 ``overlap bypass codes'' are listed in
Table 1 in section II.A.1.b. of this proposed rule. When one of the two
separately payable procedures on a multiple procedure claim was on the
bypass list, we split the claim into two ``pseudo'' single procedure
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
payable 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

[[Page 35264]]

otherwise be multiple procedure claims and could not be used.
We then assessed the claims to determine if the 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 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 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 packaged code would not be a separately
payable procedure, we considered it to be unavailable for use in
setting the composite APC median cost. Having identified ``single
session'' claims for the imaging composite APCs, we reassessed the
claim to determine if, after removal of all lines for bypass codes,
including the ``overlap bypass codes,'' a single unit of a single
separately payable code remained on the claim. If so, we attributed the
packaged costs on the claim to the single unit of the single remaining
separately payable code other than the bypass code to create a
``pseudo'' single claim. We also identified line items of overlap
bypass codes as a ``pseudo'' single claim. This allowed us to use more
claims data for ratesetting purposes for this proposed rule.
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, set the units to one on that HCPCS code to reflect our
policy of paying only one unit of a code with a status indicator of
''Q1.'' We then packaged all costs for the following into a single cost
for the ``Q1'' HCPCS code that had the highest CY 2008 relative weight
to create a ``pseudo'' single claim for that code: Additional units of
the status indicator ``Q1'' HCPCS code with the highest CY 2008
relative weight; other codes with status indicator ``Q1;'' and all
other packaged HCPCS codes and packaged revenue code costs. 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, set the units to one on that HCPCS code to reflect our policy
of paying only one unit of a code with a status indicator of ''Q2.'' We
then packaged all costs for the following into a single cost for the
``Q2'' HCPCS code that had the highest CY 2008 relative weight to
create a ``pseudo'' single claim for that code: Additional units of the
status indicator ``Q2'' HCPCS code with the highest CY 2008 relative
weight; other codes with status indicator ``Q2''; and other packaged
HCPCS codes and packaged revenue code costs. 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 and
set the units to one on that HCPCS code to reflect our policy of paying
only one unit of a code with a status indicator of ``Q2.'' We then
packaged all costs for the following into a single cost for the
selected (``T-packaged'') HCPCS code to create a ``pseudo'' single
claim for that code: additional units of the status indicator ``Q2''
HCPCS code with the highest CY 2008 relative weight; other codes with
status indicator ``Q2;'' codes with status indicator ``Q1'' (``STVX-
packaged''); and other packaged HCPCS codes and packaged revenue code
costs. 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.
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 major and to multiple minor claims. 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 the costs of packaged
revenue codes into the cost of the single major procedure remaining on
the claim. For CY 2010, this packaging also included the redistributed
packaged pharmacy overhead cost relative to the units of separately
payable drugs on each single procedure claim.
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 2009 OPPS
(73 FR 68531 through 68532) 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 2010 that are displayed in Table 4 below.
As noted in the CY 2009 OPPS/ASC final rule with comment period (73
FR 68531), we replaced the NUBC standard abbreviations for the revenue
codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the
most current NUBC descriptions of the revenue code categories and
subcategories to better articulate the meanings of the revenue codes
without actually changing the proposed list of revenue codes. In the
course of making the changes in labeling for the revenue codes in Table
2 of the CY 2009 OPPS/ASC final rule with comment period, we noticed
some changes to revenue categories and subcategories that we

[[Page 35265]]

believed warranted further review for future OPPS updates. Although we
finalized the list of packaged revenue codes in Table 2 for CY 2009, we
indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68531) that we intended to assess the NUBC revenue codes to determine
whether any changes to the list of packaged revenue codes should be
proposed for the CY 2010 OPPS. We specifically requested public input
and discussion on this issue during the comment period of the CY 2009
OPPS/ASC final rule with comment period. We did not receive any public
comments on this issue. As we discuss in section II.A.2.a. of this
proposed rule, we have completed that analysis for all revenue codes in
the revenue code-to-cost center crosswalk and, as a result, we are
proposing to add several revenue codes to the list of packaged revenue
codes for the CY 2010 OPPS. Specifically, we believe that the costs
derived from charges reported under revenue codes 0261 (IV Therapy;
Infusion Pump); 0392 (Administration, Processing and Storage for Blood
and Blood Components; Processing and Storage); 0623 (Medical Supplies--
Extension of 027X, Surgical Dressings); 0943 (Other Therapeutic
Services (also see 095X, an extension of 094X), Cardiac
Rehabilitation); and 0948 (Other Therapeutic Services (also see 095X,
an extension of 094X), Pulmonary Rehabilitation) are appropriately
packaged into payment for other OPPS services when charges appear on
lines with these revenue codes but no HCPCS code appears on the line.
Revenue codes that we are proposing to add to the CY 2010 packaged
revenue code list are identified by asterisks (*) in Table 4 below.

Table 4--Proposed CY 2010 Packaged Revenue Codes
------------------------------------------------------------------------
Revenue code Description
------------------------------------------------------------------------
0250.......................... Pharmacy; General Classification.
0251.......................... Pharmacy; Generic Drugs.
0252.......................... Pharmacy; Non-Generic Drugs.
0254.......................... Pharmacy; Drugs Incident to Other
Diagnostic Services.
0255.......................... Pharmacy; Drugs Incident to Radiology.
0257.......................... Pharmacy; Non-Prescription.
0258.......................... Pharmacy; IV Solutions.
0259.......................... Pharmacy; Other Pharmacy.
0260.......................... IV Therapy; General Classification.
0261 *........................ IV Therapy; Infusion Pump.
0262.......................... IV Therapy; IV Therapy/Pharmacy Svcs.
0263.......................... IV Therapy; IV Therapy/Drug/Supply
Delivery.
0264.......................... IV Therapy; IV Therapy/Supplies.
0269.......................... IV Therapy; Other IV Therapy.
0270.......................... Medical/Surgical Supplies and Devices;
General Classification.
0271.......................... Medical/Surgical Supplies and Devices;
Non-sterile Supply.
0272.......................... Medical/Surgical Supplies and Devices;
Sterile Supply.
0273.......................... Medical/Surgical Supplies and Devices;
Take Home Supplies.
0275.......................... Medical/Surgical Supplies and Devices;
Pacemaker.
0276.......................... Medical/Surgical Supplies and Devices;
Intraocular Lens.
0278.......................... Medical/Surgical Supplies and Devices;
Other Implants.
0279.......................... Medical/Surgical Supplies and Devices;
Other Supplies/Devices.
0280.......................... Oncology; General Classification.
0289.......................... Oncology; Other Oncology.
0343.......................... Nuclear Medicine; Diagnostic
Radiopharmaceuticals.
0344.......................... Nuclear Medicine; Therapeutic
Radiopharmaceuticals.
0370.......................... Anesthesia; General Classification.
0371.......................... Anesthesia; Anesthesia Incident to
Radiology.
0372.......................... Anesthesia; Anesthesia Incident to Other
DX Services.
0379.......................... Anesthesia; Other Anesthesia.
0390.......................... Administration, Processing and Storage
for Blood and Blood Components; General
Classification.
0392 *........................ Administration, Processing and Storage
for Blood and Blood Components;
Processing and Storage.
0399.......................... Administration, Processing and Storage
for Blood and Blood Components; Other
Blood Handling.
0560.......................... Home Health (HH)--Medical Social
Services; General Classification.
0569.......................... Home Health (HH)--Medical Social
Services; Other Med. Social Service.
0621.......................... Medical Surgical Supplies--Extension of
027X; Supplies Incident to Radiology.
0622.......................... Medical Surgical Supplies--Extension of
027X; Supplies Incident to Other DX
Services.
0623 *........................ Medical Supplies--Extension of 027X,
Surgical Dressings.
0624.......................... Medical Surgical Supplies--Extension of
027X; FDA Investigational Devices.
0630.......................... Pharmacy--Extension of 025X; Reserved.
0631.......................... Pharmacy--Extension of 025X; Single
Source Drug.
0632.......................... Pharmacy--Extension of 025X; Multiple
Source Drug.
0633.......................... Pharmacy--Extension of 025X; Restrictive
Prescription.
0681.......................... Trauma Response; Level I Trauma.
0682.......................... Trauma Response; Level II Trauma.
0683.......................... Trauma Response; Level III Trauma.
0684.......................... Trauma Response; Level IV Trauma.
0689.......................... Trauma Response; Other.
0700.......................... Cast Room; General Classification.
0709.......................... Cast Room; Reserved.
0710.......................... Recovery Room; General Classification.
0719.......................... Recovery Room; Reserved.
0720.......................... Labor Room/Delivery; General
Classification.
0721.......................... Labor Room/Delivery; Labor.

[[Page 35266]]

0732.......................... EKG/ECG (Electrocardiogram); Telemetry.
0762.......................... Specialty Room--Treatment/Observation
Room; Observation Room.
0801.......................... Inpatient Renal Dialysis; Inpatient
Hemodialysis.
0802.......................... Inpatient Renal Dialysis; Inpatient
Peritoneal Dialysis (Non-CAPD).
0803.......................... Inpatient Renal Dialysis; Inpatient
Continuous Ambulatory Peritoneal
Dialysis (CAPD).
0804.......................... Inpatient Renal Dialysis; Inpatient
Continuous Cycling Peritoneal Dialysis
(CCPD).
0809.......................... Inpatient Renal Dialysis; Other
Inpatient Dialysis.
0810.......................... Acquisition of Body Components; General
Classification.
0819.......................... Inpatient Renal Dialysis; Other Donor.
0821.......................... Hemodialysis--Outpatient or Home;
Hemodialysis Composite or Other Rate.
0824.......................... Hemodialysis--Outpatient or Home;
Maintenance--100%.
0825.......................... Hemodialysis--Outpatient or Home;
Support Services.
0829.......................... Hemodialysis--Outpatient or Home; Other
OP Hemodialysis.
0942.......................... Other Therapeutic Services (also see
095X, an extension of 094x); Education/
Training.
0943 *........................ Other Therapeutic Services (also see
095X, an extension of 094X), Cardiac
Rehabilitation.
0948 *........................ Other Therapeutic Services (also see
095X, an extension of 094X), Pulmonary
Rehabilitation.
------------------------------------------------------------------------

In addition, we excluded (1) claims that had zero costs after
summing all costs on the claim and (2) claims containing packaging flag
number 3. Effective for services furnished on or after July 1, 2004,
the 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 payable service under the OPPS) for which the
fiscal intermediary or MAC was required to allocate the sum of charges
for services with a status indicator equaling ``S'' or ``T'' based on
the relative 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. Using these 54 million claims,
we created approximately 91 million single and ``pseudo'' single
claims, of which we used 90 million single bills (after trimming out
approximately 622,000 claims as discussed above in this section) in the
proposed CY 2010 median development and ratesetting.
We used these claims to calculate the proposed CY 2010 median costs
for each separately payable HCPCS code and each APC. The comparison of
HCPCS code-specific 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 median costs for this proposed rule 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 HCPCS code assignment changes that resulted from examination
of the median costs, review of the public comments, and for other
reasons. The APC medians were recalculated after we reassigned the
affected HCPCS codes. Both the HCPCS code-specific 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.
At the February 2009 APC Panel Meeting, the APC Panel recommended
that CMS study the claims data for any APC in which the calculated
payment reduction would be greater than 10 percent. The APC Panel also
recommended that CMS provide a list of APCs to the APC Panel at the
next meeting with a proposed payment rate change of greater than 10
percent. While we recognize the concerns the APC Panel expressed with
regards to cost variability in the system, we already engage in a
standard review process for all APCs that experience significant
changes in median costs. We study all significant changes in estimated
cost to determine the effect that proposed and final payment policies
have on the APC payment rates and ensure that these policies are
appropriate and that the intended cost estimation methodologies have
been correctly applied. We note that there are a number of factors that
cause APC median costs to change from one year to the next. Some of
these are

[[Page 35267]]

a reflection of hospital behavior, and some of them are a reflection of
fundamental characteristics of the OPPS as defined in the statute. With
limited exceptions, we are required by law to reassign HCPCS codes to
APCs where it is necessary to avoid 2 times violations. Thus, there are
various mechanisms already in place to ensure that we assess changes in
cost and adjust APC weights accordingly or justify why we have not made
adjustments. We plan to continue our examination of all APCs that
experience changes of greater than10 percent, and we will provide the
APC Panel with a list of the APCs with proposed changes in costs of
more than 10 percent for CY 2010 at the next CY 2009 APC Panel meeting.
Accordingly, we are accepting this recommendation of the APC Panel in
full.
At the February 2009 APC Panel meeting, we reviewed and examined
the data process in preparation for the CY 2010 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 closely with the APC Panel's Data Subcommittee to
prepare and review data and analyses relevant to the APC configurations
and OPPS payment policies for hospital outpatient items and services.
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 2010, we are proposing to revise 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, to exclude claims that contain the ``FC'' modifier.
Specifically, we are proposing to calculate the median costs for
device-dependent APCs for CY 2010 using only the subset of single
procedure claims from CY 2008 claims data that pass the procedure-to-
device and device-to-procedure edits; do not contain token charges
(less than $1.01) for devices; 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; and do
not contain the ``FC'' modifier signifying that the hospital received
partial credit for the device. The ``FC'' modifier became effective
January 1, 2008, and is present for the first time on claims that would
be used in OPPS ratesetting for CY 2010. We believe that the standard
methodology for calculating median costs for device-dependent APCs,
further refined to exclude claims with the ``FC'' modifier, gives us
the most appropriate proposed median costs for device-dependent APCs in
which the hospital incurs the full cost of the device.
The median costs for the majority of device-dependent APCs that are
calculated using the CY 2010 proposed rule claims data are generally
stable, with most median costs increasing moderately compared to the
median costs upon which the CY 2009 OPPS payment rates were based.
However, the median costs for APC 0225 (Implantation of Neurostimulator
Electrodes, Cranial Nerve) and APC 0418 (Insertion of Left Ventricular
Pacing Electrode) demonstrate significant fluctuation. Specifically,
the CY 2010 proposed median cost for APC 0225 increases approximately
49 percent compared to the CY 2009 final median cost, although this APC
median cost had declined by approximately the same proportion from CY
2008 to CY 2009. The CY 2010 proposed median cost for APC 0418, which
had decreased approximately 45 percent from CY 2008 to CY 2009, shows
an increase of approximately 56 percent based on the claims data
available for the CY 2010 proposed rule. We believe the fluctuations in
median costs for these two APCs are a consequence of the small number
of single bills upon which the median costs are based and the small
number of providers of these services. 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,
particularly where there are small numbers of single bills from a small
number of providers. The additional single bills available for
ratesetting in the CY 2010 final rule data and updated cost report data
may result in less fluctuation in the median costs for these APCs for
CY 2010.
At the February 2009 meeting of the APC Panel, one presenter stated
that the assignment of the cranial neurostimulator implantation
procedure described by CPT code 61885 (Insertion or replacement of
cranial neurostimulator pulse generator or receiver, direct or
inductive coupling; with connection to a single electrode array) to APC
0039 (Level I Implantation of Neurostimulator Generator), along with
the peripheral/gastric neurostimulator implantation procedure described
by CPT code 64590 (Insertion or replacement of peripheral or gastric
neurostimulator pulse generator or receiver, direct or inductive
coupling) is not appropriate, given the clinical and cost differences
between the two procedures. According to the presenter, the cranial
procedure described by CPT code 61885 is more similar clinically and in
terms of resource utilization to the spinal neurostimulator
implantation procedure described by CPT code 63685 (Insertion or
replacement of spinal neurostimulator pulse generator or receiver,
direct or inductive coupling), which is the only CPT code assigned to
APC 0222 (Level II Implantation of Neurostimulator) for CY 2009. The
presenter requested that the APC Panel recommend CMS restructure the
existing configuration of neurostimulator pulse generator implantation
APCs for CY 2010 by splitting APC 0039, so that procedures involving
peripheral/gastric neurostimulators and cranial neurostimulators would
be in distinct APCs, or by reassigning the cranial neurostimulator
implantation procedure described by CPT code 61885 from APC 0039 to APC
0222. In response to this request, the APC Panel recommended that CMS
combine APC 0039 and APC 0222 for CY 2010, given the overall similarity
in median costs among the cranial, peripheral/gastric, and spinal
neurostimulator pulse generator implantation procedures assigned to
these two APCs. The APC Panel also recommended that CMS maintain the
configuration of APC 0315 (Level III Implantation of Neurostimulator
Generator) as it currently exists in CY 2009 for CY 2010.
We agree with the APC Panel that the median costs of the procedures
described by CPT codes 61885, 63685, and 64590 are sufficiently similar
to warrant placement of the CPT codes into a single APC, rather than
two APCs. We are accepting the APC Panel's

[[Page 35268]]

recommendation and, therefore, are proposing to reassign CPT code 63685
to APC 0039, to delete APC 0222, and to maintain the current
configuration of APC 0315 for CY 2010. We also are proposing to change
the title of APC 0315 to ``Level II Implantation of Neurostimulator
Generator'' to reflect the proposed two-level, rather than three-level,
structure of the neurostimulator generator implantation APCs.
In reviewing the APC Panel recommendation for consolidating APC
0039 and APC 0222, we observed that the median costs of the procedures
assigned to APC 0425 (Level II Arthroplasty or Implantation with
Prosthesis) and APC 0681 (Knee Arthroplasty) also are sufficiently
similar to warrant combining these two APCs into one APC. The proposed
HCPCS code-specific median cost for the only procedure currently
assigned to APC 0681, described by CPT code 27446 (Arthroplasty, knee,
condyle and plateau; medial OR lateral compartment), is approximately
$7,464 based on the claims data available for the CY 2010 proposed
rule. This proposed median cost is very similar to the proposed median
cost of approximately $7,852 calculated for APC 0425, which includes
other procedures involving the implantation of prosthetic devices into
bone, similar to the procedure described by CPT code 27446. Given the
shared resource and clinical characteristics of the procedures included
in APC 0425 and the only procedure assigned to APC 0681 for CY 2009, we
are proposing to consolidate these two APCs by reassigning CPT code
27446 to APC 0425, and deleting APC 0681. We also note that over the
past several years, the median cost for CPT code 27446 has fluctuated
due to a low volume of services being performed by a small number of
providers, and to a single provider performing the majority of services
(73 FR 68535). We believe that by reassigning CPT code 27446 to APC
0425 and deleting APC 0681, we can maintain greater stability from year
to year in the payment rate for this knee arthroplasty service, while
also paying appropriately for the service.
Table 5 below lists the APCs for which we are proposing to use our
standard device-dependent APC rate setting methodology for CY 2010,
with the proposed amendment to exclude claims that contain the ``FC''
modifier. We refer readers to Addendum A to this proposed rule for the
proposed payment rates for these APCs.

Table 5--Proposed CY 2010 Device-Dependent APCs
------------------------------------------------------------------------
Proposed CY 2010 status Proposed CY 2010 APC
Proposed CY 2010 APC indicator title
------------------------------------------------------------------------
0039................... S...................... Level I Implantation
of Neurostimulator
Generator.
0040................... S...................... Percutaneous
Implantation of
Neurostimulator
Electrodes.
0061................... S...................... Laminectomy,
Laparoscopy, or
Incision for
Implantation of
Neurostimulator
Electrodes.
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.
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 II Implantation
of Neurostimulator
Generator.
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
Electrode.
0425................... T...................... Level II Arthroplasty
or Implantation with
Prosthesis.
0427................... T...................... Level II Tube or
Catheter Changes or
Repositioning.
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.
------------------------------------------------------------------------

(2) Blood and Blood Products
Since the implementation of the OPPS in August 2000, we have made
separate payments for blood and blood products through APCs rather than
packaging payment for them into payments for the procedures with which
they are administered. Hospital payments for the costs of blood and
blood products, as

[[Page 35269]]

well as for the costs of collecting, processing, and storing blood and
blood products, are made through the OPPS payments for specific blood
product APCs.
For CY 2010, 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 differences 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 median costs upon which the
proposed CY 2010 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 hospital-specific, 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 2010
would result in median costs for blood and blood products that
appropriately reflect the relative estimated costs of these products
for hospitals without blood cost centers and, therefore, for these
products in general.
We refer readers to Addendum B to this proposed rule for the CY
2010 proposed payment rates for blood and blood products, which are
identified with 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 2010.
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 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. Our CY 2008 claims data available
for this 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 $55, significantly higher than the CY 2009 median cost
of APC 0381 of approximately $23 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
single allergy tests since CY 2006, we are proposing to calculate a
``per unit'' median cost for APC 0381, based upon 530 claims containing
multiple units or multiple occurrences of a single CPT code. The CY
2010 proposed median cost for APC 0381 using the ``per unit''
methodology is approximately $29. 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
In CY 2008, we implemented a policy whereby payment for all
contrast agents is packaged 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 code-specific median costs for all
separately payable echocardiography procedures that may be performed
with contrast agents by isolating single and ``pseudo'' single
echocardiography 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

[[Page 35270]]

pharmacologically induced stress, with interpretation and report).
After reviewing HCPCS code-specific median costs, we determined
that all echocardiography procedures that may be performed with
contrast agents are reasonably similar both clinically and in terms of
resource use. In CY 2008, we created APC 0128 (Echocardiogram With
Contrast) to provide payment for echocardiography procedures that are
performed with a contrast agent. We refer readers to the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66643 through 66646) for more
information on this methodology.
In order for hospitals to identify 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 to report
the CPT codes when performing echocardiography procedures without
contrast and to report the new HCPCS C-codes when performing
echocardiography procedures with contrast, or without contrast followed
by with contrast. As is our standard policy with regard to new codes,
the APC assignment of these codes was then open to comment in that
final rule.
We used the same process to calculate median costs for these codes
for CY 2009 as we used for CY 2008 to separately identify
echocardiography services provided with contrast and those provided
without contrast because the data reported under these new codes were
not yet available for CY 2009 ratesetting.
In addition, for CY 2009, the American Medical Association (AMA)
revised several CPT codes in the 93000 series to more specifically
describe particular services provided during echocardiography
procedures. The CY 2009 descriptor for new CPT code 93306
(Echocardiography, transthoracic real- time with image documentation
(2D), includes M-mode recording, when performed, complete, with
spectral Doppler echocardiography, and with color flow Doppler
echocardiography) includes the services described in CY 2008 by three
CPT codes: 93307 (Echocardiography, transthoracic, real- time with
image documentation (2D) with or without M-mode recording; complete);
93320 (Doppler echocardiography, pulsed wave and/or continuous wave
with spectral display; complete), and 93325 (Doppler echocardiography
color flow velocity mapping). Therefore, in CY 2008, the service
described in CY 2009 by new CPT code 93306 was reported with three CPT
codes, specifically CPT codes 93307, 93320, and 93325. For CY 2008, the
hospital received separate payment for CPT code 93307 through APC 0269
(Level II Echocardiogram Without Contrast Except Transesophageal), into
which payment for the other two services was packaged. The revised CY
2009 descriptor of CPT code 93307 (Echocardiography, transthoracic,
real-time with image documentation (2D), includes M- mode recording,
when performed, complete, without spectral or color Doppler
echocardiography) explicitly excludes services described by CPT codes
93320 and 93325.
To estimate the hospital costs of CPT codes 93306 and 93307 based
on their CY 2009 descriptors and the corresponding HCPCS codes C8929
and C8923 for CY 2009, we used claims data from CY 2007. As described
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68542
through 68544), we manipulated our CY 2007 single and ``pseudo'' single
claims data to simulate the new CY 2009 definitions of these services.
Specifically, we selected claims for CPT code 93307 on which CPT codes
93320 and 93325 were also present and we treated the summed costs on
these claims as if they were a single procedure claim for CPT code
93306. Similarly, we selected single claims for CPT code 93307 to
reflect the newly revised descriptor for CY 2009; that is, we included
those claims where CPT code 93307 was not billed with packaged CPT code
93320 or CPT code 93325 on the same claim. We then applied our CY 2009
methodology for calculating HCPCS code-specific median costs for these
echocardiography procedures with and without contrast by dividing the
new set of claims for CPT codes 93306 and 93307 into those billed with
and without contrast agents. We assigned the costs for simulated CPT
codes 93306 and 93307 reported without contrast to those CPT codes. We
then assigned the costs for simulated CPT codes 93306 and 93307
reported with contrast to new HCPCS code C8929 (Transthoracic
echocardiography with contrast, or without contrast followed by with
contrast, real-time with image documentation (2D), includes M-mode
recording, when performed, complete, with spectral Doppler
echocardiography, and with color flow Doppler echocardiography) and
revised HCPCS code C8923 (Transthoracic echocardiography with contrast,
or without contrast followed by with contrast, real-time with image
documentation (2D), includes M-mode recording, when performed,
complete, without spectral or color Doppler echocardiography),
respectively. In the CY 2009 OPPS/ASC final rule with comment period,
we assigned these CPT and HCPCS codes to APCs for CY 2009 based on
their simulated median costs and clinical characteristics. New CY 2009
CPT code 93306 and HCPCS code C8929 were assigned comment indicator
``NI'' in that final rule, to signify that they were new codes whose
interim final OPPS treatment was open to comment on that final rule.
This CY 2010 proposed rule is the first opportunity that we have
claims data available from hospitals for echocardiography services
performed with contrast (or without contrast followed by with contrast)
and reported with HCPCS codes C8921 through C8928. With the exception
of HCPCS code C8923, which had a significant change in its code
descriptor for CY 2009, we are proposing to use our standard
methodology to set the CY 2010 OPPS payment rates for these
echocardiography services performed with contrast, taking into
consideration their HCPCS code-specific median costs from CY 2008
claims.
For CY 2010 ratesetting, we are proposing to employ an alternative
ratesetting methodology for CPT codes 93306 and 93307 and HCPCS codes
C8929 and C8923 that is similar to the approach we used for CY 2009 in
order to account for the new codes and revised code descriptors for
which CY 2008 data are unavailable. However, in the case of the
proposed CY 2010 cost estimation, our CY 2008 claims for CPT code 93307
are only for services performed without contrast, and we have CY 2008
claims for HCPCS C8923 for the comparable services performed with
contrast. Specifically, we selected claims for CPT code 93307 on which
CPT codes 93320 and 93325 were also present and we treated the summed
costs on these claims as if they were a single procedure claim for CPT
code 93306 in order to simulate the median cost for CPT code 93306, for
which CY 2008 claims data are not available. We then selected single
claims for CPT code 93307 to reflect the newly revised descriptor for
CY 2009; that is, we included those claims where CPT code 93307 was not
billed with either packaged CPT code 93320 or CPT code 93325 on the
same claim in order to simulate an appropriate CY 2010 proposed median
cost for CPT code 93307. We assigned the costs of HCPCS code C8923 when
reported with CPT codes 93320 and 93325 to HCPCS code C8929 and the
costs of HCPCS code

[[Page 35271]]

C8923 when reported without CPT code 93320 or 93325 to HCPCS code
C8923.
Following publication of the CY 2009 OPPS/ASC final rule with
comment period, several stakeholders brought a number of concerns to
our attention, including the interim APC assignment of new CPT code
93351 (Echocardiography, transthoracic, real-time with image
documentation (2D), includes M-mode recording, when performed, during
rest and cardiovascular stress test using treadmill, bicycle exercise
and/or pharmacologically induced stress, with interpretation and
report; including performance of continuous electrocardiographic
monitoring, with physician supervision) and the corresponding new HCPCS
code C8930 (Transthoracic echocardiography, with contrast, or without
contrast followed by with contrast, real-time with image documentation
(2D), includes M-mode recording, when performed, during rest and
cardiovascular stress test using treadmill, bicycle exercise and/or
pharmacologically induced stress, with interpretation and report;
including performance of continuous electrocardiographic monitoring,
with physician supervision). These stakeholders noted that new CY 2009
CPT code 93351 was created to include the services reported previously
by CPT codes 93015 (Cardiovascular stress test using maximal or
submaximal treadmill or bicycle exercise, continuous
electrocardiographic monitoring, and/or pharmacological stress; with
physician supervision, with interpretation and report) and 93350
(Echocardiography, transthoracic, real-time with image documentation
(2D), includes M-mode recording, when performed, during rest and
cardiovascular stress test using treadmill, bicycle exercise and/or
pharmacologically induced stress, with interpretation and report).
Because new CY 2009 CPT code 93351 was meant to include the services
previously reported with both the CPT codes for a transthoracic
echocardiogram during rest and stress (CPT code 93350 is recognized
under the OPPS) and a cardiovascular stress test (CPT code 93017 is
recognized under the OPPS, rather than CPT code 93015), these
stakeholders disagreed with our assignments of both CPT codes 93350 and
93351 to APC 0269 for CY 2009.
Upon review of these concerns and our CY 2008 data, for CY 2010, we
are proposing to use an alternative methodology to simulate median
costs for CPT code 93351 and corresponding HCPCS code C8930, for which
CY 2008 claims data are unavailable, and for CPT code 93350 and
corresponding HCPCS code C8928 (Transthoracic echocardiography with
contrast, or without contrast followed by with contrast, real-time with
image documentation (2D), includes M-mode recording, when performed,
during rest and cardiovascular stress test using treadmill, bicycle
exercise and/or pharmacologically induced stress, with interpretation
and report). That is, we are proposing to use claims that contain both
CPT codes 93350 and 93017 (Cardiovascular stress test using maximal or
submaximal treadmill or bicycle exercise, continuous
electrocardiographic monitoring, and/or pharmacological stress; tracing
only, without interpretation and report) to simulate the median cost
for CPT code 93351. We also are proposing to use the remaining claims
that contain CPT code 93350 but that do not contain CPT code 93017 to
develop the proposed CY 2010 median cost for CPT code 93350. We
identified over 74,000 CY 2008 claims with both CPT code 93350 and CPT
code 93017 on the same date of service and no other separately paid
services appearing on the same date after applying our bypass
processing logic, discussed in section II.A.1.b. of this proposed rule,
that we modified to treat CPT codes 93350 and code 93017 as a single
service. We calculated a proposed median cost of approximately $604.
Therefore, for CY 2010, we are proposing to reassign CPT code 93351 to
revised APC 0270 (Level III Echocardiogram Without Contrast) which has
a proposed APC median cost of approximately $596. We are proposing to
continue to assign CPT code 93350 to APC 0269, which has a proposed APC
median cost of approximately $456, based on its HCPCS code-specific
median cost of approximately $406 based on approximately 11,000 single
claims. Furthermore, we are proposing to use claims for HCPCS code
C8928 that are reported with CPT code 93017 on the same claim to
simulate the CY 2010 median cost for HCPCS code C8930. We identified
over 4,000 claims with both HCPCS code C8930 and CPT code 93017 on the
same date of service and no other separately paid services appearing on
the same date after applying our bypass processing logic, discussed in
section II.A.1.b. of this proposed rule, that we modified to treat
HCPCS code C8930 and CPT code 93017 as a single service. We calculated
a HCPCS code-specific median cost of approximately $706. Therefore, we
are proposing to continue to assign HCPCS code C8930 to APC 0128 with a
proposed APC median cost of approximately $660. We also are proposing
to continue to assign HCPCS code C8928 to APC 0128, based on its HCPCS
code-specific median cost of approximately $595 based on approximately
1,000 single claims.
Table 6 below shows CY 2009 CPT codes for billing echocardiography
services without contrast, their proposed APC assignments for CY 2010,
and the corresponding HCPCS codes for use when echocardiography
services are performed with contrast (or without contrast followed by
with contrast), along with their proposed APC assignments for CY 2010.
BILLING CODE 4120-01-P

[[Page 35272]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.317

[[Page 35273]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.318

[[Page 35274]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.319

[[Page 35275]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.320

BILLING CODE 4120-01-C
Finally, for CY 2010, based upon our proposed APC configurations,
we also are proposing to revise the titles of our existing series of
echocardiography APCs to more accurately describe the groups of
services identified by CPT codes 93303 through 93352 and HCPCS codes
C8921 through C8930 that are assigned to these APCs. We are proposing
to rename APCs 0269, 0270, and 0697 as described in Table 7 below.

[[Page 35276]]

Table 7--Proposed CY 2010 Echocardiography APCs
------------------------------------------------------------------------
Proposed CY 2010
Proposed CY 2010 APC Proposed CY 2010 APC approximate APC
title median cost
------------------------------------------------------------------------
0128.......................... Echocardiogram With $660
Contrast.
0269.......................... Level II 456
Echocardiogram
Without Contrast.
0270.......................... Level III 596
Echocardiogram
Without Contrast.
0697.......................... Level I 263
Echocardiogram
Without Contrast.
------------------------------------------------------------------------

(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 with comment period 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 (other than implantable 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 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).
For CY 2008 ratesetting, we used only claims for nuclear medicine
procedures that contained a diagnostic radiopharmaceutical in
calculating the median costs for APCs that include 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-
radiolabeled product 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 radiolabeled product and procedure HCPCS codes that are
included in these edits can be viewed on the CMS Web site at: http://
www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp.
The CY 2008 OPPS claims that are subject to the procedure-to-
radiolabeled product edits were not available for setting payment rates
in CY 2009. Therefore, as described in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68545), we continued to use our established
CY 2008 methodology for setting the payment rates for APCs that
included nuclear medicine procedures for CY 2009. We used an updated
list of radiolabeled products, including but not limited to diagnostic
radiopharmaceuticals, from the procedure-to-radiolabeled product 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 to calculate median costs for
nuclear medicine procedures and their associated APCs. 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 ensured that the costs of diagnostic
radiopharmaceuticals were included in the CY 2009 ratesetting process
for these APCs.
As discussed in section II.A.4.b.(1) of this proposed rule, during
the September 2007 APC Panel meeting, the APC Panel requested that CMS
evaluate the impact of expanded packaging on beneficiaries. Also,
during the March 2008 APC Panel meeting, the APC Panel requested that
CMS report to the APC Panel at the first meeting in CY 2009 regarding
the impact of packaging on net payments for patient care. In response
to these requests, we shared data with the APC Panel at the February
2009 APC Panel meeting that compared the frequency of the billing of
diagnostic radiopharmaceuticals billed under the OPPS in CY 2007,
before the packaging of all diagnostic radiopharmaceuticals went into
effect, to the frequency of the billing of those same products in
CY2008, their first year of packaged payment. We also reviewed
information about the aggregate payment for diagnostic
radiopharmaceuticals and nuclear medicine procedures during those same
2 years. A summary of these data analyses is provided in section
II.A.4.b.(1) of this proposed rule.
In addition to these aggregate analyses of total frequency and
payment, we also presented our analyses of the number of hospitals
performing nuclear medicine scans and the specific diagnostic

[[Page 35277]]

radiopharmaceuticals appearing with cardiac and tumor imaging nuclear
medicine procedures, excluding positron emission tomography (PET)
scans, by classes of hospitals between the CY 2007 claims processed
through September 30, 2007 and the CY 2008 claims processed through
September 30, 2008. At the March 2008 APC Panel meeting, the APC Panel
also recommended that we evaluate the usage and frequency, geographic
distribution, and size and type of hospitals performing nuclear
medicine studies using radioisotopes to assess beneficiaries' access
and that we present these analyses at the first APC Panel meeting in CY
2009. The number of all hospitals reporting any nuclear medicine
procedure declined by 2 percent between the CY 2007 claims data and the
CY 2008 claims data. Across several classes of hospitals (urban and
rural, teaching and nonteaching, and small and large OPPS service
volume), the number of hospitals billing any nuclear medicine procedure
declined by up to 4 percent over that same time period. With regard to
the specific diagnostic radiopharmaceuticals reported with cardiac and
tumor imaging nuclear medicine procedure, we generally observed
comparable distributions of radiopharmaceuticals between the CY 2007
claims data and the CY 2008 claims data. However, the utility of this
analysis was limited due to the introduction of the procedure-to-
radiolabeled product claims processing edits discussed above. There are
nuclear medicine procedures reported with a diagnostic
radiopharmaceutical HCPCS code on the CY 2008 claims that would have
not necessarily been billed with a diagnostic radiopharmaceutical HCPCS
code on the CY 2007 claims. Specifically, we observed an increase in
billing for many radiopharmaceuticals, some new and costly, between the
CY 2007 claims data and the CY 2008 claims data. We do not know how
much of this was attributable to changes in hospitals' use of
radiopharmaceuticals or to the CY 2008 introduction of the procedure-
to-radiolabeled product edits that require a radiolabeled product on
the claim for payment of the nuclear medicine procedure. With the
exception of the notable increases in the frequencies of certain
radiopharmaceutical HCPCS codes that potentially resulted from the
introduction of these edits, in general, hospital billing patterns for
diagnostic radiopharmaceuticals associated with cardiac and tumor
imaging nuclear medicine scans did not change dramatically between CY
2007 and CY 2008 for all hospitals and classes of hospitals. We
concluded that very few hospitals stopped providing nuclear medicine
procedures as a result of our CY 2008 policy to package payment for
diagnostic radiopharmaceuticals and that, in general, hospitals did not
decrease their use of expensive radiopharmaceuticals.
As a result of the discussions of the APC Panel following our
presentation of the analyses of the impact of packaging payment for all
diagnostic radiopharmaceuticals in the OPPS, the APC Panel further
recommended that CMS continue to analyze the impact on beneficiaries of
increased packaging of diagnostic radiopharmaceuticals and provide more
detailed analyses at the next APC Panel meeting. Further, the APC Panel
requested that, in the more detailed analyses of packaging of
diagnostic radiopharmaceuticals by type of nuclear medicine scan, CMS
analyze the data according to the specific CPT codes billed with the
diagnostic radiopharmaceuticals. We are accepting the APC Panel's
recommendation and will provide additional data to the APC Panel at an
upcoming meeting.
For CY 2010 ratesetting, we are able to use CY 2008 OPPS claims
that were subject to the procedure-to-radiolabeled product claims
processing edits incorporated into the I/OCE prior to payment of claims
in order to develop single and ``pseudo'' single claims for nuclear
medicine procedures according to our standard methodology. We believe
that using the CY 2008 claims for these services without further
editing for the presence of a radiolabeled product is now appropriate
for CY 2010 because these claims reflect all possible relationships
between the nuclear medicine procedures and their associated
radiolabeled products that we have accommodated for payment of nuclear
medicine procedures. Moreover, as we indicated in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68548 through 68549), in the rare
circumstance where a diagnostic radiopharmaceutical is not provided in
association with a nuclear medicine procedure, for example, because a
beneficiary receives a therapeutic radiopharmaceutical as part of a
hospital inpatient stay and then returns to the HOPD for a nuclear
medicine scan without needing a diagnostic radiopharmaceutical to be
administered again for the study, we believe it is appropriate to use
these claims for ratesetting purposes. We believe that just as these
situations are representative of the performance of a nuclear medicine
scan, it is also appropriate to include them for ratesetting purposes.
(6) Hyperbaric Oxygen Therapy
Since the implementation of the 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 OPPS
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. The
public comments on the CY 2005 OPPS 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 4
years. We are proposing to continue using the same methodology to
estimate a ``per unit'' median cost for HCPCS code C1300 for CY 2010 of
approximately $108, using 279,139 claims with multiple units or
multiple occurrences.
(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

[[Page 35278]]

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 the 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 2010, 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 to continue to
make one payment under APC 0375 for the services that meet the specific
conditions for using modifier -CA. We are proposing to 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.
We believe that hospitals are reporting the -CA modifier according
to the policy initially established in CY 2003. We note that the claims
frequency for APC 0375 has been decreasing over the past few years. For
this proposed rule, there are only 131 claims for this APC. Although
the median cost for APC 0375 has increased in recent years, the median
in the data for this proposed rule is only slightly higher than the
final median cost for CY 2009. 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 as long as
hospitals continue judicious reporting of the -CA modifier. Table 8
below shows the number of claims and the final median costs for APC
0375 for CYs 2007, 2008 and 2009. For CY 2010, we are proposing a
median cost for APC 0375 of approximately $5,784.

Table 8--Claims for Ancillary Outpatient Services When Patient Expires (-
Ca Modifier) for CYs 2007 Through 2009
------------------------------------------------------------------------
Number of APC median
Prospective payment year claims cost
------------------------------------------------------------------------
CY 2007................................. 260 $3,549
CY 2008................................. 183 4,945
CY 2009................................. 168 5,545
------------------------------------------------------------------------

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.
Combining 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 may be low in volume and/or incorrectly coded. Under the
OPPS, we currently have composite APC policies for extended assessment
and management services, low dose rate (LDR) prostate brachytherapy,
cardiac electrophysiologic evaluation and ablation services, mental
health services, and multiple imaging services. We refer readers to the
CY 2008 OPPS/ASC final rule with comment period for a full discussion
of the development of the composite APC methodology (72 FR 66611
through 66614 and 66650 through 66652).
While 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, we are not proposing any new composite
APCs for CY 2010 so that we may monitor the effects of the existing
composite APCs on utilization and payment. In response to our CY 2009
proposal to apply a composite payment methodology to multiple imaging
procedures provided on the same date of service, several public
commenters stated that we should proceed cautiously as we expand
service bundling. They commented that we should not implement
additional composite methodologies until adequate data are available to
evaluate the composite policies' effectiveness and impact on
beneficiary access to care (73 FR 68561 through 68562).
In response to the concerns of the public commenters and the APC
Panel, we reviewed the CY 2008 claims data for claims processed through
September 30, 2008, for the services in the following composite APCs:
APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation
Composite); APC 8001 (Low Dose Rate Prostate Brachytherapy Composite);
APC 8002 (Level I Extended Assessment and Evaluation Composite); and
APC 8003 (Level II Extended Assessment and Evaluation Composite). Our
analyses did not consider inflation, changes in beneficiary population,
or other comparable variables that can affect changes in aggregate
payment from year to year. We found that the average payment for the
package of services in both APC 8000 and APC 8001 increased from CY
2007, when payments were made for all individual services, to CY 2008
under the composite payment methodology. We also note that the proposed
median costs for these composite APCs for CY 2010 are higher than the
median costs upon which the CY 2009 payments are based. We believe
that, in part, this is because we are using more claims data for common
clinical scenarios to calculate the median costs of these APCs than we
were prior to the implementation of the composite payment methodology.
With regard to APCs 8002 and 8003, we compared payment for all
visits appearing with observation services in CY 2007 with payments for
all visits appearing with observation services in CY 2008 and found
that total payment

[[Page 35279]]

for visits and observation services increased from approximately $197
million to $270 million for claims processed through September 30 in
each year. We attribute this increase in payments, in part, to the
introduction of a composite payment for visits and observation through
the extended assessment and management composite methodology that
occurred for CY 2008 and that did not incorporate the International
Classification of Diseases, Ninth Edition, Clinical Modification (ICD-
9-CM) diagnosis criteria previously necessary for separate payment of
observation.
We will continue to review the claims data for the impact of all of
the composite APCs on payments to hospitals and on services to
beneficiaries and will take such data into consideration before
proposing new composite APCs. As stated in the CY 2009 OPPS/ASC final
rule with comment period, we believe that we proceeded with an
appropriate level of caution by implementing multiple imaging composite
APCs as the one new composite APC policy for CY 2009 (73 FR 68563).
However, we do recognize the concerns expressed by the public
commenters that moving ahead too quickly with any nonstandard OPPS
payment methodology (even one such as composite APCs that may improve
the accuracy of the OPPS payment rates by utilizing more complete and
valid claims in ratesetting) could have unintended consequences and
requires close monitoring. Because the multiple imaging composite APCs
were implemented for the first time in CY 2009, we will not have data
available for such monitoring until early CY 2010. Therefore, we
believe that it is in the best interest of hospitals and the integrity
of the OPPS that we do not propose any new composite APC policies for
at least one year.
At its February 2009 meeting, the APC Panel recommended that CMS
evaluate the implications of creating composite APCs for cardiac
resynchronization therapy with a defibrillator or pacemaker and report
its findings to the APC Panel. While we are not proposing any new
composite APCs for CY2010, we are accepting this APC Panel
recommendation, and we will evaluate the implications of creating
composite APCs for cardiac resynchronization therapy services and
report our findings to the APC Panel at a future meeting. We also will
consider bringing other potential composite APCs to the APC Panel for
further discussion.
For CY 2010, we are proposing to continue our established composite
APC policies for extended assessment and management, LDR prostate
brachytherapy, cardiac electrophysiologic evaluation and ablation,
mental health services, and multiple imaging services, as discussed in
sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), and
II.A.2.e.(5), respectively, of this proposed rule.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and
8003)
For CY 2010, 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. 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 referral 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 referral 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) Type A emergency
department visit, a high level (Level 5) Type B 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 through66649), the Integrated
Outpatient Code Editor (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 OPPS 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 2010 median costs for
these composite APCs. We are not proposing to change these criteria for
the CY 2010 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
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66812).
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. We are not proposing to
change these reporting requirements for the CY 2010 OPPS. However, as
discussed below, the APC Panel at its February 2009 meeting requested
that CMS issue guidance clarifying the correct method for reporting the
starting time for observation services. The APC Panel noted that the
descriptions of the start time for observation services located in the
Medicare Claims Processing Manual (Pub. 100-4), Chapter 4, sections
290.2.2 through 290.5, cause confusion for hospitals. We are accepting
this recommendation and plan to issue clarifying guidance in the Claims
Processing Manual through a future quarterly update of the OPPS.
As noted in detail in 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 in
the OPPS claims data through CY 2006 available at that time. We stated
that we did 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. Similarly, we stated that we expected that
hospitals would 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 CY2008 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

[[Page 35280]]

Integrity contractors or other contractors review the claims against
the medical record.
As noted above, we observed a 37 percent increase in total payments
for all visits appearing with observation services for claims processed
through September 30 in CY 2007 and CY 2008. We believe this increase
is, in part, attributable to the expansion of payment under the
extended assessment and management composites to all ICD-9-CM
diagnoses. To confirm this, we calculated the percentage of visit HCPCS
codes billed with HCPCS code G0378 (Observation services, per hour)
between CY 2007 and CY 2008 and compared the percentage associated with
visit codes included in the extended assessment and management
composites in each year. If hospitals had inappropriately changed their
visit reporting behavior to maximize payment through the new composite
APCs, we would expect to see significant changes in the percentage of
visit HCPCS codes included in the composite APCs billed with
observation services relative to all other visit HCPCS codes billed
with observation services between CY 2007 and CY 2008. We did not
observe a sizable increase in the proportion of visit HCPCS codes
included in the composite APCs relative to the proportion of all other
visit HCPCS codes billed with observation services. For example, the
percentage of claims billed with CPT code 99285 (Emergency department
visit for the evaluation and management of a patient (Level 5)) and
HCPCS code G0378 was 51 percent in the CY 2007 data and 54 percent in
the CY 2008 data. Similarly, the percentage of claims billed with CPT
code 99284 (Emergency department visit for the evaluation and
management of a patient (Level 4)) and HCPCS code G0378 decreased only
slightly from 28 percent in the CY 2007 data to 27 percent in the CY
2008 data. We conclude that although the volume of visits billed with
HCPCS code G0378 increased between CY 2007 and CY2008, the overall
pattern of billing visit levels did not change significantly. We will
continue to carefully monitor any changes in billing practices on a
service-specific and hospital-specific level.
For CY 2010, we are proposing to continue the extended assessment
and management composite APC payment methodology for APCs 8002 and
8003. As stated earlier, we also are 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 related policies provide the most appropriate means of paying
for these services. We are proposing to calculate the median costs for
APCs 8002 and8003 using all single and ``pseudo'' single procedure
claims for CY 2008 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'' that is reported 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 referral 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. We refer readers to section XII.F. of this proposed rule for a
full discussion of our proposed revision of the code descriptor for
HCPCS code G0379 for CY 2010.
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
(Level 5 Hospital Emergency Department Visit Provided in a Type B
Emergency Department) provided on the same date of service or one day
before the date of service for HCPCS code G0378. (As discussed in
detail in the CY2009 OPPS/ASC final rule with comment period (73 FR
68684), we finalized our proposal 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 CY2010 median costs. The proposed CY
2010 median cost resulting from this process for composite APC8002 is
approximately $384, which was calculated from 14,981 single and
``pseudo'' single bills that met the required criteria. The proposed CY
2010 median cost for composite APC 8003 is approximately $709, which
was calculated from 154,843 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 further in sections III.D and IX. of this proposed
rule, and consistent with our CY 2008 and CY 2009 final policies, 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 are utilizing 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
results in the most accurate cost estimates for APCs 0604 through 0617
and 0626 through 0629 for CY 2010.
At the February 2009 meeting of the APC Panel, the APC Panel
recommended that CMS present at the next APC Panel meeting an analysis
of CY 2008 claims data for clinic, emergency department (Types A and
B), and extended assessment and management composite APCs. We are
accepting this recommendation, and we will share the requested claims
data with the APC Panel at its next meeting.
In summary, for CY 2010, 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. We are proposing to continue the
extended assessment and management composite APC payment methodology
and criteria that we finalized for CY 2009. We also are proposing to
calculate the median costs for APCs 8002 and 8003 using all single and
``pseudo'' single procedure claims from CY 2008 that meet the criteria
for payment of each composite APC. We are not proposing to change the
reporting requirements for observation services for the CY 2010 OPPS.
However, we plan to issue further clarifying guidance in the Medicare
Claims Processing Manual related to observation start time, as
recommended by the APC Panel.

[[Continued on page 35281]]

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

[[pp. 35281-35330]] Medicare Program: Proposed Changes to the Hospital Outpatient
Prospective Payment System and CY 2010 Payment Rates; Proposed Changes
to the Ambulatory Surgical Center Payment System and CY 2010 Payment
Rates

[[Continued from page 35280]]

[[Page 35281]]

(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
LDR prostate brachytherapy is a treatment for prostate cancer in
which hollow needles or catheters are inserted into the prostate,
followed by permanent implantation of radioactive sources into the
prostate through the needles/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 being 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, had 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 further 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, reported 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 2010, we are proposing to continue paying for LDR prostate
brachytherapy services using the composite APC methodology proposed and
implemented for CY 2008 and CY 2009. That is, we are proposing to use
CY 2008 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 and CY 2009 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 0651 (Complex Interstitial Radiation
Source Application), the APCs to which CPT codes 55875 and 77778 are
assigned, respectively. The median costs for APCs 0163 and 0651 would
continue to be calculated using single and ``pseudo'' single procedure
claims. 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 2008 claims data available for this proposed
rule, we were able to use 669 claims that contained both CPT codes
77778 and 55875 to calculate the median cost upon which the proposed CY
2010 payment for composite APC 8001 is based. The proposed median cost
for composite APC 8001 for CY 2010 is approximately $3,106. This is an
increase compared to the CY2009 OPPS/ASC final rule with comment period
in which we calculated a final median cost for this composite APC of
approximately $2,967 based on a full year of CY 2007 claims data. The
CY 2010 proposed median cost for this composite APC is slightly less
than $3,268, the sum of the proposed median costs for APCs 0163 and
0651 ($2,453+$815), the APCs to which CPT codes 55875 and 77778 map if
one service is billed on a claim without the other. We believe the
proposed CY 2010 median cost for composite APC 8001 of approximately
$3,106 calculated from claims we believe to be correctly coded results
in a reasonable and appropriate payment rate for this service in CY
2010.
(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 hospital outpatient setting.
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 costs 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 specified 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 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. Table 9 in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66656) identified the CPT codes
that are

[[Page 35282]]

assigned to groups A and B. For a full discussion of how we identified
the group A and group B procedures and established the 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 2010, we are proposing to continue paying for cardiac
electrophysiologic evaluation and ablation services using the composite
APC methodology proposed and implemented for CY 2008 and CY 2009.
Consistent with our CY 2008 and CY 2009 practice, we would not use the
claims that meet the composite payment criteria in the calculation of
the median costs for APC 0085 and APC 0086, to which the CPT codes in
both groups A and B for composite APC 8000 are otherwise assigned.
Median costs for APCs 0085 and 0086 continue to be calculated using
single procedure claims. We continue to believe that the composite APC
methodology 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. Furthermore, 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 2008 claims data available for this proposed
rule, we were able to use 6,975 claims containing a combination of
group A and group B codes and calculated a proposed median cost of
approximately $10,105 for composite APC 8000. This is an increase
compared to the CY 2009 OPPS/ASC final rule with comment period in
which we calculated a final median cost for this composite APC of
approximately $9,206 based on a full year of CY 2007 claims data. We
believe that the proposed median cost of $10,105 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 9 below lists the groups of
procedures upon which we are proposing to base composite APC 8000 for
CY 2010.

Table 9--Proposed Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite
APC 8000 Is Based
----------------------------------------------------------------------------------------------------------------
Proposed Proposed CY
Codes used in combinations: at least one in Group A and one in CY 2009 HCPCS single code 2010 SI
Group B code CY 2010 APC (composite)
----------------------------------------------------------------------------------------------------------------
Group A
----------------------------------------------------------------------------------------------------------------
Comprehensive electrophysiologic evaluation with right atrial 93619 0085 Q3
pacing and recording, right ventricular pacing and recording, His
bundle recording, including insertion and repositioning of
multiple electrode catheters, without induction or attempted
induction of arrhythmia...........................................
Comprehensive electrophysiologic evaluation including insertion and 93620 0085 Q3
repositioning of multiple electrode catheters with induction or
attempted induction of arrhythmia; with right atrial pacing and
recording, right ventricular pacing and recording, His bundle
recording.........................................................
----------------------------------------------------------------------------------------------------------------
Group B
----------------------------------------------------------------------------------------------------------------
Intracardiac catheter ablation of atrioventricular node function, 93650 0085 Q3
atrioventricular conduction for creation of complete heart block,
with or without temporary pacemaker placement.....................
Intracardiac catheter ablation of arrhythmogenic focus; for 93651 0086 Q3
treatment of supraventricular tachycardia by ablation of fast or
slow atrioventricular pathways, accessory atrioventricular
connections or other atrial foci, singly or in combination........
Intracardiac catheter ablation of arrhythmogenic focus; for 93652 0086 Q3
treatment of ventricular tachycardia..............................
----------------------------------------------------------------------------------------------------------------

(4) Mental Health Services Composite APC (APC 0034)
For CY 2010, we are proposing to continue our longstanding policy
of limiting the aggregate payment for specified less resource-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 for CY
2010. 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.
Therefore, 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 2010, as discussed further in section X.B. of this proposed
rule, we are proposing to continue using the two tiered payment
approach for partial hospitalization services that we implemented in CY
2009: One APC for days with three services (APC 0172) (Level I Partial
Hospitalization (3 services)) and one APC for days with four or more
services (APC 0173) (Level II Partial Hospitalization (4 or more
services)). When a CMHC or hospital provides three units of partial
hospitalization services and meets all other partial hospitalization
payment criteria, we are proposing that the CMHC or hospital be paid
through APC 0172. When the CMHC or hospital provides 4 or more units of
partial hospitalization services and meets all other partial
hospitalization payment criteria, we are proposing that the CMHC or
hospital be paid through APC 0173. We are proposing to set the CY 2010
payment rate for mental health services composite APC 0034 (Mental
Health Services Composite) at the same

[[Page 35283]]

rate as we are proposing for APC 0173, which is the maximum partial
hospitalization per diem payment. We believe this APC payment 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. When the
aggregate 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
exceeds the maximum per diem partial hospitalization payment, we are
proposing that those specified mental health services would be assigned
to APC 0034. We are proposing that APC 0034 would continue to have the
same payment rate as APC 0173, and that the hospital would continue to
be paid one unit of APC 0034. The I/OCE currently determines, and we
are proposing for CY 2010 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 by the hospital on that single date of service.
For CY 2010, we are proposing to continue assigning status
indicator ``Q3'' (Codes that May be Paid Through a Composite APC) to
the HCPCS codes that are assigned to composite APC 0034 in Addendum M
to this proposed rule. We also are proposing to continue assigning
status indicator ``S'' (Significant Procedure, Not Discounted when
Multiple), as adopted for CY 2009, to APC 0034 for CY 2010.
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and
8008)
Prior to CY 2009, hospitals received a full APC payment for each
imaging service on a claim, regardless of how many procedures were
performed during a single session using the same imaging modality.
Based on extensive data analysis, we determined that this practice
neither reflected nor promoted the efficiencies hospitals can achieve
when performing multiple imaging procedures during a single session (73
FR 41448 through 41450). As a result of our data analysis, and in
response to ongoing requests from MedPAC to improve payment accuracy
for imaging services under the OPPS, we expanded the composite APC
model developed in CY 2008 to multiple imaging services. Effective
January 1, 2009, we provide a single payment each time a hospital bills
more than one imaging procedure within an imaging family on the same
date of service. We utilize three imaging families based on imaging
modality for purposes of this methodology: Ultrasound, computed
tomography (CT) and computed tomographic angiography (CTA), and
magnetic resonance imaging (MRI) and magnetic resonance angiography
(MRA). The HCPCS codes subject to the multiple imaging composite
policy, and their respective families, are listed in Table 8 of the CY
2009 OPPS/ASC final rule with comment period (73 FR 68567 through
68569).
While there are three imaging families, there are five multiple
imaging composite APCs due to the statutory requirement at section
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging
services provided with and without contrast. While the ultrasound
procedures included in the policy do not involve contrast, both CT/CTA
and MRI/MRA scans can be provided either with or without contrast. The
five multiple imaging composite APCs established in CY 2009 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 define the single imaging session for the
``with contrast'' composite APCs as having at least one or more imaging
procedures from the same family performed with contrast on the same
date of service. For example, if the hospital performs an MRI without
contrast during the same session as at least one other MRI with
contrast, the hospital will receive payment for APC 8008, the ``with
contrast'' composite APC.
Hospitals continue to use the same HCPCS codes to report imaging
procedures, and the I/OCE determines when combinations of imaging
procedures qualify for composite APC payment or map to standard (sole
service) APCs for payment. We will make a single payment for those
imaging procedures that qualify for composite APC payment, as well as
any packaged services furnished on the same date of service. The
standard (noncomposite) APC assignments continue to apply for single
imaging procedures and multiple imaging procedures performed across
families.
For a full discussion of the development of the multiple imaging
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68559 through 68569).
During the February 2009 meeting of the APC Panel, the APC Panel
heard from stakeholders who claimed that a composite payment is not
appropriate when multiple imaging procedures are provided on the same
date of service but at different times. Some APC Panel members
expressed concern that the same efficiencies that may be gained when
multiple imaging procedures are performed during the same sitting may
not be gained if a significant amount of time passes between the second
and subsequent imaging procedures, when the patient may leave not only
the scanner, but also the radiology department or hospital. The APC
Panel recommended that CMS continue to work with stakeholders to
examine different options for APCs for multiple imaging sessions and
multiple imaging procedures. We are accepting this recommendation, and
we will continue to work with any stakeholders who are interested in
our multiple imaging composite payment methodology. We note that we
routinely seek broad public input on OPPS payment rates and payment
policies, including the multiple imaging composite APCs, through a
variety of forums. Through our annual rulemaking process, we consider
all timely public comments received from interested organizations and
individuals, and respond to each of those public comments in the final
rule for the forthcoming year. We also seek input from the public at
meetings of the APC Panel, and consider opinions expressed in
correspondences received outside of the annual rulemaking cycle.
Furthermore, we note that we regularly accept requests from all
interested parties to discuss with us their views about OPPS payment
policy issues, and that we do not work exclusively with any single
stakeholder or stakeholder group.
While we are accepting the APC Panel recommendation that CMS
continue to work with stakeholders to examine different options for
APCs for multiple imaging sessions and multiple imaging procedures, we
do not believe it is appropriate to propose modifications to the
multiple imaging composite policy for CY 2010. As stated in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68565), we continue to
believe that composite payment is appropriate even when procedures are
provided on the same date of service but at different times, because
hospitals do

[[Page 35284]]

not expend the same facility resources each and every time a patient is
seen for a distinct imaging service in a separate imaging session. In
most cases, we expect that patients in those circumstances would
receive imaging procedures at different times during a single prolonged
hospital outpatient encounter, and that the efficiencies that may be
gained from providing multiple imaging procedures during a single
session are achieved in such ways as not having to register the patient
again, or not having to re-establish new intravenous access for an
additional study when contrast is required. Furthermore, we stated that
even if the same level of efficiencies could not be gained for multiple
imaging procedures performed on the same date of service but at
different times, we expect that any higher costs associated with these
cases would be reflected in the claims data and cost reports we use to
calculate the median costs for the multiple imaging composite APCs and,
therefore, in their payment rates.
In summary, for CY 2010, we are proposing to continue paying for
all multiple imaging procedures within an imaging family performed on
the same date of service using the multiple imaging composite payment
methodology, without modification. The proposed CY 2010 payment rates
for the five multiple imaging composite APCs (APC 8004, APC 8005, APC
8006, APC 8007, and APC 8008) are based on median costs calculated from
the partial year CY 2008 claims available for the proposed rule that
would have qualified for composite payment under the current policy
(that is, those claims with more than one procedure within the same
family on a single date of service). To calculate the proposed median
costs, we used the same methodology that we used to calculate the final
CY 2009 median costs for these composite APCs. That is, we removed any
HCPCS codes in the OPPS imaging families that overlapped with codes on
our bypass list (``overlap bypass codes'') 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 the
proposed multiple imaging composite APC median costs appear in Table 11
below. 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 reassess the remaining
multiple procedure claims using the full bypass list and bypass process
in order to determine if we could make other ``pseudo'' single bills.
That is, we assessed whether a single separately paid service remained
on the claim after removing line items for the ``overlap bypass
codes.''
We were able to identify 1.7 million ``single session'' claims out
of an estimated 2.5 million potential composite cases from our
ratesetting claims data, or well over half of all eligible claims, to
calculate the proposed CY 2010 median costs for the multiple imaging
composite APCs. The HCPCS codes subject to the proposed multiple
imaging composite policy, and their respective families, are listed
below in Table 10.

Table 10--Proposed OPPS Imaging Families and Multiple Imaging Procedure
Composite APCs
------------------------------------------------------------------------
Proposed CY 2010 APC 8004 (ultrasound Proposed CY 2010 approximate
composite) APC median cost = $197.
------------------------------------------------------------------------
Family 1--Ultrasound
------------------------------------------------------------------------
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
------------------------------------------------------------------------

------------------------------------------------------------------------
Proposed CY 2010 APC 8005 (CT and CTA Proposed CY 2010 approximate
without contrast composite)* APC median cost = $429
------------------------------------------------------------------------
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.
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.

------------------------------------------------------------------------
Proposed CY 2010 APC 8006 (CT and CTA with Proposed CY 2010 approximate
contrast composite) APC median cost = $634
------------------------------------------------------------------------
70487..................................... Ct maxillofacial w/dye.
70460..................................... Ct head/brain w/dye.
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.

[[Page 35285]]

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
------------------------------------------------------------------------

------------------------------------------------------------------------
Proposed CY 2010 APC 8007 (MRI and MRA Proposed CY 2010 approximate
without contrast composite) * APC median cost = $732
------------------------------------------------------------------------
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.
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.

------------------------------------------------------------------------
Proposed CY 2010 APC 8008 (MRI and MRA Proposed CY 2010 approximate
with contrast composite) APC median cost = $1,013
------------------------------------------------------------------------
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.
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.
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.
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.
------------------------------------------------------------------------

Table 11--Proposed OPPS Imaging Family Services Overlapping With HCPCS
Codes on the Proposed CY 2010 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.
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.

[[Page 35286]]

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.
73221..................................... Mri joint upr extrem w/o
dye.
73718..................................... Mri lower extremity w/o dye.
73721..................................... Mri jnt of lwr extre w/o
dye.
------------------------------------------------------------------------

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 2010 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
clinic visit APCs. We selected APC 0606 as the base because APC 0606
was the mid-level clinic visit APC (that is, Level 3 of five levels).
Therefore, for CY 2010, 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, APC 0606, to
calculate unscaled weights. Following our standard methodology, but
using the proposed CY2010 median cost for APC 0606, for CY 2010 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 proposed unscaled relative payment weight for each APC. The
choice of the APC on which to base the proposed 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 budget neutral manner. Budget neutrality ensures that
estimated aggregate weight under the OPPS for CY 2010 is neither
greater than nor less than the estimated aggregate weight that would
have been made without the changes. To comply with this requirement
concerning the APC changes, we are proposing to compare estimated
aggregate weight using the CY 2009 scaled relative weights to estimated
aggregate weight using the CY 2010 unscaled relative weights. For CY
2009, we multiply the CY 2009 scaled APC relative weight applicable to
a service paid under the OPPS by the volume of that service from CY
2008 claims to calculate the total weight for each service. We then add
together the total weight for each of these services in order to
calculate an estimated aggregate weight for the year. For CY 2010, we
perform the same process using the CY 2010 unscaled weights rather than
scaled weights. We then calculate the weight scaler by dividing the CY
2009 estimated aggregate weight by the CY 2010 estimated aggregate
weight. The service mix is the same in the current and prospective
years because we use the same set of claims for service volume in
calculating the aggregate weight for each year. For a detailed
discussion of the weight scaler calculation, we refer readers to the
OPPS claims accounting document available on the CMS Web site at:
http://www.cms.hhs.gov/HospitalOutpatientPPS/. Again this year, we
included payments to CMHCs in our comparison of estimated unscaled
weight in CY 2010 to estimated total weight in CY 2009 using CY 2008
claims data and holding all other things constant. Based on this
comparison, we adjusted the unscaled relative weights for purposes of
budget neutrality. The CY 2010 unscaled relative payment weights were
adjusted by multiplying them by a proposed weight scaler of 1.2863 to
ensure budget neutrality of the proposed CY 2010 relative weights in
this proposed rule.
Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of
Public Law 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 proposed budget neutrality
calculations for the CY 2010 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 cost of providing a service or bundle of services for a
particular patient, but with the exception of outlier cases, the
payment 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 that payment is adequate to enable the hospital to
provide quality care and establishing incentives for efficiency through
larger units of payment. In the CY 2008 OPPS/

[[Page 35287]]

ASC final rule with comment period (72 FR66610 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 assign status indicator ``N'' to those HCPCS codes that we
believe are always integral to the performance of the primary modality;
therefore, we always package their costs into the costs of the
separately paid primary services with which they are billed. Services
assigned status indicator ``N'' are unconditionally packaged.
We assign status indicator ``Q1'' (``STVX-Packaged Codes''), ``Q2''
(``T-Packaged Codes''), or ``Q3'' (Codes that may be paid through a
composite APC) to each conditionally packaged HCPCS code. An ``STVX-
packaged code'' describes a HCPCS code whose payment is packaged when
one or more separately paid primary services with the status indicator
of ``S,'' ``T,'' ``V,'' or ``X'' 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 with the status indicator of ``T'' 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'' are conditionally packaged. We refer readers
to section XIII.A.1. of this proposed rule for a complete listing of
status indicators.
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.''
In addition, in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66650 through 66659), we finalized additional packaging for the
CY 2008 OPPS, which included the establishment of 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). In the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68559 through 68569), we expanded the composite APC model
to one new clinical area, multiple imaging services. We created five
multiple imaging composite APCs for payment in CY 2009 that incorporate
statutory requirements to differentiate between imaging services
provided with contrast and without contrast as required by section
1833(t)(2)(G) of the Act. The multiple imaging composite 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 discuss composite APCs in more detail in
section II.A.2.e. of this proposed rule.
Hospitals include charges for packaged services on their claims,
and the estimated 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 the CPT Editorial
Panel or CMS provides 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.
b. Service-Specific Packaging Issues
(1) Packaged Services Addressed by the APC Panel Recommendations
The Packaging Subcommittee of the APC Panel was established to
review 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.
During the September 2007 APC Panel meeting, the APC Panel
requested that CMS evaluate the impact of expanded packaging on
beneficiaries. During the March 2008 APC Panel meeting, the APC Panel
requested that CMS report to the Panel at the first Panel meeting in CY
2009 regarding the impact of packaging on net payments for patient
care. In response to these requests, we shared data with the APC Panel
at the February 2009 APC Panel meeting that compared the frequency of
specific categories of services billed under the OPPS in CY 2007,
before the expanded packaging went into effect, to the frequency of
those same categories of services in CY 2008, their first year of
packaged payment. In each category, the HCPCS codes that we compared
are the ones that we identified in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66659 through 66664) as fitting into one of the
seven packaging categories listed in section II.A.4.a. of this proposed
rule. The data shared with the APC Panel at the February 2009 APC Panel
meeting compared CY 2007 claims processed through September 30, 2007 to
CY 2008 claims processed through September 30, 2008. We did not make
any adjustments for inflation, changes in Medicare population, or other
variables that potentially influenced billing between CY 2007 and CY
2008. These data represent about 60 percent of the full year data. A
summary of these data analyses is provided below.
Analysis of the diagnostic radiopharmaceuticals category showed
that the frequency of the reporting of diagnostic radiopharmaceuticals
increased by 1 percent between the first 9 months of CY 2007 and the
first 9 months of CY 2008. In CY 2007, some diagnostic
radiopharmaceuticals were packaged and others were separately payable,
depending on whether their per day mean costs fell above or below the
$55 drug packaging threshold for CY 2007. All diagnostic

[[Page 35288]]

radiopharmaceuticals were uniformly packaged in CY 2008. Two percent
more hospitals reported one or more diagnostic radiopharmaceuticals
during CY 2008 as compared to CY 2007. Effective for CY 2008, we first
required reporting of a radiolabeled product (including diagnostic
radiopharmaceuticals) when billing a nuclear medicine procedure, and we
believe that the increases in frequency and the number of reporting
hospitals reflect hospitals meeting this reporting requirement.
We also found that nuclear medicine procedures (into which
diagnostic radiopharmaceuticals were packaged) and associated
diagnostic radiopharmaceuticals were billed approximately 3 million
times during the first 9 months of both CY 2007 and CY 2008. Further
analysis revealed that we paid hospitals over $637 million for nuclear
medicine procedures and diagnostic radiopharmaceuticals during the
first 9 months of CY 2007, when diagnostic radiopharmaceuticals were
separately payable, and over $619 million for nuclear medicine
procedures and diagnostic radiopharmaceuticals during the first 9
months of CY 2008, when payment for diagnostic radiopharmaceuticals was
packaged. This represents a 3 percent decrease in aggregate payment
between the first 9 months of CY 2007 and the first 9 months of CY
2008.
Using the same data, we calculated an average payment per service
or item billed (including nuclear medicine procedures and packaged or
separately payable diagnostic radiopharmaceuticals) of $203 in CY 2007
and $198 in CY 2008 for nuclear medicine procedures. This represents a
decrease of 2 percent in average payment per item or service billed
between CY 2007 and CY 2008. It is unclear how much of the decrease in
estimated aggregate or average per service or item billed payment may
be due to packaging payment for diagnostic radiopharmaceuticals (and
other services that were newly packaged for CY 2008) and how much may
be due to the usual annual APC recalibration and typical fluctuations
in service frequency. However, we believe that all of these factors
likely contributed to the slight decrease in aggregate payment in CY
2008, as compared to CY 2007. Overall, the observed changes between CY
2007 and CY 2008 are very small and indicate that there has been very
little change in frequency or aggregate payment in this clinical area
between CY 2007 and CY 2008.
We similarly analyzed 9 months of CY 2007 and CY 2008 data related
to all services that were packaged during CY 2008 because they were
categorized as guidance services. Analysis of the guidance category
(which includes image-guided radiation therapy services) showed that
the frequency of guidance services increased by 2 percent between the
first 9 months of CY 2007 and the first 9 months of CY 2008. One
percent fewer hospitals reported one or more guidance services during
CY 2007 as compared to CY 2008.
We further analyzed 9 months of CY 2007 and CY 2008 claims data for
radiation oncology services that would be accompanied by radiation
oncology guidance. We found that radiation oncology services (including
radiation oncology guidance services) were billed approximately 4
million times in CY 2007 and 3.9 million times in CY 2008, representing
a decrease in frequency of approximately 5 percent between CY 2007 and
CY 2008. These numbers represent each instance where a radiation
oncology service or a radiation oncology guidance service was billed.
Our analysis indicates that hospitals were paid over $818 million for
radiation oncology services and radiation oncology guidance services
under the OPPS during the first 9 months of CY 2007, when radiation
oncology guidance services were separately payable. During the first 9
months of CY 2008, when payments for radiation oncology guidance were
packaged, hospitals were paid over $740 million for radiation oncology
services under the OPPS. This $740 million includes packaged payment
for radiation oncology guidance services and represents a 10 percent
decrease in aggregate payment from CY 2007 to CY 2008. Using the first
9 months of data for both CY 2007 and CY 2008, we calculated an average
payment per radiation oncology service or item billed of $201 in CY
2007 and $190 in CY 2008, representing a decrease of 5 percent from CY
2007 to CY 2008. It is unclear how much of the decrease in aggregate
payment and the decrease in average payment per service provided may be
due to packaging payment for radiation oncology guidance services (and
other services that were newly packaged for CY 2008) and how much may
be due to the usual annual APC recalibration and typical fluctuations
in service frequency. This analysis is discussed in further detail
below, under ``Recommendation 1'' in this section of this proposed
rule. In that analysis, we demonstrate that the volume of some packaged
radiation oncology guidance services increased during the period,
leading us to conclude that, irrespective of the decline in the
frequency of radiation oncology services in general, hospitals do not
appear to be changing their practice patterns specifically in response
to packaged payment for radiation oncology guidance services.
We similarly analyzed 9 months of CY 2007 and CY 2008 data related
to all services that were packaged during CY 2008 because they were
categorized as intraoperative services. Analysis of the intraoperative
category (which includes intravascular ultrasound (IVUS), intracardiac
echocardiography (ICE), and coronary fractional flow reserve (FFR))
showed minimal changes in the frequency and the number of reporting
hospitals between CY 2007 and CY 2008.
We found that cardiac catheterization and other percutaneous
vascular procedures that would typically be accompanied by IVUS, ICE
and FFR (including IVUS, ICE, and FFR) were billed approximately
375,000 times in CY 2007 and approximately 400,000 times in CY 2008,
representing an increase of 8 percent in the number of services and
items billed between CY 2007 and CY 2008. Further analysis revealed
that the OPPS paid hospitals over $912 million for cardiac
catheterizations, other related services, and IVUS, ICE, and FFR in CY
2007, when IVUS, ICE, and FFR were separately payable. In the first 9
months of CY 2008, the OPPS paid hospitals approximately $1.1 billion
for cardiac catheterization and other percutaneous vascular procedures
and IVUS, ICE, and FFR, when payments for IVUS, ICE, and FFR were
packaged. This represents a 25 percent increase in payment from CY 2007
to CY 2008. Using the 9 months of data for both CY 2007 and CY 2008, we
calculated an average payment per service or item provided of $2,430 in
CY 2007 and $2,800 in CY 2008 for cardiac catheterization and other
related services. This represents an increase of 15 percent in average
payment per item or service from CY 2007 to CY 2008.
We cannot determine how much of the 25 percent increase in
aggregate payment for these services may be due to the packaging of
payment for IVUS, ICE, and FFR (and other services that were newly
packaged for CY 2008) and how much may be due to the usual annual APC
recalibration and typical fluctuations in service frequency. However,
we believe that all of these factors contributed to the increase in
payment between these 2 years.
The three remaining packaging categories (excluding observation
services, which are further discussed in section II.A.2.e.(1) of this
proposed

[[Page 35289]]

rule), contrast agents, image processing services, and imaging
supervision and interpretation services, show minimal changes in
frequency between CY 2007 and CY 2008, ranging from a 2 percent
increase to a 1 percent decrease in frequency. Similarly, when
examining the number of hospitals reporting these services, the data
show similar numbers of hospitals reporting these services in CY 2007,
when these services were separately payable, and CY2008, when they were
packaged. Specifically, the percentage change in the number of
reporting hospitals for these categories between CY 2007 and CY 2008
ranges from 0 percent to a decrease of 1 percent.
In summary, these preliminary data indicate that hospitals in
aggregate do not appear to have significantly changed their service
reporting patterns as a result of the expanded packaging adopted for
the OPPS beginning in CY 2008.
The APC Panel's Packaging Subcommittee reviewed the packaging
status of several CPT codes and reported its findings to the APC Panel
at its February 2009 meeting. The full report of the February 18-19,
2009 APC Panel meeting can be found on the CMS Web site at: http://
www.cms.hhs.gov/FACA/05_
AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp. The APC Panel
accepted the report of the Packaging Subcommittee, heard several
presentations related to packaged services, discussed the deliberations
of the Packaging Subcommittee, and recommended that--
1. CMS pay separately for radiation therapy guidance services
performed in the treatment room for 2 years and then reevaluate
packaging on the basis of claims data. (Recommendation 1)
2. CMS continue to analyze the impact of increased packaging on
beneficiaries and provide more detailed versions of the analyses
presented at the February 2009 meeting of services initially packaged
in CY 2008 at the next Panel meeting. In addition, the Panel requested
that, in the more detailed analyses of radiation oncology services that
would be accompanied by radiation oncology guidance, CMS stratify the
data according to the type of radiation oncology service, specifically,
intensity modulated radiation therapy, stereotactic radiosurgery,
brachytherapy, and conventional radiation therapy. (Recommendation 2)
3. CMS continue to analyze the impact on beneficiaries of increased
packaging of diagnostic radiopharmaceuticals and provide more detailed
analyses at the next Panel meeting. In addition, the Panel requested
that, in the more detailed analyses of packaging of diagnostic
radiopharmaceuticals by type of nuclear medicine scan, CMS break down
the data according to the specific CPT codes billed with the diagnostic
radiopharmaceuticals. (Recommendation 3)
4. CPT code 36592 (Collection of blood specimen using established
central or peripheral catheter, venous, not otherwise specified) remain
assigned to APC 0624 (Phlebotomy and Minor Vascular Access Device
Procedures) for CY 2010. (Recommendation 4)
5. The Packaging Subcommittee continue its work until the next APC
Panel meeting. (Recommendation 5)
We address each of these recommendations in turn in the discussion
that follows.
Recommendation 1
We are not proposing to pay separately for radiation therapy
guidance services provided in the treatment room for CY 2010, which
would be consistent with the APC Panel's recommendation. Instead, we
are proposing to maintain the packaged status of radiation therapy
guidance services performed in the treatment room for CY 2010.
As discussed above in this section, during the February 2009 APC
Panel meeting, we presented data that estimated that aggregate payment
for radiation oncology services, including the payment for radiation
oncology guidance services, decreased by approximately 10 percent
between the first 9 months of CY 2007 (before the expanded packaging
went into effect) and the first 9 months of CY 2008 (after the expanded
packaging went into effect). This decline may be attributable to many
factors, including lower payment rates for common radiation oncology
services in CY 2008 specifically and generally reduced volume for
separately paid radiation oncology services. The APC Panel expressed
concern that this aggregate payment decrease could inhibit patient
access to technologically advanced and clinically valuable radiation
oncology guidance services whose payment became packaged effective
January 1, 2008.
While we presented data to the APC Panel comparing payment between
CY 2007 and CY 2008 in response to past APC Panel recommendations, we
note that we made changes to the bypass list for CY 2009 to ensure that
we more fully captured all packaged costs on each claim, which resulted
in significantly increased payment rates for many of these radiation
oncology services for CY 2009, as compared to the CY 2008 payment rates
for these services.
Specifically, as discussed in detail in the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68575), in response to public comments
received, several radiation oncology CPT codes had been included on the
bypass list for the CY 2008 OPPS although they failed to meet the
empirical criteria for inclusion on the bypass list. For CY 2009, we
removed from the bypass list those radiation oncology codes that did
not meet the empirical criteria. As a result of these changes to the
bypass list, the CY 2009 median costs for several common radiation
oncology APCs increased by more than 9 percent as compared to the CY
2008 median costs, while the median costs for some of the other lower
volume radiation oncology APCs, most notably the brachytherapy source
application APCs, declined. For example, as noted in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68575), these changes to the
bypass list resulted in payment for the common combination of intensity
modulated radiation therapy (IMRT) and image guided radiation therapy
(IGRT) increasing from $348 in CY 2008 to $411 in CY 2009. Notably, the
CY 2007 total payment rate for this combination of services, before the
expanded packaging went into effect, was $403.
We do not yet have CY 2009 claims data reflecting utilization based
on the payment rates in effect for CY 2009. However, we do not expect
that an overall per service payment comparison between CY 2007 and CY
2009 would likely demonstrate a significant decrease in payment for
radiation oncology services because we have adopted a significant
increase in the CY 2009 payment rates for the most common radiation
oncology services. In addition, we note that CY 2010 proposed rule data
indicate that the CY 2010 APC median costs applicable to most radiation
oncology services experience increases of approximately 2 to 15 percent
when compared to their CY 2009 median costs. Although a small number of
other lower volume radiation oncology APCs, most notably the
brachytherapy and stereotactic radiosurgery APCs, experience declines
in median costs, we do not expect that an overall per service payment
comparison between CY 2007 and CY 2010 would likely demonstrate a
significant decrease in payment for radiation oncology services over
this time period.
While we understand that the CY 2007 to CY 2008 aggregate payment

[[Page 35290]]

comparison provided to the APC Panel during the February 2009 meeting
may have contributed to the APC Panel's particular concern about
payment for radiation oncology services for CY 2010, we do not believe
that packaging payment for radiation oncology guidance services has
primarily caused this decline. In addition, we do not believe that
beneficiaries' access to these services has been limited as a result of
packaging payment for radiation oncology guidance services. In the data
presented to the APC Panel at the February 2009 meeting, the number of
all packaged guidance services provided during the first 9 months of CY
2008 represented a 2 percent increase from the number of guidance
services provided during the first 9 months of CY 2007. Further,
although the CY 2008 volume of the radiation oncology guidance codes
that we newly packaged for CY 2008 varied, with some of the services
experiencing increases in volume and others experiencing decreases in
volume, in aggregate, the reporting of radiation oncology guidance
services increased by 4 percent in the first 9 months of claims for CY
2008, as compared to the first 9 months of CY 2007, and the number of
hospitals reporting these services also increased. This further
supports our belief that, irrespective of the decline in the frequency
of radiation oncology services in general, hospitals do not appear to
be changing their practice patterns specifically in response to
packaged payment for radiation oncology guidance services.
Therefore, we are not proposing to pay separately for radiation
therapy guidance services performed in the treatment room for 2 years
as the APC Panel recommended. Instead, for CY 2010, we are proposing to
maintain the packaged status of all radiation therapy guidance
services, including those radiation therapy guidance services performed
in the treatment room.
Recommendation 2
We are accepting the APC Panel recommendation to continue to
analyze the impact of increased packaging on beneficiaries and to share
more data with the APC Panel. We will carefully consider which
additional data would be most informative for the APC Panel and will
discuss these data with the APC Panel at the next CY 2009 APC Panel
meeting and/or the first CY 2010 APC Panel meeting. Similarly, we will
determine what additional detailed data related to radiation oncology
services would be helpful to the APC Panel and will share these data at
the next CY 2009 APC Panel meeting and/or the first CY 2010 APC Panel
meeting.
Recommendation 3
We are accepting the APC Panel's recommendation that CMS continue
to analyze the impact on beneficiaries of increased packaging of
diagnostic radiopharmaceuticals and provide more detailed analyses at
the next APC Panel meeting. In these analyses of diagnostic
radiopharmaceuticals by type of nuclear medicine scan, the APC Panel
further recommended that CMS analyze the data according to the specific
CPT codes billed with the diagnostic radiopharmaceuticals. This APC
Panel recommendation is discussed in detail in section II.A.2.d (5) of
this proposed rule. We are accepting the APC Panel's recommendation and
will provide additional data to the APC Panel at an upcoming meeting.
Recommendation 4
For CY 2010, we are proposing to continue 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 to assign it to APC 0624 (Phlebotomy and Minor Vascular Access
Device Procedures), the same APC to which CPT code 36591 (Collection of
blood specimen from a completely implantable venous access device) is
currently assigned as the APC Panel recommended. 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. For CY
2009, in response to public comments, we proposed to treat CPT code
36592 as a conditionally packaged code, with assignment to APC 0624. In
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68576), we
discussed the public comments we received regarding our proposed
treatment of CPT code 36592. Several of these commenters supported our
proposal to treat CPT code 36592 as a conditionally packaged code with
assignment to APC 0624. We stated in the CY 2009 OPPS/ASC final rule
with comment period that when cost data for CPT code 36592 became
available for the CY 2010 OPPS annual update, we would reevaluate
whether assignment to APC 0624 continued to be appropriate.
Based on our analysis of claims data, our clinical understanding of
the service, and our discussion with the APC Panel Packaging
Subcommittee, we are proposing to maintain the assignment of CPT code
36592 to APC 0624 for CY 2010, consistent with the APC Panel
recommendation, and we are proposing to continue to treat CPT code
36592 as an ``STVX packaged code'' and assign it to APC 0624. We note
that we expect hospitals to follow the CPT guidance related to CPT
codes 36591 and 36592 regarding when these services should be
appropriately reported.
Recommendation 5
In response to the APC Panel's recommendation for the Packaging
Subcommittee to remain active until the next APC Panel meeting, we note
that we have accepted this recommendation and the APC Panel Packaging
Subcommittee remains active. 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. 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) Other Service-Specific Packaging Issues
The APC Panel also recommended that CMS reassign CPT code 76098
(Radiological examination, surgical specimen) from APC 0317 (Level II
Miscellaneous Radiology Procedures) to APC 0260 (Level I Plain Film),
and to place CPT code 76098 on the bypass list. Based on our analysis
of the CY 2010 claims containing CPT 76098 and clinical review of the
services being furnished, we are proposing to treat CPT code 76098 as a
``T-packaged'' code for CY 2010 with continued assignment to APC 0317.
As discussed above, a ``T-packaged code,'' identified with status
indicator ``Q2,'' describes a code whose payment is packaged when one
or more separately paid surgical procedures with a status indicator of
``T'' are provided during the hospital encounter. The assignment of
status indicator ``Q2'' to CPT code 76098 would result in more claims
data being available to set the median costs for the surgical
procedures with which CPT code 76098 is most commonly billed (for
example, CPT code 19101 (Biopsy of breast, percutaneous, needle core,
not using image guidance; open incisional)), while continuing to
provide appropriate

[[Page 35291]]

separate payment that reflects the costs of the service, including its
packaged costs, when it is not billed with a surgical procedure.
Further discussion related to this proposal is included in section
II.A.1.b. of this 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 2010, 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 2010 published in the FY 2010 IPPS/LTCH PPS proposed
rule (74 FR24239 through 24241) is 2.1 percent. To set the proposed
OPPS conversion factor for CY 2010, we increased the CY 2009 conversion
factor of $66.059, as specified in the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68584 through 68585), by 2.1 percent. Hospitals
that fail to meet the reporting requirements of the Hospital Outpatient
Quality Data Reporting Program (HOP QDRP) 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 requirements and the
payment reduction for hospitals that fail to meet those requirements,
we refer readers to section XVI. of this proposed rule.
In accordance with section 1833(t)(9)(B) of the Act, we further
adjusted the conversion factor for CY 2010 to ensure that any revisions
we are proposing to make to our updates for a revised wage index and
rural adjustment are made on a budget neutral basis. We calculated an
overall budget neutrality factor of 1.0000 for wage index changes by
comparing total payments from our simulation model using the FY 2010
IPPS proposed wage index values to those payments using the current (FY
2009) IPPS wage index values. For CY 2010, we are not proposing a
change to our rural adjustment policy. Therefore, the proposed budget
neutrality factor for the rural adjustment is 1.0000.
For this proposed rule, we estimate that pass-through spending for
both drugs and biologicals and devices for CY 2010 would equal
approximately $38 million, which represents 0.12 percent of total
projected CY 2010 OPPS spending. Therefore, the conversion factor is
also adjusted by the difference between the 0.11 percent estimate of
pass-through spending set aside for CY 2009 and the 0.12 percent
estimate of CY 2010 pass-through spending. Finally, estimated payments
for outliers remain at 1.0 percent of total OPPS payments for CY 2010.
The proposed market basket increase update factor of 2.1 percent
for CY 2010 and the adjustment of 0.01 percent of projected OPPS
spending for the difference in the pass-through spending set aside
resulted in a full proposed market basket conversion factor for CY 2010
of $67.439. To calculate the proposed CY 2010 reduced market basket
conversion factor for those hospitals that fail to meet the
requirements of the HOP QDRP for the full CY 2010 payment update, we
made all other adjustments discussed above, but used a proposed reduced
market basket increase update factor of 0.1 percent. This resulted in a
proposed reduced market basket conversion factor for CY 2010 of $66.118
for those hospitals that fail to meet the HOP QDRP requirements.

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 2010 OPPS. We refer readers to section II.G. of this 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 2010 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 care short-stay hospital under
the IPPS would 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 2010 version
of the IPPS wage indices used to pay IPPS hospitals to adjust the CY
2010 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 2010 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. For the FY
2010 wage indices, these changes include a continuing transition to the
new reclassification threshold criteria that were finalized in the FY
2009 IPPS final rule (73 FR 48568 through 48570), updated 2007-2008
occupational mix survey data, and a continuing transition to State-
level budget neutrality for the rural and imputed floors. We refer
readers to the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24137 through
24153) for a detailed discussion of all proposed changes to the FY 2010
IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS
final rule with comment period (69 FR 65842 through 65844) and
subsequent OPPS

[[Page 35292]]

rules for a detailed discussion of the history of these wage index
adjustments as applied under the OPPS.
The IPPS wage indices that we are proposing to adopt in this
proposed rule include all reclassifications that are approved by the
Medicare Geographic Classification Review Board (MGCRB) for FY 2010. We
note that reclassifications under section 508 of Public Law 108-173 and
certain special exception reclassifications that were extended by
section 106(a) of Public Law 109-432 (MIEA-TRHCA) and section 117(a)(1)
of Public Law 110-173 (MMSEA) were set to terminate September 30, 2008,
but were further extended by section 124 of Public Law 110-275 (MIPPA)
through September 30, 2009.
As noted in the CY 2009 OPPS/ASC final rule with comment period (73
FR 68585), after issuance of the CY 2009 OPPS/ASC proposed rule,
section 124 of Public Law 110-275 further extended geographic
reclassifications under section 508 and certain special exception
reclassifications until September 30, 2009. We did not make any
proposals related to these provisions for the CY 2009 OPPS wage indices
in our CY 2009 proposed rule because Public Law 110-275 was enacted
after issuance of the CY 2009 OPPS/ASC proposed rule. In accordance
with section 124 of Public Law 110-275, for CY 2009, we adopted all
section 508 geographic reclassifications through September 30, 2009.
Similar to our treatment of section 508 reclassifications extended
under Public Law 110-173 as described in the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68586), hospitals with section 508
reclassifications revert to their home area wage index, with out-
migration adjustment if applicable, from October 1, 2009, to December
31, 2009. As we did for CY 2008, we also have extended the special
exception wage indices for certain hospitals through December 31, 2009,
under the OPPS, in order to give these hospitals the special exception
wage indices under the OPPS for the same time period as under the IPPS.
We refer readers to the Federal Register notice published subsequent to
the FY 2009 IPPS final rule for a detailed discussion of the changes to
the wage indices as required by section 124 of Public Law 110-275 (73
FR 57888). Because the provisions of section 124 of Public Law 110-275
expire in 2009 and are not applicable to FY 2010, we are not making any
proposals related to those provisions for the OPPS wage indices for CY
2010.
For purposes of the OPPS, we are proposing to continue our policy
in CY 2010 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 in the Federal Register for the FY 2010 IPPS proposed wage
indices (74 FR 24446 through 24462) identifies counties eligible for
the out-migration adjustment and providers receiving the adjustment. As
we have done in prior years, we are reprinting 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
2010 OPPS.
As stated earlier in this section, we continue to believe that
using the IPPS wage indices 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 2010 IPPS wage indices for calculating
the OPPS payments in CY 2010. 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 FY 2010 IPPS proposed 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, readers will find
a link to the FY 2010 IPPS proposed wage index tables.

D. Proposed Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims
for ratesetting, CMS uses CCRs to determine outlier payments, payments
for pass-through devices, and monthly interim transitional corridor
payments under the OPPS during the PPS year. Medicare contractors
cannot calculate a CCR for some hospitals 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 the predetermined
ceiling threshold for a valid CCR) or for hospitals whose most recent
cost report reflects an all-inclusive rate status (Medicare Claims
Processing Manual, Pub. 100-04, Chapter 4, Section 10.11). We are
proposing to update the default ratios for CY 2010 using the most
recent cost report data. We discuss our policy for using default CCRs,
including setting the ceiling threshold for a valid CCR, in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in
the context of our adoption of an outlier reconciliation policy for
cost reports beginning on or after January 1, 2009.
For CY 2010, we used our standard methodology of calculating the
statewide average default CCRs using the same hospital overall CCRs
that we use to adjust charges to costs on claims data for setting the
CY 2010 proposed OPPS relative weights. Table 12 below lists the
proposed CY 2010 default urban and rural CCRs by State and compares
them to last year's default CCRs. These proposed CCRs are the ratio of
total costs to total charges from each hospital'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 the volume of separately paid
line-items on hospital claims corresponding to the year of the majority
of cost reports used to calculate the overall CCRs. We refer readers to
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 our
trimming criteria.
For this proposed rule, approximately 85 percent of the submitted
cost reports utilized in the default ratio calculations represented
data for cost reporting periods ending in CY 2007 and 14 percent were
for cost reporting periods ending in CY 2006. For Maryland, we used an
overall weighted average CCR for all hospitals in the nation as a
substitute for Maryland CCRs. Few hospitals in Maryland are eligible to
receive payment under the OPPS, which limits the data available to
calculate an accurate and representative CCR. In

[[Page 35293]]

general, observed changes in the statewide average default CCRs between
CY 2009 and CY 2010 are modest and the few significant changes are
associated with areas that have a small number of hospitals.

Table 12--Proposed CY 2010 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
Previous
Proposed CY default CCR
State Urban/rural 2010 default (CY 2009 OPPS
CCR Final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA....................................... RURAL............................ 0.511 0.562
ALASKA....................................... URBAN............................ 0.334 0.345
ALABAMA...................................... RURAL............................ 0.218 0.221
ALABAMA...................................... URBAN............................ 0.202 0.202
ARKANSAS..................................... RURAL............................ 0.256 0.256
ARKANSAS..................................... URBAN............................ 0.259 0.268
ARIZONA...................................... RURAL............................ 0.260 0.267
ARIZONA...................................... URBAN............................ 0.219 0.226
CALIFORNIA................................... RURAL............................ 0.210 0.219
CALIFORNIA................................... URBAN............................ 0.212 0.218
COLORADO..................................... RURAL............................ 0.343 0.346
COLORADO..................................... URBAN............................ 0.251 0.248
CONNECTICUT.................................. RURAL............................ 0.371 0.372
CONNECTICUT.................................. URBAN............................ 0.333 0.322
DISTRICT OF COLUMBIA......................... URBAN............................ 0.327 0.329
DELAWARE..................................... RURAL............................ 0.320 0.302
DELAWARE..................................... URBAN............................ 0.382 0.349
FLORIDA...................................... RURAL............................ 0.205 0.204
FLORIDA...................................... URBAN............................ 0.189 0.189
GEORGIA...................................... RURAL............................ 0.267 0.267
GEORGIA...................................... URBAN............................ 0.247 0.251
HAWAII....................................... RURAL............................ 0.357 0.367
HAWAII....................................... URBAN............................ 0.307 0.344
IOWA......................................... RURAL............................ 0.332 0.439
IOWA......................................... URBAN............................ 0.292 0.294
IDAHO........................................ RURAL............................ 0.477 0.449
IDAHO........................................ URBAN............................ 0.425 0.419
ILLINOIS..................................... RURAL............................ 0.277 0.280
ILLINOIS..................................... URBAN............................ 0.261 0.266
INDIANA...................................... RURAL............................ 0.295 0.298
INDIANA...................................... URBAN............................ 0.297 0.295
KANSAS....................................... RURAL............................ 0.297 0.300
KANSAS....................................... URBAN............................ 0.238 0.238
KENTUCKY..................................... RURAL............................ 0.233 0.236
KENTUCKY..................................... URBAN............................ 0.260 0.255
LOUISIANA.................................... RURAL............................ 0.281 0.283
LOUISIANA.................................... URBAN............................ 0.265 0.258
MARYLAND..................................... RURAL............................ 0.299 0.303
MARYLAND..................................... URBAN............................ 0.271 0.276
MASSACHUSETTS................................ URBAN............................ 0.325 0.328
MAINE........................................ RURAL............................ 0.451 0.452
MAINE........................................ URBAN............................ 0.436 0.428
MICHIGAN..................................... RURAL............................ 0.319 0.317
MICHIGAN..................................... URBAN............................ 0.319 0.321
MINNESOTA.................................... RURAL............................ 0.485 0.488
MINNESOTA.................................... URBAN............................ 0.330 0.348
MISSOURI..................................... RURAL............................ 0.274 0.269
MISSOURI..................................... URBAN............................ 0.276 0.282
MISSISSIPPI.................................. RURAL............................ 0.261 0.261
MISSISSIPPI.................................. URBAN............................ 0.198 0.209
MONTANA...................................... RURAL............................ 0.468 0.455
MONTANA...................................... URBAN............................ 0.466 0.439
NORTH CAROLINA............................... RURAL............................ 0.272 0.272
NORTH CAROLINA............................... URBAN............................ 0.288 0.292
NORTH DAKOTA................................. RURAL............................ 0.349 0.369
NORTH DAKOTA................................. URBAN............................ 0.352 0.354
NEBRASKA..................................... RURAL............................ 0.346 0.345
NEBRASKA..................................... URBAN............................ 0.264 0.283
NEW HAMPSHIRE................................ RURAL............................ 0.350 0.350
NEW HAMPSHIRE................................ URBAN............................ 0.288 0.296
NEW JERSEY................................... URBAN............................ 0.251 0.257
NEW MEXICO................................... RURAL............................ 0.264 0.263
NEW MEXICO................................... URBAN............................ 0.337 0.328
NEVADA....................................... RURAL............................ 0.311 0.312
NEVADA....................................... URBAN............................ 0.192 0.192
NEW YORK..................................... RURAL............................ 0.421 0.412

[[Page 35294]]

NEW YORK..................................... URBAN............................ 0.385 0.388
OHIO......................................... RURAL............................ 0.348 0.353
OHIO......................................... URBAN............................ 0.254 0.258
OKLAHOMA..................................... RURAL............................ 0.275 0.278
OKLAHOMA..................................... URBAN............................ 0.238 0.238
OREGON....................................... RURAL............................ 0.311 0.318
OREGON....................................... URBAN............................ 0.353 0.374
PENNSYLVANIA................................. RURAL............................ 0.282 0.284
PENNSYLVANIA................................. URBAN............................ 0.224 0.232
PUERTO RICO.................................. URBAN............................ 0.487 0.519
RHODE ISLAND................................. URBAN............................ 0.293 0.294
SOUTH CAROLINA............................... RURAL............................ 0.243 0.242
SOUTH CAROLINA............................... URBAN............................ 0.245 0.240
SOUTH DAKOTA................................. RURAL............................ 0.328 0.336
SOUTH DAKOTA................................. URBAN............................ 0.263 0.267
TENNESSEE.................................... RURAL............................ 0.237 0.244
TENNESSEE.................................... URBAN............................ 0.220 0.221
TEXAS........................................ RURAL............................ 0.256 0.257
TEXAS........................................ URBAN............................ 0.230 0.238
UTAH......................................... RURAL............................ 0.406 0.413
UTAH......................................... URBAN............................ 0.409 0.430
VIRGINIA..................................... RURAL............................ 0.253 0.257
VIRGINIA..................................... URBAN............................ 0.263 0.266
VERMONT...................................... RURAL............................ 0.412 0.406
VERMONT...................................... URBAN............................ 0.422 0.422
WASHINGTON................................... RURAL............................ 0.354 0.349
WASHINGTON................................... URBAN............................ 0.336 0.342
WISCONSIN.................................... RURAL............................ 0.402 0.399
WISCONSIN.................................... URBAN............................ 0.334 0.346
WEST VIRGINIA................................ RURAL............................ 0.292 0.293
WEST VIRGINIA................................ URBAN............................ 0.348 0.349
WYOMING...................................... RURAL............................ 0.413 0.418
WYOMING...................................... URBAN............................ 0.315 0.331
----------------------------------------------------------------------------------------------------------------

E. Proposed OPPS Payment to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Public Law 110-
275 (MIPPA)
When the OPPS was implemented, every provider was eligible to
receive an additional payment adjustment (called either transitional
corridor payments or transitional outpatient payments (TOPs)) if the
payments it received for covered OPD services under the OPPS were less
than the payments it would have received for the same services under
the prior reasonable cost-based system (referred to as the pre-BBA
amount). Section 1833(t)(7) of the Act provides that the transitional
corridor payments are temporary payments for most providers and were
intended to ease their transition from the prior reasonable cost-based
payment system to the OPPS system. There are two exceptions to this
provision, cancer hospitals and children's hospitals, 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 Public Law 108-173 amended section
1833(t)(7)(D)(i) of the Act to extend these payments through December
31, 2005, for rural hospitals with 100 or fewer beds. Section 411 also
extended the transitional corridor payments to SCHs located in rural
areas for services furnished during the period that began 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 Public Law 108-173, for rural
hospitals having 100 or fewer beds and SCHs located in rural areas
expired on December 31, 2005.
Section 5105 of Public Law 109-171 reinstituted the 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 was less than the provider's pre-BBA
amount, the amount of payment was 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 Public Law 109-171
through Transmittal 877, issued on February 24, 2006. In the
Transmittal, 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. In the CY 2007 OPPS/ASC
final rule with comment period (71 FR 68010), we stated that EACHs were
not eligible for TOPs under Public Law 109-171. However, we stated they
were 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) of our regulations to reflect the requirements of
Public Law 109-171.

[[Page 35295]]

In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated
that, effective for services provided on or after January 1, 2009,
rural hospitals having 100 or fewer beds that are not SCHs would no
longer be eligible for TOPs, in accordance with section 5105 of Public
Law 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC
proposed rule, section 147 of Public Law 110-275 amended section
1833(t)(7)(D)(i) of the Act by extending the period of TOPs to rural
hospitals with 100 beds or fewer for 1 year, for services provided
before January 1, 2010. Section 147 of Public Law 110-275 also extended
TOPs to SCHs (including EACHs) with 100 or fewer beds for covered OPD
services provided on or after January 1, 2009, and before January 1,
2010. In accordance with section 147 of Public Law 110-275, when the
OPPS payment is less than the provider's pre-BBA amount, the amount of
payment is increased by 85 percent of the amount of the difference
between the two payment systems for CY 2009.
For CY 2009, we revised Sec. Sec. 419.70(d)(2) and (d)(4) and
added a new paragraph (d)(5) to incorporate the provisions of section
147 of Public Law 110-275. In addition, we made other technical changes
to Sec. 419.70(d)(2) to more precisely capture our existing policy and
to correct an inaccurate cross-reference. We also made technical
corrections to the cross-references in paragraphs (e), (g), and (i) of
Sec. 419.70. For CY 2010, we are proposing to make a technical
correction to the heading of Sec. 419.70(d)(5) to correctly identify
the policy as described in the subsequent regulation text. The
paragraph heading should indicate that the adjustment applies to small
SCHs, rather than to rural SCHs.
Effective for services provided on or after January 1, 2010, rural
hospitals and SCHs (including EACHs) having 100 or fewer beds will no
longer be eligible for hold harmless TOPs, in accordance with section
147 of Public Law 110-275.
2. Proposed Adjustment for Rural SCHs Implemented in CY 2006 Related to
Public Law 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 sources, and devices paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the
Act, as added by section 411 of Public Law 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 hospitals
in urban areas. Our analysis showed a difference in costs for rural
SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment
adjustment for rural SCHs of 7.1 percent for all services and
procedures paid under the OPPS, excluding separately payable drugs and
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy, in accordance with section 1833(t)(13)(B) of
the Act.
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 Public Law 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 may review the adjustment
in the future and, if appropriate, would revise the adjustment. We
provided the same 7.1 percent adjustment to rural SCHs, including
EACHs, again in CY 2008 and CY 2009. Further, in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68590), we updated the
regulations at Sec. 419.43(g)(4) to specify, in general terms, that
items paid at charges adjusted to costs by application of a hospital-
specific CCR are excluded from the 7.1 percent payment adjustment.
For the CY 2010 OPPS, we are proposing to continue our policy of a
budget neutral 7.1 percent payment adjustment for rural SCHs, including
EACHs, for all services and procedures paid under the OPPS, excluding
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs. 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.

F. Proposed Hospital Outpatient Outlier Payments

1. Background
Currently, the OPPS pays outlier payments on a service-by-service
basis. For CY 2009, 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 $1,800
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 the cost of a service 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.
Before CY 2009, this outlier payment had historically been considered a
final payment by longstanding OPPS policy. We implemented a
reconciliation process similar to the IPPS outlier reconciliation
process for cost reports with cost reporting periods beginning on or
after January 1, 2009 (73 FR 68594 through 68599).
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. We previously estimated
that CY 2008 outlier payments were approximately 0.73 percent of the
total CY 2008 OPPS payments (73 FR 68592). Our current estimate of
total outlier payments as a percent of total CY 2008 OPPS payment,
using available CY 2008 claims and the revised OPPS expenditure
estimate, is approximately 1.2 percent of the total aggregated OPPS
payments. Therefore, for CY 2008, we estimate that we paid
approximately 0.2 percent more than the CY 2008 outlier target of 1.0
percent of total aggregated OPPS payments. We will update our estimate
of CY 2008 outlier spending in the CY 2010 OPPS/ASC final rule with
comment period.
As explained in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68594), we set our projected target for aggregate outlier
payments at 1.0 percent of the aggregate total payments under the OPPS
for CY 2009. The outlier thresholds were set so that estimated CY 2009
aggregate outlier payments would equal 1.0 percent of

[[Page 35296]]

the total aggregated payments under the OPPS. Using the same set of CY
2008 claims and CY 2009 payment rates, we currently estimate that the
aggregate outlier payments for CY 2009 would be approximately 1.08
percent of the total CY 2009 OPPS payments. The difference between 1.0
percent and 1.08 percent is reflected in the regulatory impact analysis
in section XXI.B. of this proposed rule. We note that we provide
estimated CY 2010 outlier payments for hospitals and CMHCs with claims
included in the claims data that we used to model impacts 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 2010, we are proposing to continue our policy of estimating
outlier payments to be 1.0 percent of the estimated aggregate total
payments under the OPPS for outlier payments. We are proposing that a
portion of that 1.0 percent, specifically 0.02 percent, would be
allocated to CMHCs for PHP outlier payments. This is the amount of
estimated outlier payments that would result from the proposed CMHC
outlier threshold as a proportion of total estimated outlier payments.
As discussed in section X.C. of this proposed rule, for CMHCs, we are
proposing that if a CMHC's cost for partial hospitalization services,
paid under either APC 0172 (Level I Partial Hospitalization (3
services)) or APC 0173 (Level II Partial Hospitalization (4 or more
services)), exceeds 3.40 times the payment for APC 0173, the outlier
payment would be calculated as 50 percent of the amount by which the
cost exceeds 3.40 times the APC 0173 payment rate. For further
discussion of CMHC outlier payments, we refer readers to section X.C.
of this proposed rule. To ensure that the estimated CY 2010 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 a
$2,225 fixed-dollar threshold. This proposed threshold reflects the
methodology discussed below in this section, as well as the proposed
APC recalibration for CY 2010.
We calculated the fixed-dollar threshold for this proposed rule
using largely the same methodology as we did in CY 2009 (73 FR 41462).
For purposes of estimating outlier payments for this proposed rule, we
used the CCRs available in the April 2009 update to the Outpatient
Provider Specific File (OPSF). The OPSF contains provider-specific
data, such as the most current CCR, which are maintained by the
Medicare contractors and used by the OPPS Pricer to pay claims. The
claims that we use to model each OPPS update lag by 2 years. For this
proposed rule, we used CY 2008 claims to model the CY 2010 OPPS. In
order to estimate the CY 2010 hospital outlier payments for this
proposed rule, we inflated the charges on the CY 2008 claims using the
same inflation factor of 1.1511 that we used to estimate the IPPS
fixed-dollar outlier threshold for the FY 2010 IPPS/LTCH PPS proposed
rule (74 FR 24245). For 1 year, the inflation factor we used is 1.0729.
The methodology for determining this charge inflation factor was
discussed in the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24245). 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 could 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 2010
IPPS outlier calculation to the CCRs used to simulate the CY 2010 OPPS
outlier payments that determine the fixed-dollar threshold.
Specifically, for CY 2010, we are proposing to apply an adjustment of
0.9840 to the CCRs that were in the April 2009 OPSF to trend them
forward from CY 2009 to CY 2010. The methodology for calculating this
adjustment is discussed in the FY 2010 IPPS/LTCH PPS proposed rule (74
FR 24245 through 24247).
Therefore, to model hospital outlier payments for this proposed
rule, we applied the overall CCRs from the April 2009 OPSF file after
adjustment (using the proposed CCR inflation adjustment factor of
0.9840 to approximate CY 2010 CCRs) to charges on CY 2008 claims that
were adjusted (using the proposed charge inflation factor of 1.1511 to
approximate CY 2010 charges). We simulated aggregated CY 2010 hospital
outlier payments using these costs for several different fixed-dollar
thresholds, holding the 1.75 multiple threshold 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 2010 OPPS payments. We
estimate that a proposed fixed-dollar threshold of $2,225, 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 proposed fixed-dollar $2,225
threshold are met. For CMHCs, if a CMHC's cost for partial
hospitalization services, paid under either APC 0172 or APC 0173,
exceeds 3.40 times the payment for APC 0173, the outlier payment would
be calculated as 50 percent of the amount by which the cost exceeds
3.40 times the APC 0173 payment rate.
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 furnished 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
QDRP requirements, we are proposing to continue our policy that we
implemented in CY 2009 that the hospitals' costs would be compared to
the reduced payments for purposes of outlier eligibility and payment
calculation. For more information on the HOP QDRP, we refer readers to
section XVI. of this proposed rule.
3. Outlier Reconciliation
In the CY 2009 OPPS/ASC final rule with comment period (73 CFR
68599), we adopted as final policy a process to reconcile hospital or
CMHC outlier payments at cost report settlement for services furnished
during cost reporting periods beginning in CY 2009. OPPS outlier
reconciliation ensures accurate

[[Page 35297]]

outlier payments for those facilities whose CCRs fluctuate
significantly relative to the CCRs of other facilities, and who receive
a significant amount of outlier payments. OPPS outlier reconciliation
thresholds are provided in section 10.7.2.1 of Chapter 4 of the
Medicare Claims Processing Manual (Pub. 100-4), reevaluated annually,
and modified if necessary. When the cost report is settled,
reconciliation of outlier payments will be based on the overall CCR,
calculated as 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 outlier payments ensures that the outlier payments
made are appropriate and that final outlier payments reflect the most
accurate cost data. In the CY 2009 OPPS/ASC finale rule with comment
period (73 FR 68599), we also finalized a proposal to adjust the amount
of final outlier payments determined during reconciliation for the time
value of money. The OPPS outlier reconciliation process will require
recalculating outlier payments for individual claims in order to
accurately determine the net effect of a change in an overall CCR on a
facility's total outlier payments. For cost reporting periods beginning
in CY 2009, Medicare contractors will begin to identify cost reports
that require outlier reconciliation as a component of cost report
settlement. At this time, CMS continues to develop a method for
reexamining claims to calculate the change in total outlier payments in
order to reconcile outlier payments for these cost reports.
As under the IPPS, we do not adjust the fixed-dollar threshold or
amount of total OPPS payment set aside for outlier payments for
reconciliation activity. The predictability of the fixed-dollar
threshold is an important component of a prospective payment system. We
do not adjust the prospectively set outlier threshold for the amount of
outlier payment reconciled at cost report settlement because such
action would be contrary to the prospective nature of the system. Our
outlier threshold calculation assumes that CCRs accurately estimate
hospital costs based on the information available to us at the time we
set the prospective fixed-dollar outlier threshold. For these reasons,
we are not incorporating any assumptions about the effects of
reconciliation into our calculation of the proposed OPPS fixed-dollar
outlier threshold.

G. Proposed Calculation of an Adjusted Medicare Payment From the
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 42
CFR Part 419, subparts C and D. 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 proposed 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 2010 scaled weight for the
APC by the proposed CY 2010 conversion factor.
We note that section 1833(t)(17) of the Act, which applies to
hospitals as defined under section 1886(d)(1)(B) of the Act, requires
that hospitals that fail to submit data required to be submitted on
quality measures selected by the Secretary, in the form and manner and
at a time specified by the Secretary, receive 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 apply to certain outpatient items and services provided by
hospitals that are required to report outpatient quality data and that
fail to meet the Hospital Outpatient Quality Data Reporting Program
(HOP QDRP) requirements. For further discussion of the proposed payment
reduction for hospitals that fail to meet the requirements of the HOP
QDRP, we refer readers to section XVI.D. of this proposed rule.
We demonstrate in the steps below how to determine the APC payments
that would be made in a calendar year under the OPPS to a hospital that
fulfills the HOP QDRP requirements and to a hospital that fails to meet
the HOP QDRP requirements for a service that has any of the following
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 payment amount
that they 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 the
requirements of the HOP QDRP as the ``full'' national unadjusted
payment rate. We refer to the national unadjusted payment rate for
hospitals that fail to meet the requirements of the HOP QDRP as the
``reduced'' national unadjusted payment rate. The reduced national
unadjusted payment rate is calculated by multiplying the reporting
ratio of 0.98 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 requirements in order to receive the full CY 2010 OPPS
increase factor.
Step 1. Calculate 60 percent (the labor-related portion) of the
proposed 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 OPPS 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 and
identifies the labor-related portion of a specific payment rate for a
specific service.

X is the 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
geographic statistical areas (which are based upon OMB standards) to
which hospitals are assigned for FY 2010 under the IPPS,
reclassifications through the MGCRB, section 1886(d)(8)(B) of the Act,
as well as ``Lugar'' reclassifications under section

[[Page 35298]]

1886(d)(8)(B) of the Act. We note that the reclassifications of
hospitals under section 508 of Public Law 108-173, as extended by
section 124 of Public Law 110-275, will expire on September 30, 2009,
and will not be applicable under the IPPS for FY 2010. Therefore, these
reclassifications will not apply to the CY 2010 OPPS. For further
discussion of the proposed changes to the FY 2010 IPPS wage indices, as
applied to the CY 2010 OPPS, we refer readers to section II.C. of this
proposed rule. The proposed wage index values include the occupational
mix adjustment described in section II.C. of this proposed rule that
was developed for the FY 2010 IPPS proposed payment rates appearing in
the Federal Register on May 22, 2009 (74 FR 24140 through 24144).
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 Public Law
108-173. Addendum L to this proposed rule contains the qualifying
counties and the proposed wage index increase developed for the FY 2010
IPPS published in the FY 2010 IPPS/LTCH PPS proposed rule as Table 4J
(74 FR 24446 through24462). 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 and
adjusts the labor-related portion of the national payment rate for the
specific service by the wage index.

Xa is the 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 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 is the 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, set forth 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 and
applies the rural adjustment for rural SCHs.

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment *
1.071

We have provided examples below of the calculation of both the
proposed full and reduced national unadjusted payment rates that would
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 Wayne, New Jersey that is assigned to CBSA
35644. This provider bills one service that is assigned to APC 0019
(Level I Excision/Biopsy). The proposed CY 2010 full national
unadjusted payment rate for APC 0019 is $292.33. The proposed reduced
national unadjusted payment rate for a hospital that fails to meet the
HOP QDRP requirements is $286.48. This reduced rate is calculated by
multiplying the reporting ratio of 0.98 by the full unadjusted payment
rate for APC 0019.
The proposed FY 2010 wage index for a provider located in CBSA
35644 in New Jersey is 1.2986. The labor portion of the full national
unadjusted payment is $227.77 (.60 * $292.33 *1.2986). The labor
portion of the reduced national unadjusted payment is $223.21 (.60 *
$286.48 *1.2986). The nonlabor portion of the full national unadjusted
payment is $116.93 (.40 * $292.33). The nonlabor portion of the reduced
national unadjusted payment is $114.59 (.40 * $286.48). The sum of the
labor and nonlabor portions of the full national adjusted payment is
$344.70 ($227.77 + $116.93). The sum of the reduced national adjusted
payment is $337.80 ($223.21 + $114.59).

H. Proposed Beneficiary Copayments

1. Background
Section 1833(t)(3)(B) of the Act requires the Secretary to set
rules for determining the unadjusted 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 2010, 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.
2. Proposed Copayment Policy
For CY 2010, we are proposing to determine copayment amounts for
new and revised APCs using the same methodology that we implemented
beginning in 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 standard rounding principles that we have
historically used 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) in which we discuss our
rationale for applying these rounding principles.) The national
unadjusted copayment amounts for services payable under the OPPS that
would be effective January 1, 2010, are shown in Addenda A and B to
this proposed rule. As discussed in section XVI.D. of this proposed
rule, we are proposing that for CY 2010, 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.

[[Page 35299]]

3. Proposed Calculation of an Adjusted Copayment Amount for an APC
Group
Individuals interested in calculating the national copayment
liability for a Medicare beneficiary for a given service provided by a
hospital that met or failed to meet its HOP QDRP 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, $64.13 is 22 percent of the full national
unadjusted payment rate of $292.33.
The formula below is a mathematical representation of Step 1 and
calculates national copayment as a percentage of national payment for a
given service.

B is the 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 Step 6 under 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 and
applies the beneficiary percentage to the adjusted payment rate for a
service calculated under section II.G. of this proposed rule, with and
without the rural adjustment, to calculate the 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
requirements, multiply the copayment calculated in Step 3 by the
reporting ratio of 0.98.
The proposed unadjusted copayments for services payable under the
OPPS that would be effective January 1, 2010 are shown in Addenda A and
B to this proposed rule. We 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 CPT and Level II HCPCS Codes

CPT and Level II HCPCS codes are used to report procedures,
services, items, and supplies under the hospital OPPS. Specifically,
CMS recognizes the following codes on OPPS claims: (1) Category I CPT
codes, which describe medical services and procedures; (2) Category III
CPT codes, which describe new and emerging technologies, services, and
procedures; and (3) Level II HCPCS codes, which are used primarily to
identify products, supplies, temporary procedures, and services not
described by CPT codes. CPT codes are established by the AMA and the
Level II HCPCS codes are established by the CMS HCPCS Workgroup. These
codes are updated and changed throughout the year. CPT and HCPCS code
changes that affect the OPPS are published both through the annual
rulemaking cycle and through the OPPS quarterly update Change Requests
(CRs). CMS releases new Level II HCPCS codes to the public or
recognizes the release of new CPT codes by the AMA and makes these
codes effective (that is, the codes can be reported on Medicare claims)
outside of the formal rulemaking process via OPPS quarterly update CRs.
This quarterly process offers hospitals access to codes that may more
accurately describe items or services furnished and/or provides payment
or more accurate payment for these items or services in a more timely
manner than if CMS waited for the annual rulemaking process. We solicit
comments on these new codes and finalize our proposals related to these
codes through our annual rulemaking process. In Table 13 below, we
summarize our proposed process for updating codes through our OPPS
quarterly update CRs, seeking public comment, and finalizing their
treatment under the OPPS.

Table 13--Comment Timeframe for New or Revised HCPCS CODES
----------------------------------------------------------------------------------------------------------------
OPPS quarterly update CR Type of code Effective date Comments sought When finalized
----------------------------------------------------------------------------------------------------------------
April 1, 2009................... Level II HCPCS April 1, 2009..... CY 2010 OPPS/ASC CY 2010 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
July 1, 2009.................... Level II HCPCS July 1, 2009...... CY 2010 OPPS/ASC CY 2010 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
Category I July 1, 2009...... CY 2010 OPPS/ASC CY 2010 OPPS/ASC
(certain vaccine proposed rule. final rule with
codes) and III comment period.
CPT Codes.
October 1, 2009................. Level II HCPCS October 1, 2009... CY 2010 OPPS/ASC CY 2011 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
January 1, 2010................. Level II HCPCS January 1, 2010... CY 2010 OPPS/ASC CY 2011 OPPS/ASC
Codes. final rule with final rule with
Comment Period. comment period.
Category I and III January 1, 2010... CY 2010 OPPS/ASC CY 2011 OPPS/ASC
CPT Codes. final rule with final rule with
comment period. comment period.
----------------------------------------------------------------------------------------------------------------

This process is discussed in detail below and we have separated our
discussion into two sections based on whether we are proposing to
solicit public comments in this CY 2010 proposed rule on a specific
group of the CPT and Level II HCPCS codes or whether we are proposing
to solicit public comments on another specific group of the codes in
the CY 2010 final rule with comment period. We note that we sought
public comments in the CY 2009 OPPS/ASC final rule with comment period
on the new CPT and Level II HCPCS codes that were effective January 1,
2009. Earlier, the AMA had released the new Category I vaccine codes
and Category III CPT codes effective January 1, 2009, on the AMA Web
site in July 2009. The new Level II HCPCS codes and Category I and III
CPT codes were included in our January 2009 OPPS quarterly update CR.
We also sought public comments in the CY2009 OPPS/ASC final rule with
comment period on the new Level II HCPCS codes effective October 1,
2008.

[[Page 35300]]

These new codes with effective dates of October 1, 2008, or January 1,
2009, were flagged with comment indicator ``NI'' (New code, interim APC
assignment; comments will be accepted on the interim APC assignment for
the new code) in Addendum B to the CY 2009 OPPS/ASC final rule with
comment period to indicate that we were assigning them an interim
payment status and an APC and payment rate, if applicable, which were
subject to public comment following publication of the CY2009 OPPS/ASC
final rule with comment period. We will respond to public comments and
finalize our proposed OPPS treatment of these codes in the CY 2010
OPPS/ASC final rule with comment period.
1. Proposed Treatment of New Level II HCPCS Codes and Category I CPT
Vaccine Codes and Category III CPT Codes for Which We Are Soliciting
Public Comments in this Proposed Rule
Effective April 1 and July 1 of CY 2009, we made effective a total
of 13 new Level II HCPCS codes and 5 new Category I vaccine and
Category III CPT codes that were not addressed in the CY 2009 OPPS/ASC
final rule with comment period that updated the OPPS. Thirteen new
Level II HCPCS codes were made effective for the April and July 2009
updates, and 13 Level II HCPCS codes were newly recognized for separate
payment. Although one of the new Level II HCPCS codes is not payable
under the OPPS, we changed the OPPS status indicator for one existing
Level II HCPCS code from the interim status indicator designated in the
CY 2009 OPPS/ASC final rule with comment period.
Through the April 2009 OPPS quarterly update CR (Transmittal 1702,
Change Request 6416, dated March 13, 2009), we allowed separate payment
for a total of 2 additional Level II HCPCS codes, specifically existing
HCPCS code C9247 (Iobenguane, I-123, diagnostic, per study dose, up to
10 millicuries) and new HCPCS code C9249 (Injection, certolizumab
pegol, 1 mg). HCPCS code C9249, which received separate payment as a
result of its pass-through status under the OPPS, was made effective on
April 1, 2009. HCPCS code C9247 was released January 1, 2009, through
the January 2009 OPPS quarterly update CR (Transmittal 1657, Change
Request 6320, dated December 31, 2008). From January 1, 2009, through
March 31, 2009, because HCPCS code C9247 is a nonpass-through
diagnostic radiopharmaceutical, and nonpass-through diagnostic
radiopharmaceutical are always packaged under the CY 2009 OPPS, it was
packaged under the OPPS and assigned status indicator ``N'' (Items and
Services Packaged into APC Rates. Paid under OPPS; payment is packaged
into payment for other services, including outliers). Therefore, there
was no separate APC payment for HCPCS code C9247 from January 1, 2009,
through March 31, 2009. Effective April 1, 2009, HCPCS code C9247 was
allowed separate pass-through payment and its status indicator was
changed from ``N'' to ``G'' (Pass-Through Drugs and Biologicals. Paid
under OPPS; separate APC payment includes pass-through amount).
Through the July 2009 OPPS quarterly update CR (Transmittal 107,
Change Request 6492, dated May 22, 2009) which included HCPCS codes
that were made effective July 1, 2009, we allowed separate payment for
a total of 11 new Level II HCPCS codes for pass-through drugs and
biologicals and new nonpass-through drugs and nonimplantable
biologicals. Specifically, we provided separate payment for HCPCS codes
C9250 (Human plasma fibrin sealant, vapor-heated, solvent-detergent
(Artiss), 2ml); C9251 (Injection, C1 esterase inhibitor (human), 10
units); C9252 (Injection, plerixafor, 1 mg); C9253 (Injection,
temozolomide, 1 mg); C9360 (Dermal substitute, native, non-denatured
collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5
square centimeters); C9361 (Collagen matrix nerve wrap (NeuroMend
Collagen Nerve Wrap), per 0.5 centimeter length); C9362 (Porous
purified collagen matrix bone void filler (Integra Mozaik
Osteoconductive Scaffold Strip), per 0.5 cc); C9363 (Skin substitute,
Integra Meshed Bilayer Wound Matrix, per square centimeter); C9364
(Porcine implant, Permacol, per square centimeter); Q2023 (Injection,
factor viii (antihemophilic factor, recombinant) (Xyntha), per i.u.);
and Q4116 (Skin substitute, Alloderm, per square centimeter).
Although HCPCS code Q4115 (Skin substitute, Alloskin, per square
centimeter) was initially assigned status indicator ``K'' (Nonpass-
Through Drugs and Biologicals) for July 2009 to signify its separate
payment, we are correcting its status indicator assignment to ``M''
(Items and Services Not Billable to the Fiscal Intermediary/MAC)
retroactive to July 2009 because no July 2009 pricing information is
available for the ASP payment methodology that applies to payment of
new HCPCS codes for drugs and biologicals. If ASP information becomes
available for a later quarter in CY 2009 or for a quarter in CY 2010,
we would reassign HCPCS code Q4115 status indicator ``K'' for that
quarter and pay separately for the new biological HCPCS code at ASP+4
percent, consistent with the final CY 2009 policy and the proposed CY
2010 policy for payment of new drug and biological HCPCS codes.
For CY 2010, we are proposing to continue our established policy of
recognizing Category I CPT vaccine codes for which FDA approval is
imminent and Category III CPT codes that the AMA releases in January of
each year for implementation in July through the OPPS quarterly update
process. Under the OPPS, Category I vaccine codes and Category III CPT
codes that are released on the AMA Web site in January are made
effective in July of the same year through the July OPPS quarterly
update CR, consistent with the AMA's implementation date for the codes.
Through the July 2009 OPPS quarterly update CR, we allowed separate
payment for 3 of the 5 new Category I vaccine and Category III CPT
Codes effective July 1, 2009. Specifically, as displayed in Table 16,
we allowed payment for CPT codes 0199T (Physiologic recording of tremor
using accelerometer(s) and gyroscope(s), (including frequency and
amplitude) including interpretation and report); 0200T (Percutaneous
sacral augmentation (sacroplasty), unilateral injection(s), including
the use of a balloon or mechanical device (if utilized), one or more
needles); and 0201T (Percutaneous sacral augmentation (sacroplasty),
bilateral injections, including the use of a balloon or mechanical
device (if utilized), two or more needles). We note that CPT code 0202T
(Posterior vertebral joint(s) arthroplasty (e.g. , facet joint[s]
replacement) including facetectomy, laminectomy, foraminotomy and
vertebral column fixation, with or without injection of bone cement,
including fluoroscopy, single level, lumbar spine) was assigned status
indicator ``C'' (Inpatient procedures. Not paid under OPPS. Admit
patient. Bill as inpatient.) because we believe that this procedure may
only be safely performed on Medicare beneficiaries in the hospital
inpatient setting. In addition, CPT code 90670 (Pneumococcal conjugate
vaccine, 13 valent, for intramuscular use), a Category I CPT vaccine
code, was assigned status indicator ``E'' (Items, Codes, and Services *
* * Not paid by Medicare when submitted on outpatient claims (any
outpatient bill type)) because the drug has not yet been approved by
the FDA for marketing.
In this proposed rule, we are soliciting public comments on the
proposed status indicators and the

[[Page 35301]]

proposed APC assignments and payment rates, if applicable, for the 14
Level II HCPCS codes and the 5 Category I vaccine and Category III CPT
codes that were newly recognized or had a change in OPPS status
indicator in April or July 2009 through the respective OPPS quarterly
update CRs. These codes are listed in Tables 14, 15, and 16 of this
proposed rule. We are proposing to finalize their status indicators and
their APC assignments and payment rates, if applicable, in the CY 2010
OPPS/ASC final rule with comment period. Because the July 2009 OPPS
quarterly update CR was issued close to the publication of this
proposed rule, the Level II HCPCS codes and the Category I vaccine and
Category III CPT codes implemented through the July 2009 OPPS quarterly
update CR could not be included in Addendum B to this proposed rule,
but these codes are listed in Tables 15 and 16, respectively. We are
proposing to incorporate them into Addendum B to the CY 2010 OPPS/ASC
final rule with comment period, which is consistent with our annual
OPPS update policy. The Level II HCPCS codes implemented or modified
through the April 2009 OPPS update CR and displayed in Table 14 are
included in Addendum B to this proposed rule, where their proposed CY
2010 payment rates also are shown.

Table 14--Level II HCPCS Codes With a Change in OPPS Status Indicator or Newly Implemented in April 2009
----------------------------------------------------------------------------------------------------------------
Proposed CY 2010 Status Proposed CY
CY 2009 HCPCS Code CY 2009 Long Descriptor Indicator 2010 APC
----------------------------------------------------------------------------------------------------------------
C9247........................... Iobenguane, I-123, diagnostic, G........................... 9247
per study dose, up to 10
millicuries.
C9249........................... Injection, certolizumab pegol, 1 G........................... 9249
mg.
----------------------------------------------------------------------------------------------------------------

Table 15--New Level II HCPCS Codes Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
Proposed CY 2010 Proposed CY 2010 Proposed CY 2010
CY 2009 HCPCS Code CY 2009 Long Descriptor Status Indicator APC Payment Rate*
----------------------------------------------------------------------------------------------------------------
C9250................... Human plasma fibrin G.................. 9250............... $155.00
sealant, vapor-heated,
solvent-detergent
(Artiss), 2ml.
C9251................... Injection, C1 esterase G.................. 9251............... 41.34
inhibitor (human), 10
units.
C9252................... Injection, plerixafor, G.................. 9252............... 276.04
1 mg.
C9253................... Injection, G.................. 9253............... 5.00
temozolomide, 1 mg.
C9360................... Dermal substitute, G.................. 9360............... 14.31
native, non-denatured
collagen, neonatal
bovine origin
(SurgiMend Collagen
Matrix), per 0.5
square centimeters.
C9361................... Collagen matrix nerve G.................. 9361............... 124.55
wrap (NeuroMend
Collagen Nerve Wrap),
per 0.5 centimeter
length.
C9362................... Porous purified G.................. 9362............... 56.71
collagen matrix bone
void filler (Integra
Mozaik Osteoconductive
Scaffold Strip), per
0.5 cc.
C9363................... Skin substitute, G.................. 9363............... 11.13
Integra Meshed Bilayer
Wound Matrix, per
square centimeter.
C9364................... Porcine implant, G.................. 9364............... 18.57
Permacol, per square
centimeter.
Q2023................... Injection, factor viii K.................. 1268............... 1.15
(antihemophilic
factor, recombinant)
(Xyntha), per i.u.
Q4115................... Skin substitute, M.................. Not Applicable..... Not Applicable
Alloskin, per square
centimeter.
Q4116................... Skin substitute, K.................. 1270............... 32.42
Alloderm, per square
centimeter.
----------------------------------------------------------------------------------------------------------------
*Based on July 2009 ASP information.

Table 16--Category I Vaccine and Category III CPT Codes Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
Proposed CY 2010 Proposed CY 2010 Proposed CY 2010
CY 2009 HCPCS code CY 2009 long descriptor status indicator APC payment rate
----------------------------------------------------------------------------------------------------------------
0199T................... Physiologic recording S.................. 0215............... $40.79
of tremor using
accelerometer(s) and
gyroscope(s),
(including frequency
and amplitude)
including
interpretation and
report.
0200T................... Percutaneous sacral T.................. 0049............... 1,489.69
augmentation
(sacroplasty),
unilateral
injection(s),
including the use of a
balloon or mechanical
device (if utilized),
one or more needles.
0201T................... Percutaneous sacral T.................. 0050............... 2,134.51
augmentation
(sacroplasty),
bilateral injections,
including the use of a
balloon or mechanical
device (if utilized),
two or more needles.
0202T................... Posterior vertebral C.................. Not applicable..... Not applicable
joint(s) arthroplasty
(e.g., facet joint[s]
replacement) including
facetectomy,
laminectomy,
foraminotomy and
vertebral column
fixation, with or
without injection of
bone cement, including
fluoroscopy, single
level, lumbar spine.
90670................... Pneumococcal conjugate E.................. Not applicable..... Not applicable
vaccine, 13 valent,
for intramuscular use.
----------------------------------------------------------------------------------------------------------------

[[Page 35302]]

2. Proposed Process for New Level II HCPCS Codes and Category I and III
CPT Codes for Which We Will Be Soliciting Public Comments in the CY
2010 OPPS/ASC Final Rule With Comment Period
As has been our practice in the past, we incorporate those new
Category I and III CPT codes and new Level II HCPCS codes that are
effective January 1 in the final rule with comment period updating the
OPPS for the following calendar year. These codes are released to the
public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites
(for CPT codes), and also through the January OPPS quarterly update
CRs. In the past, we also have released new Level II HCPCS codes that
are effective October 1 through the October OPPS quarterly update CRs
and incorporated these new codes in the final rule with comment period
updating the OPPS for the following calendar year. All of 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 and the APC assignment, and payment
rate, if applicable, for all such codes flagged with comment indicator
``NI'' are open to public comment in the OPPS/ASC final rule with
comment period, and we respond to these comments in the final rule with
comment period for the next calendar year's OPPS/ASC update. We are
proposing to continue this process for CY 2010. Specifically, for CY
2010, we are proposing to include in Addendum B to the CY 2010 OPPS/ASC
final rule with comment period the new Category I and III CPT codes
effective January 1, 2010 (including those Category I vaccine and
Category III CPT codes that were released by the AMA in July 2009) that
would be incorporated in the January 2010 OPPS quarterly update CR and
the new Level II HCPCS codes, effective October 1, 2009 or January 1,
2010, that would be released by CMS in its October 2009 and January
2010 OPPS quarterly update CRs. These codes would be flagged with
comment indicator ``NI'' in Addendum B to the CY 2010 OPPS/ASC final
rule with comment period to indicate that we have assigned them an
interim OPPS payment status. Their status indicators and their APC
assignments and payment rates, if applicable, would be open to public
comment in the CY 2010 OPPS/ASC final rule with comment period and
would be finalized in the CY 2011 OPPS/ASC final rule with comment
period.

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 outpatient department services.
Section 1833(t)(2)(B) of the Act provides that the Secretary may
establish groups of covered outpatient department services within this
classification system, so that services classified within each group
are comparable clinically and with respect to the use of resources (and
so that an implantable item is classified to the group that includes
the service to which the item relates). 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 (72 FR 66650), 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 our CY 2009 OPPS policy, we
provide composite APC payment for certain extended assessment and
management services, low dose rate (LDR) prostate brachytherapy,
cardiac electrophysiologic evaluation and ablation, mental health
services, and 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
not less often than annually and revise the groups, relative payment
weights, and the wage and other adjustments under the OPPS to take into
account changes in medical practice, changes in technology, 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 to consult with an
outside panel of experts to review (and advise the Secretary
concerning) the clinical integrity of the APC groups and the relative
payment weights (the APC Panel recommendations for specific services
for the CY 2010 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 (or mean cost, if so elected) for an item or service
within the same group (referred to as the ``2 times rule''). We use the
median cost

[[Page 35303]]

of the item or service in implementing this provision. Section
1833(t)(2) of the Act authorizes the Secretary to make exceptions to
the 2 times rule in unusual cases, such as low-volume items and
services (but the Secretary may not make such an exception in the case
of a drug or biological that has been designated as an orphan drug
under section 526 of the Federal Food, Drug, and Cosmetic Act).
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. 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 for CY
2010.
During the APC Panel's February 2009 meeting, we presented median
cost and utilization data for services furnished during the period of
January 1, 2008 through September 30, 2008, 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, and our proposals for CY 2010 are contained mainly 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 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 2010 included in this proposed
rule are related to changes in median costs of services that were
observed in the CY 2008 claims data newly available for CY 2010
ratesetting. In addition, we 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 2010.
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 that were initially assigned in the
April 2009 Addendum B update (Transmittal 1702, Change Request 6416,
dated March13, 2009).
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 2010 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 2008 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 and to determine which APCs
should be proposed as exceptions to the 2 times rule for CY 2010. 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 17 of this proposed rule lists 14 APCs that we are proposing
to exempt from the 2 times rule for CY 2010 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 2008
claims data used to determine the APC payment rates that we are
proposing for CY 2010. 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 17--Proposed APC Exceptions to the 2 Times Rule for CY 2010
------------------------------------------------------------------------
Proposed CY 2010 APC Proposed CY 2010 APC title
------------------------------------------------------------------------
0080........................................ Diagnostic Cardiac
Catheterization.
0105........................................ Repair/Revision/Removal of
Pacemakers, AICDs, or
Vascular Devices.
0128........................................ Echocardiogram with
Contrast.
0141........................................ Level I Upper GI
Procedures.
0142........................................ Small Intestine Endoscopy.
0237........................................ Level II Posterior Segment
Eye Procedures.
0245........................................ Level I Cataract
Procedures without IOL
Insert.
0303........................................ Treatment Device
Construction.
0325........................................ Group Psychotherapy.
0381........................................ Single Allergy Tests.
0432........................................ Health and Behavior
Services.
0436........................................ Level I Drug
Administration.
0604........................................ Level 1 Hospital Clinic
Visits.
0664........................................ Level I Proton Beam
Radiation Therapy.
------------------------------------------------------------------------

[[Page 35304]]

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 cost bands identify the APCs to
which new technology procedures and services with estimated service
costs that fall within those cost bands are assigned under the OPPS.
Payment for each APC is made at the mid-point of the APC's assigned
cost band. For example, payment for New Technology APC 1507 (New
Technology--Level VII ($500-$600)) is made at $550. Currently, there
are 82 New Technology APCs, ranging from the lowest cost band assigned
to APC 1491 (New Technology--Level IA ($0-$10)) through the highest
cost band assigned to APC 1574 (New Technology--Level XXXVII ($9,500-
$10000). In CY 2004 (68 FR 63416), we last restructured the New
Technology APCs to make the cost intervals more consistent across
payment levels and refined the cost bands for these APCs to retain two
parallel sets of New Technology APCs, one set with a status indicator
of ``S'' (Significant Procedures, Not Discounted when Multiple. Paid
under OPPS; separate APC payment) and the other set with a status
indicator of ``T'' (Significant Procedure, Multiple Reduction Applies.
Paid under OPPS; separate APC payment). These current New Technology
APC configurations 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 59902),
we generally keep a procedure in the New Technology APC to which it is
initially assigned until we have collected sufficient data to enable us
to move the procedure to a clinically appropriate APC. However, in
cases where we find that our original New Technology APC assignment was
based on inaccurate or inadequate information (although it was the best
information available at the time), 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, in this proposed rule, for CY
2010 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.
Table 18 below lists the HCPCS code and its associated status
indicator that we are proposing to reassign from a New Technology APC
to a clinically appropriate APC for CY 2010. Based on the CY2008 OPPS
claims data available for this proposed rule, we believe we have
sufficient claims data to propose reassignment of CPT code 0182T to a
clinically appropriate APC. Specifically, we are proposing to reassign
this electronic brachytherapy service from APC 1519 (New Technology--
Level IXX ($1700-$1800)) to APC 0313 (Brachytherapy), where other
brachytherapy services also reside. Based on hospital claims data for
CPT code 0182T, its hospital resource costs are similar to those of
other services assigned to APC 0313.

Table 18--Proposed CY 2010 Reassignment of a New Technology Procedure to a Clinical APC
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
CY 2009 HCPCS code CY 2009 short descriptor CY 2009 SI CY 2009 APC 2010 SI 2010 APC
----------------------------------------------------------------------------------------------------------------
0182T..................... Hdr elect brachytherapy......... S 1519 S 0313
----------------------------------------------------------------------------------------------------------------

D. Proposed OPPS APC Specific Policies: Insertion of Posterior Spinous
Process Distraction Device (APC 0052)

For CY 2009 (73 FR 68620), we reassigned CPT codes 0171T (Insertion
of posterior spinous process distraction device (including necessary
removal of bone or ligament for insertion and imaging guidance),
lumbar, single level) and 0172T (Insertion of posterior spinous process
distraction device (including necessary removal of bone or ligament for
insertion and imaging guidance), lumbar, each additional level) from
APC 0050 (Level II Musculoskeletal Procedures Except Hand and Foot) to
APC 0052 (Level IV Musculoskeletal Procedures Except Hand and Foot).
For CY 2007 and CY 2008, the device implanted in procedures described
by CPT codes 0171T and 0172T, HCPCS code C1821 (Interspinous process
distraction device (implantable)), was assigned pass-through payment
status and, therefore, was paid separately at charges adjusted to cost.
The period of pass-through payment for HCPCS code C1821 expired after
December 31, 2008. According to our established methodology, the costs
of devices no longer eligible for pass-through payments are packaged
into the costs of the procedures with which the devices are reported in
the claims data used to set the payment rates for those procedures.
Therefore, the costs of the implanted device identified by HCPCS code
C1821 are packaged into the costs of CPT codes 0171T and 0172T
beginning in CY 2009.
At the February 2009 meeting, the APC Panel heard a public
presentation that recommended reassignment of CPT codes 0171T and 0172T
from APC 0052 to APC 0425 (Level II Arthroplasty or Implantation with
Prosthesis). The presenter believed that APC resource homogeneity would
be improved if CPT codes 0171T and 0172T were reassigned to APC 0425.
The presenter asserted, based on its analysis of CY 2007 claims

[[Page 35305]]

data, that the median cost of CPT code 0171T was significantly higher
than the median cost of APC 0052, while only slightly lower than the
median cost of APC 0425. The presenter indicated that, while the median
cost of APC 0052 was significantly higher than the median cost of
device HCPCS code C1821, device costs are only one element of the
overall procedure cost and other associated procedure costs are more
than $3,200. Regarding clinical homogeneity, the presenter stated that
kyphoplasty is the only spine procedure currently assigned to APC 0052
other than CPT codes 0171T and 0172T. The presenter also claimed that
36 percent of claims for CPT code 0171T are reported without HCPCS code
C1821, which identified a device that is always implanted in procedures
reported with CPT codes 0171T and 0172T. The presenter requested
reassignment of CPT codes 0171T and 0172T to APC 0425 because this APC
is a device-dependent APC, and CPT codes 0171T and 0172T would then be
subject to procedure-to-device claims processing edits.
The APC Panel recommended that CMS continue the assignment of CPT
codes 0171T and 0172T to APC 0052 for CY 2010, institute procedure-to-
device claims processing edits for HCPCS code C1821, and then
reevaluate the APC assignments of CPT codes 0171T and 0172T in one
year.
Under our existing policy, we generally do not identify any
individual HCPCS codes as device-dependent codes under the OPPS. We
create device edits, when appropriate, for procedures assigned to
device-dependent APCs, where those APCs have been historically
identified under the OPPS as having very high device costs. As we noted
in the CY 2009 OPPS/ASC final rule with comment period regarding APC
0052 (73 FR 68621), we typically do not implement procedure-to-device
edits for an APC where there are not device HCPCS codes for all
possible devices that could be used to perform a procedure that always
requires a device, and the APC is not designated as a device-dependent
APC. APC 0052 is not a device-dependent APC because a number of the
procedures assigned to the APC do not require the use of implantable
devices. Furthermore, in some cases, there may not be HCPCS codes that
describe all devices that may be used to perform the procedures in APC
0052.
We examined the CY 2008 claims data available for this proposed
rule to determine the frequency of billing CPT code 0171T (which is the
main procedure code reported with HCPCS code C1821) with and without
device HCPCS code C1821. CPT code 0172T is an add-on code to CPT code
0171T. We recognize that our single claims for CPT code 0172T may not
be correctly coded claims and, therefore, our cost estimation for CPT
code 0172T may not be accurate. Our analysis shows that the CY 2010
proposed rule median cost for CPT code 0171T is approximately $7,717
based on over 800 single claims. The CY 2010 proposed rule claims data
for CPT code 0171T reveal a median cost of approximately $7,916 based
on over 500 single claims with HCPCS code C1821, and a median cost of
approximately $7,387 based on about 300 single claims without HCPCS
code C1821. Therefore, the median cost of claims for CPT code 0171T
reported with HCPCS code C1821 is similar to the median cost of claims
for the procedure reported without HCPCS code C1821. We have no reason
to believe that those hospitals not reporting the device HCPCS code
have failed to consider the cost of the device in charging for the
procedure. Furthermore, claims for CPT code 0171T reported with HCPCS
code C1821 account for about two-thirds of the single claims available
for ratesetting. The overall median cost of CPT code 0171T falls within
an appropriate range of HCPCS code-specific median costs for those
services proposed for CY 2010 assignment to APC 0052, which has a
proposed APC median cost of approximately $5,939 and no 2 times
violation. Moreover, we do not believe that procedure-to-device claims
processing edits are necessary to ensure accurate cost estimation for
CPT code 0171T.
The CY 2010 proposed rule line-item median cost for HCPCS code
C1821 is approximately $4,625, while the CY 2010 proposed rule median
cost of APC 0052 is approximately $1,300 more than this device cost.
Previous estimates of procedure time presented to us at the time of the
device pass-through application for the interspinous process
distraction device described by HCPCS code C1821 were approximately 30
to 60 minutes of procedure time for the service currently described by
CPT code 0171T. This is reasonably comparable to the typical procedure
time for kyphoplasty described by CPT code 22523 (Percutaneous
vertebral augmentation, including cavity creation (fracture reduction
and bone biopsy included when performed) using mechanical device, one
vertebral body, unilateral or bilateral cannulation (e.g.,
kyphoplasty); thoracic) and CPT code 22524 (Percutaneous vertebral
augmentation, including cavity creation (fracture reduction and bone
biopsy included when performed) using mechanical device, one vertebral
body, unilateral or bilateral cannulation (e.g., kyphoplasty); lumbar),
which are also assigned to APC 0052.
In summary, because we believe that APC 0052 pays appropriately for
the procedure cost of CPT codes 0171T and 0172T, we are proposing to
maintain the assignment of CPT codes 0171T and 0172T to APC0052 for CY
2010 and not to implement device edits for these procedures. We are
accepting one part of the APC Panel's recommendation regarding the
continued assignment of CPT codes 0171T and 0172T to APC 0052, but we
are not accepting the APC Panel's further recommendation to institute
procedure-to-device edits for these services for CY 2010. As we do for
all OPPS services, we will reevaluate the APC assignments of CPT codes
0171T and 0172T when additional claims data become available for CY
2011 ratesetting, in accordance with the final part of the APC Panel's
recommendation for these procedures.

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
Section 1833(t)(6)(B)(iii) of the Act requires that, under the
OPPS, a category of devices be eligible for transitional pass-through
payments for at least 2, but not more than 3, years. This pass-through
payment eligibility period begins with the first date on which
transitional pass-through payments may be 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 pass-through status expiration dates for the
category codes on the date on which a category is in effect. The date
on which a category is in effect is the first date on which pass-
through payment may be made for any medical device that is described by
such category. We propose and finalize the dates for expiration of
pass-through status for device categories as part of the OPPS annual
update.
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

[[Page 35306]]

section 1833(t)(2)(H) of the Act, are an exception to this established
policy.
There currently are no device categories eligible for pass-through
payment, and there are no categories for which we would propose
expiration of pass-through status. If we create new device categories
for pass-through payment status during the remainder of CY 2009 or
during CY 2010, we will propose future expiration dates in accordance
with the statutory requirement that they be eligible for pass-through
payments for at least 2, but not more than 3, years from the date on
which pass-through payment for any medical device described by the
category may first be made.
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 device 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 device APC offset amounts for
eligible pass-through device categories through the transmittals that
implement the quarterly OPPS updates.
We currently have published a list of all procedural APCs with the
CY 2009 portions (both percentages and dollar amounts) of the APC
payment amounts that we determine are associated with the cost of
devices, on the CMS Web site at: http://www.cms.hhs.gov/
HospitalOutpatientPPS/01_overview.asp. The dollar amounts are used as
the device APC offset amounts. In addition, in accordance with our
established practice, the device APC offset amounts in a related APC
are used in order to evaluate whether the cost of a device in an
application for a new device category for pass-through payment is not
insignificant in relation to the APC payment amount for the service
related to the category of devices, as specified in our regulations at
Sec. 419.66(d).
b. Proposed Policy
For CY 2010, we are proposing to continue our established policies
for calculating and setting the device APC offset amounts for each
device category eligible for pass-through payment. We also are
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 already 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 device APC offset amount
from the pass-through payment for the device category. As stated
earlier, these device APC offset amounts also would be used in order to
evaluate whether the cost of a device in an application for a new
device category for pass-through payment is not insignificant in
relation to the APC payment amount for the service related to the
category of devices (Sec. 419.66(d)).
We are proposing in section V.A.4. of this proposed rule to specify
that, beginning in CY 2010, the pass-through evaluation process and
pass-through payment methodology for implantable biologicals that are
surgically inserted or implanted (through a surgical incision or a
natural orifice) would be the device pass-through process and payment
methodology only. As a result of that proposal, we are proposing in
this section that, beginning in CY 2010, we would include implantable
biologicals in our calculation of the device APC offset amounts. As of
CY 2009, the costs of implantable biologicals not eligible for pass-
through payment are packaged into the costs of the procedures in which
they are implanted because nonpass-through implantable biologicals are
not separately paid. We are proposing to calculate and set any device
APC offset amount for a new device pass-through category that includes
a newly eligible implantable biological beginning in CY 2010 using the
same methodology we have historically used to calculate and set device
APC offset amounts for device categories eligible for pass-through
payment (72 FR 66751 through 66752), with one modification. Because
implantable biologicals would be considered devices rather than drugs
for purposes of pass-through evaluation and payment under this proposal
for CY 2010, the device APC offset amounts would include the costs of
implantable biologicals for the first time. We also would utilize these
revised device APC offset amounts to evaluate whether the cost of an
implantable biological in an application for a new device category for
pass-through payment is not insignificant in relation to the APC
payment amount for the service related to the category of devices.
Further, we are proposing to no longer use the ``policy-packaged'' drug
APC offset amounts for evaluating the cost significance of implantable
biological pass-through applications under review and for setting the
APC offset amounts that would apply to pass-through payment for those
implantable biologicals, effective for new pass-through status
determinations beginning in CY 2010. In addition, we are proposing to
update, on the CMS Web site at http://www.cms.hhs.gov/
HospitalOutpatientPPS, the list of all procedural APCs with the final
CY 2010 portions of the APC payment amounts that we determine are
associated with the cost of devices so that this information is
available for use by the public in developing potential CY2010 device
pass-through payment applications and by CMS in reviewing those
applications.

B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit and
Partial Credit Devices

1. Background
In recent years, there have been several field actions on and
recalls of medical devices 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 ratesetting methodology for
device-dependent APCs uses only claims that contain the correct device
code for the procedure, do not contain token charges, and do not
contain the ``FB'' modifier signifying that the device was furnished
without cost or with a full credit. As discussed in section
II.A.2.d.(1) of this proposed rule, we are proposing to refine further
our standard ratesetting methodology for device-dependent APCs for CY
2010 by also excluding claims with the ``FC'' modifier signifying that
the device was furnished with partial 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

[[Page 35307]]

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 (71 FR 68071 through
68077). Hospitals are instructed to report no cost/full credit cases
using the ``FB'' modifier on the line with the procedure code in which
the no cost/full credit device is used. In cases in which the device is
furnished without cost or with full credit, the hospital is instructed
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 instructed to report as the
device charge the difference between its usual charge for the device
being implanted and its usual charge for the device for which it
received full credit. In CY 2008, we expanded this payment adjustment
policy to include cases in which hospitals receive partial credit 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. We
reduce the OPPS payment for the implantation procedure by 100 percent
of the device offset for no cost/full credit 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 the ``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
policies (72 FR 66743 through 66749).
2. Proposed APCs and Devices Subject to the Adjustment Policy
For CY 2010, we are proposing to continue the policy of reducing
OPPS payment for specified APCs 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 specified 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 reflects 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 involve 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 procedure (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
are proposing to continue to restrict the devices to which 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 device
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 2010 proposed
rule data and the clinical characteristics of APCs to determine whether
the APCs to which the no cost/full credit and partial credit device
adjustment policy applies in CY 2009 continue to meet the criteria for
CY 2010, and to determine whether other APCs to which the policy does
not apply in CY 2009 would meet the criteria for CY 2010. Based on the
CY 2008 claims data available for this proposed rule, we are not
proposing any changes to the APCs and devices to which this policy
applies. Table 19 below lists the proposed APCs to which the payment
reduction policy for no cost/full credit and partial credit devices
would apply in CY 2010 and displays the proposed payment reduction
percentages for both no cost/full credit and partial credit
circumstances. Table 20 below lists the proposed devices to which this
policy would apply in CY 2010. We will update the lists of APCs and
devices to which the no cost/full credit and partial credit device
adjustment policy would apply in CY 2010, consistent with the three
selection criteria discussed earlier in this section, based on the
final CY 2008 claims data available for the CY 2010 OPPS/ASC final rule
with comment period.

Table 19--Proposed APCs to Which the No Cost/Full Credit and Partial
Credit Device Adjustment Policy Would Apply
------------------------------------------------------------------------
Proposed CY
2010 device Proposed CY
offset 2010 device
Proposed CY 2010 APC Proposed CY percentage offset
2010 APC title for no cost/ percentage
full credit for partial
case credit case
------------------------------------------------------------------------
0039......................... Level I 85 43
Implantation
of
Neurostimulato
r Generator.

[[Page 35308]]

0040......................... Percutaneous 58 29
Implantation
of
Neurostimulato
r Electrodes.
0061......................... Laminectomy, 63 31
Laparoscopy,
or Incision
for
Implantation
of
Neurostimulato
r Electrodes.
0089......................... Insertion/ 71 35
Replacement of
Permanent
Pacemaker and
Electrodes.
0090......................... Insertion/ 73 37
Replacement of
Pacemaker
Pulse
Generator.
0106......................... Insertion/ 41 20
Replacement of
Pacemaker
Leads and/or
Electrodes.
0107......................... Insertion of 88 44
Cardioverter-
Defibrillator.
0108......................... Insertion/ 88 44
Replacement/
Repair of
Cardioverter-
Defibrillator
Leads.
0225......................... Implantation of 73 37
Neurostimulato
r Electrodes,
Cranial Nerve.
0227......................... Implantation of 82 41
Drug Infusion
Device.
0259......................... Level VII ENT 85 42
Procedures.
0315......................... Level II 88 44
Implantation
of
Neurostimulato
r Generator.
0385......................... Level I 58 29
Prosthetic
Urological
Procedures.
0386......................... Level II 70 35
Prosthetic
Urological
Procedures.
0418......................... Insertion of 81 40
Left
Ventricular
Pacing Elect.
0425......................... Level II 57 28
Arthroplasty
or
Implantation
with
Prosthesis.
0648......................... Level IV Breast 47 23
Surgery.
0654......................... Insertion/ 74 37
Replacement of
a permanent
dual chamber
pacemaker.
0655......................... Insertion/ 75 37
Replacement/
Conversion of
a permanent
dual chamber
pacemaker.
0680......................... Insertion of 73 36
Patient
Activated
Event
Recorders.
------------------------------------------------------------------------

Table 20--Proposed Devices to Which the No Cost/Full Credit and Partial
Credit Device Adjustment Policy Would Apply
------------------------------------------------------------------------
CY 2009 device HCPCS code CY 2009 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).
C1777.............................. Lead, AICD, endo single coil.
C1778.............................. Lead, neurostimulator.
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.
C1895.............................. Lead, AICD, endo dual coil.
C1896.............................. Lead, AICD, non sing/dual.
C1897.............................. Lead, neurostim, test kit.
C1898.............................. Lead, pmkr, other than trans.
C1899.............................. Lead, pmkr/AICD combination.
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.
L8685.............................. Implt nrostm pls gen sng rec.
L8686.............................. Implt nrostm pls gen sng non.
L8687.............................. Implt nrostm pls gen dua rec.
L8688.............................. Implt nrostm pls gen dua non.
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 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.
Transitional pass-through payments also are 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 for a drug or
biological described in section 1833(t)(6)(C)(i)(II) of the Act can be
made for at least 2 years but not more than 3 years after the product's
first payment as a hospital outpatient service under Part B. The pass-
through payment eligibility period is discussed in detail in section
V.A.5. of this proposed rule. Proposed CY 2010 pass-through drugs and
biologicals and their designated APCs are assigned status indicator
``G''

[[Page 35309]]

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 to be equal to the average price for the drug or biological
for all competitive acquisition areas and the 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 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.
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 establishes the payment
methodology for Medicare Part B drugs and biologicals under the
competitive acquisition program (CAP). The Part B drug CAP was
implemented on July 1, 2006, and included approximately 190 of the most
common Part B drugs provided in the physician's office setting. As we
noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68633), the Part B drug CAP program was suspended beginning in CY 2009
(Medicare Learning Network (MLN) Matters Special Edition 0833,
available via the Web site: http://www.medicare.gov). Therefore, there
is no effective Part B drug CAP rate for pass-through drugs and
biologicals as of January 1, 2009. As we noted in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68633), if the program is
reinstituted during CY 2010 and Part B drug CAP rates become available,
we would again use the Part B drug CAP rate for pass-through drugs and
biologicals if they are a part of the Part B drug CAP program.
Otherwise, we would continue to use the rate that would be paid in the
physician's office setting for drugs and biologicals with pass-through
status. We note that the June 2009 CY 2010 MPFS proposed rule (CMS-
1413-P; Medicare Program; Payment Policies under the Physician Fee
Schedule and Other Revisions to Part B for CY 2010) includes proposed
changes to the operation of the Part B drug CAP program, including a
proposal to change the frequency of CAP drug pricing updates.
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 CYs
2008 and 2009, we estimated the OPPS pass-through payment amount for
drugs and biologicals to be $6.6 million and $23.3 million,
respectively. Our proposed OPPS pass-through payment estimate for drugs
and biologicals in CY 2010 is $28 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 2009
We are proposing that the pass-through status of 6 drugs and
biologicals would expire on December 31, 2009, as listed in Table 21
below. All of these drugs and biologicals will have received OPPS pass-
through payment for at least 2 years and no more than 3 years by
December 31, 2009. These items were approved for pass-through status on
or before January 1, 2008. With the exception of those groups of drugs
and biologicals that are always packaged when they do not have pass-
through status, specifically diagnostic radiopharmaceuticals, contrast
agents, and implantable biologicals, 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 calendar year (which is proposed at $65 for CY
2010), as discussed further in section V.B.2. of this proposed rule. If
the drug's or biological's 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
(which is proposed at ASP+4 percent for CY 2010). Section V.B.2.d. of
this proposed rule discusses the packaging of all nonpass-through
contrast agents, diagnostic radiopharmaceuticals, and implantable
biologicals.

Table 21--Proposed Drugs and Biologicals for Which Pass-Through Status Would Expire December 31, 2009
----------------------------------------------------------------------------------------------------------------
Proposed
CY 2009 HCPCS code CY 2009 short descriptor Proposed CY 2010 SI CY 2010
APC
----------------------------------------------------------------------------------------------------------------
C9354.................................... Veritas collagen matrix, cm2 N........................... N/A
C9355.................................... Neuromatrix nerve cuff, cm.. N........................... N/A
J1300.................................... Eculizumab injection........ K........................... 9236

[[Page 35310]]

J3488.................................... Reclast injection........... K........................... 0951
J9261.................................... Nelarabine injection........ K........................... 0825
J9330.................................... Temsirolimus injection...... K........................... 1168
----------------------------------------------------------------------------------------------------------------

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or
Continuing Pass-Through Status in CY 2010
We are proposing to continue pass-through status in CY 2010 for 31
drugs and biologicals. None of these products will have received OPPS
pass-through payment for at least 2 years and no more than 3 years by
December 31, 2009. These items, which were approved for pass-through
status between April 1, 2008 and July 1, 2009, are listed in Table 22
below. The APCs and HCPCS codes for these drugs and biologicals are
assigned status indicator ``G'' in Addenda A and B to this proposed
rule.
Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through
payment for pass-through drugs and biologicals (the pass-through
payment amount) as the difference between the amount authorized under
section 1842(o) of the Act (or, if the drug or biological is covered
under a CAP 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 the year established under such
section as calculated and adjusted by the Secretary) and the portion of
the otherwise applicable OPD fee schedule that the Secretary determines
is associated with the drug or biological. Payment for drugs and
biologicals with pass-through status under the OPPS is currently made
at the physician's office payment rate of ASP+6 percent. We believe it
is consistent with the statute to continue to provide payment for drugs
and biologicals with pass-through status at a rate of ASP+6 percent in
CY 2010, the amount that drugs and biologicals receive under section
1842(o) of the Act. Thus, for CY 2010, we are proposing to pay for
pass-through drugs and biologicals at ASP+6 percent, equivalent to the
rate these drugs and biologicals would receive in the physician's
office setting in CY 2010. The difference between ASP+4 percent that we
are proposing to pay for nonpass-through separately payable drugs under
the CY 2010 OPPS and ASP+6 percent, therefore, would be the CY 2010
pass-through payment amount for these drugs and biologicals. In the
case of pass-through contrast agents, diagnostic radiopharmaceuticals,
and implantable biologicals, their pass-through payment amount would be
equal to ASP+6 percent because, if not on pass-through status, payment
for these products would be packaged into the associated procedures.
In addition, we are proposing to update pass-through payment rates
on a quarterly basis on the CMS Web site during CY 2010 if later
quarter ASP submissions (or more recent WAC or AWP information, as
applicable) indicate that adjustments to the payment rates for these
pass-through drugs or biologicals are necessary. If the Part B drug CAP
is reinstated during CY 2010, and a drug or biological that has been
granted pass-through status for CY 2010 becomes covered under the Part
B drug CAP, we are proposing to provide pass-through payment at the
Part B drug CAP rate and to make the appropriate adjustments to the
payment rates for these drugs and biologicals on a quarterly basis as
appropriate.
In CY 2010, consistent with our CY 2009 policy for diagnostic
radiopharmaceuticals, we are proposing to provide payment for both
diagnostic and therapeutic radiopharmaceuticals that are granted pass-
through status based on the ASP methodology. As stated above, for
purposes of pass-through payment, we consider radiopharmaceuticals to
be drugs under the OPPS and, therefore, if a diagnostic or therapeutic
radiopharmaceutical receives pass-through status during CY 2010, we are
proposing to follow the standard ASP methodology to determine its pass-
through payment rate under the OPPS. If ASP information is available,
the payment rate would be equivalent to the payment rate that drugs
receive under section 1842(o) of the Act, that is, ASP+6 percent. If
ASP data are not available for a radiopharmaceutical, we are proposing
to provide pass-through payment at WAC+6 percent, the equivalent
payment provided to nonradiopharmaceutical pass-through drugs and
biologicals without ASP information. If WAC information is also not
available, we are proposing to provide payment for the pass-through
radiopharmaceutical at 95 percent of its most recent AWP.

Table 22--Proposed Drugs and Biologicals With Pass-Through Status in CY
2010
------------------------------------------------------------------------
CY 2009 short Proposed CY Proposed CY
CY 2009 HCPCS code descriptor 2010 SI 2010 APC
------------------------------------------------------------------------
C9245........................ Injection, G 9245
romiplostim.
C9246........................ Inj, gadoxetate G 9246
disodium.
C9247........................ Inj, G 9247
iobenguane, I-
123, dx.
C9248........................ Inj, G 9248
clevidipine
butyrate.
C9249........................ Inj, G 9249
certolizumab
pegol.
C9250........................ Artiss fibrin G 9250
sealant.
C9251........................ Inj, C1 G 9251
esterase
inhibitor.
C9252........................ Injection, G 9252
plerixafor.
C9253........................ Injection, G 9253
temozolomide.
C9356........................ TendoGlide G 9356
Tendon Prot,
cm2.
C9358........................ SurgiMend, G 9358
fetal.
C9359........................ Implnt, bon G 9359
void filler-
putty.

[[Page 35311]]

C9360........................ SurgiMend, G 9360
neonatal.
C9361........................ NeuraMend nerve G 9361
wrap.
C9362........................ Implnt, bon G 9362
void filler-
strip.
C9363........................ Integra Meshed G 9363
Bil Wound Mat.
C9364........................ Porcine G 9364
implant,
Permacol.
J0641........................ Levoleucovorin G 1236
injection.
J1267........................ Doripenem G 9241
injection.
J1453........................ Fosaprepitant G 9242
injection.
J1459........................ Inj IVIG G 1214
privigen 500
mg.
J1571........................ Hepagam b im G 0946
injection.
J1573........................ Hepagam b G 1138
intravenous,
inj.
J1953........................ Levetiracetam G 9238
injection.
J2785........................ Injection, G 9244
regadenoson.
J8705........................ Topotecan oral. G 1238
J9033........................ Bendamustine G 9243
injection.
J9207........................ Ixabepilone G 9240
injection.
J9225........................ Vantas implant. G 1711
J9226........................ Supprelin LA G 1142
implant.
Q4114........................ Flowable Wound G 1251
Matrix, 1 cc.
------------------------------------------------------------------------

As discussed in more detail in section V.B.2.d. of this proposed
rule, over the last 2 years, we implemented a policy whereby payment
for all nonpass-through diagnostic radiopharmaceuticals, contrast
agents, and implantable biologicals is packaged into payment for the
associated procedure, and we are proposing to continue the packaging of
these items, regardless of their per-day cost, in CY 2010. As stated
earlier, pass-through payment is the difference between the amount
authorized under section 1842(o) of the Act (or, if the drug or
biological is covered under a CAP 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 the year
established under such section as calculated and adjusted by the
Secretary) and the portion of the otherwise applicable OPD fee schedule
that the Secretary determines is associated with the drug or
biological. Because payment for a drug that is either a diagnostic
radiopharmaceutical or a contrast agent (identified as a ``policy-
packaged'' drug, first described in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68639)) or for an implantable biological
(which we are proposing to consider to be a device for all payment
purposes beginning in CY2010 as discussed in sections V.A.4. and
V.B.2.d. of this proposed rule) would otherwise be packaged if the
product did not have pass-through status, we believe the otherwise
applicable OPPS payment amount would be equal to the ``policy-
packaged'' drug or the device APC offset amount for the associated
clinical APC in which the drug or biological is utilized. The
calculation of the ``policy-packaged'' drug and the device APC offset
amounts are described in more detail in sections V.A.6.b. and IV.A.2.
of this proposed rule, respectively. It follows that the copayment for
the nonpass-through payment portion (the otherwise applicable fee
schedule amount that we would also offset from payment for the drug or
biological if a payment offset applies) of the total OPPS payment for
this subset of drugs and biologicals would, therefore, be accounted for
in the copayment for the associated clinical APC in which the drug or
biological is used. According to section 1833(t)(8)(E) of the Act, the
amount of copayment associated with pass-through items is equal to the
amount of copayment that would be applicable if the pass-through
adjustment was not applied. Therefore, beginning in CY 2010, we are
proposing to set the associated copayment amount for pass-through
diagnostic radiopharmaceuticals, contrast agents, and implantable
biologicals that would otherwise be packaged if the item did not have
pass-through status to zero. The separate OPPS payment to a hospital
for the pass-through diagnostic radiopharmaceutical, contrast agent, or
implantable biological, after taking into account any applicable
payment offset for the item due to the device or ``policy-packaged''
APC offset policy, is the item's pass-through payment, which is not
subject to a copayment according to the statute. Therefore, we are not
publishing a copayment amount for these items in Addendum A and B to
this proposed rule.
4. Pass-Through Payment for Implantable Biologicals
a. Background
Section 1833(t)(6)(A)(iv) of the Act authorizes transitional pass-
through payments for new medical devices, drugs, and biologicals, for
those items where payment was not being made as a hospital outpatient
service under Part B as of December 31, 1996, and whose cost is not
insignificant in relation to the OPD fee schedule amount payable for
the service (or group of services) involved. These pass-through
payments are in addition to the usual APC payments for services in
which the product is used. Coding and payment for drugs and biologicals
with pass-through status are generally provided on a product-specific
basis, while coding and payment for devices with pass-through status
are provided for categories of devices that may describe numerous
products. The Act specifies that the duration of transitional pass-
through payments for devices must be no less than 2 and no more than 3
years from the first date on which payment is made for any medical
device that is described by the category. For drugs and biologicals, as
further discussed in section V.A.5. of this proposed rule, generally
beginning in CY 2010 we are specifying, consistent with the statute,
that the pass-through payment eligibility period for drugs and
biologicals is no less than 2 and no more than 3 years from the first
date on which payment is made for the drug or biological under Part B
as an outpatient

[[Page 35312]]

hospital service. Therefore, we utilize separate pass-through
application and evaluation processes and criteria for drugs and
biologicals and device categories because the statutory provisions are
not the same for all items that may receive pass-through payment. These
processes and the applicable evaluation criteria are available on the
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_
passthrough_payment.asp#TopOf Page. The regulations that govern pass-
through payment for drugs and biologicals are found in Sec. 419.64 and
those applicable to pass-through device categories are found in Sec.
419.66.
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 the 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. For the drugs and biologicals that would have otherwise
been paid under the Part B drug CAP, because the Part B drug CAP has
been suspended beginning January 1, 2009, pass-through payment for
these drugs and biologicals is currently made at the physician's office
payment rate of ASP+6 percent. In the case of diagnostic
radiopharmaceuticals, where all products without pass-through status
are packaged into payment for nuclear medicine procedures, the pass-
through payment is reduced by an amount that reflects the diagnostic
radiopharmaceutical portion of the APC payment amount for the
associated nuclear medicine procedure (the ``policy-packaged'' drug APC
offset) that we determine is associated with the cost of predecessor
diagnostic radiopharmaceuticals. We are proposing a similar payment
offset policy for contrast agents beginning in CY 2010, as discussed in
section V.A.6. of this proposed rule. Pass-through payment for a
category of devices is made at the hospital's charge for the device
adjusted to cost by application of the hospital's CCR. If applicable,
the device payment is reduced by an amount that reflects the portion of
the APC payment amount for the associated surgical procedure that we
determine is associated with the cost of the device, called the device
APC offset and discussed further in section IV.A.2. of this proposed
rule.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68633
through 68636), we finalized a policy to package payment for
implantable biologicals without pass-through status that are surgically
inserted or implanted (through a surgical incision or a natural
orifice) into payment for the associated surgical procedure. Prior to
our implementation of this policy for nonpass-through implantable
biologicals, we adopted in the CY 2003 OPPS final rule with comment
period (67 FR 66763) the current OPPS policy that packages payment for
an implantable device into the associated surgical procedures when its
pass-through payment period ends because payment for all implantable
devices without pass-through status under the OPPS is packaged. We
consider nonpass-through implantable devices to be integral and
supportive items for which packaged payment is most appropriate. As we
stated in the CY2009 OPPS/ASC final rule with comment period (73 FR
68634), we believe this policy to package payment for implantable
devices that are integral to the performance of procedures paid
separately through an APC payment should also apply to payment for
implantable biologicals without pass-through status, when those
biologicals function as implantable devices. Implantable biologicals
may be used in place of other implantable nonbiological devices whose
costs are already accounted for in the associated procedural APC
payments for surgical procedures. We reasoned that if we were to
provide separate payment for nonpass-through implantable biologicals,
we would potentially be providing duplicate device payment, both
through the packaged nonbiological device cost included in the surgical
procedure's payment and the separate biological payment.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68634), we stated our belief that the three implantable biologicals
with expiring pass-through status for CY 2009 differ from other
biologicals paid under the OPPS in that they specifically always
function as surgically implanted devices. We noted that both
implantable nonbiological devices under the OPPS and the three
biologicals with expiring pass-through status in CY 2009 are surgically
inserted or implanted (including through a surgical incision or a
natural orifice). These three biologicals are approved by the FDA as
devices, and they are solely surgically implanted according to their
FDA-approved indications. Furthermore, in some cases, these implantable
biologicals can substitute for implantable nonbiological devices (such
as for synthetic nerve conduits or synthetic mesh used in tendon
repair).
For other nonpass-through biologicals paid under the OPPS that may
sometimes be used as implantable devices, we have instructed hospitals,
beginning via Transmittal 1336, Change Request 5718, dated September
14, 2007, to not separately bill the HCPCS codes for the products when
using these items as implantable devices (including as a scaffold or an
alternative to human or nonhuman connective tissue or mesh used in a
graft) during surgical procedures. In such cases, we consider payment
for the biological used as an implantable device in a specific clinical
case to be included in payment for the surgical procedure. We stated
that hospitals may include the charge for the biological in their
charge for the procedure, report the charge on an uncoded revenue
center line, or report the charge under a device HCPCS code, if one
exists, so that the biological costs may be considered in future
ratesetting for the associated surgical procedures.
Several commenters to the CY 2009 OPPS/ASC proposed rule supported
CMS' proposal to package payment for implantable biologicals without
pass-through status into payment for the associated surgical procedure
(73 FR 68635). One commenter also recommended that CMS treat
biologicals that are always surgically implanted or inserted and have
FDA device approval, as devices for purposes of pass-through payment,
rather than as drugs. The commenter observed that this would allow all
implantable devices, biological and otherwise, to be subject to a
single pass-through payment policy. The commenter concluded that this
policy change would provide consistency in billing and payment for
these products functioning as implantable devices during their pass-
through payment period, as well as after the expiration of pass-through
status.
We finalized in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68635) our proposal to package payment for any nonpass-through
biological that is surgically inserted or implanted (through a surgical
incision or a natural orifice) into the payment for the associated
surgical procedure, just as we package payment for all nonpass-through,
implantable, nonbiological devices. As a result of this final policy,
the three implantable biologicals with

[[Page 35313]]

expiring pass-through status in CY 2009 were packaged and assigned
status indicator ``N'' as of January 1, 2009. In addition, any new
biologicals without pass-through status that are surgically inserted or
implanted (through a surgical incision or a natural orifice) are also
packaged beginning in CY 2009. Hospitals continue to report the HCPCS
codes that describe biologicals that are always used as implantable
devices on their claims, and we package the costs of those biologicals
into the associated procedures, according to the standard OPPS
ratesetting methodology that is described in section II.A.2. of this
proposed rule. Moreover, for nonpass-through biologicals that may
sometimes be used as implantable devices, we continue to instruct
hospitals to not bill separately for the HCPCS codes for the products
when used as implantable devices. This reporting ensures that the costs
of these products that may be, but are not always, used as implanted
biologicals are appropriately packaged into payment for the associated
implantation procedures when the products are used as implantable
devices.
b. Proposed Policy for CY 2010
Some implantable biologicals are described by device category codes
for expired pass-through categories, including HCPCS code C1781 (Mesh
(implantable)), HCPCS code C1762 (Connective tissue, human), and HCPCS
code C1763 (Connective tissue, non-human). All implantables described
by the latter two categories are biologicals, while HCPCS code C1781
describes both implantable biological and nonbiological devices.
Historically, these category codes included biological products that we
approved for pass-through payment under the device pass-through
process, initially when we paid for pass-through devices on a brand-
specific basis from CY 2000 through March 31, 2001, and later through
the device categories described by HCPCS codes C1781, C1762, and C1763
which were developed effective April 1, 2001.
We believe that it is most appropriate for a product to be eligible
for a single period of OPPS pass-through payment, rather than a period
of device pass-through payment and a period of drug or biological pass-
through payment. The limited timeframe for transitional pass-through
payment ensures that new devices, drugs, and biologicals may receive
special payment consideration under the OPPS for the first few years
after their initial use, in order to allow sufficient time for their
cost information to be reflected in hospital claims data and,
therefore, to be available for OPPS ratesetting. After the pass-through
payment period ends, like other existing services, we have cost
information regarding these new products provided to us by hospitals
from claims and cost report data. We then utilize that information when
packaging the costs of the items (all devices, diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals, and
other drugs with an estimated per day cost equal to or less than the
annual drug packaging threshold) or paying separately for the products
(drugs except contrast agents and diagnostic radiopharmaceuticals and
also nonimplantable biologicals with estimated per day costs above the
annual drug packaging threshold). Further, although implantable
biologicals with pass-through status may substitute for nonpass-through
implantable devices whose costs are packaged into procedural APC
payments, our existing APC offset policies for the costs of predecessor
items packaged into APC payment for the associated services do not
apply to pass-through payment for biologicals. We note that the APC
offset amount that would be most applicable to implantable biologicals,
were we to establish such an offset policy for them, would be the
device APC offset amount, based on their similarity of function to the
implantable devices whose costs have been included in establishing the
procedural APC payment, not the ``policy-packaged'' or ``threshold-
packaged'' drug APC offset amounts that one would expect to apply to
pass-through drugs and biologicals. Similarly, when we currently
evaluate a pass-through implantable biological application for the cost
significance of the product, our methodology utilizes the ``policy-
packaged'' APC offset amount to assess the candidate implantable
biological, not the device APC offset amount that would be more
reflective of the costs of predecessor devices related to the candidate
implantable biological, such as those of device category HCPCS codes
C1781, C1762, and C1763.
Many implantable biologicals, such as the three biologicals that
expired from pass-through status after CY 2008, have FDA approval as
devices. A number of other implantable biologicals with FDA approval as
devices have also been approved for OPPS pass-through payment over the
past several years, based on their product-specific pass-through
applications as biologicals, not devices. Moreover, outside of the
period of pass-through payment, the costs of implantable biologicals,
like the costs of implantable devices, are now packaged into the cost
of the procedure in which they are used. Implantable biologicals may be
used in place of other implantable nonbiological devices whose costs
are already accounted for in the associated procedural APC payments.
Payment is made for nonpass-through implantable biologicals, like for
devices, through the APC payment for the associated surgical procedure.
In view of these considerations, we are proposing that the pass-
through evaluation process and pass-through payment methodology for
implantable biologicals that are surgically inserted or implanted
(through a surgical incision or a natural orifice) and that are newly
approved for pass-through status beginning on or after January 1, 2010,
be the device pass-through process and payment methodology only. Given
the shared payment methodologies for implantable biological and
nonbiological devices during their nonpass-through payment periods, as
well as their overlapping and sometimes identical clinical uses and
their similar regulation by the FDA as devices, we believe that the
most consistent pass-through payment policy for these different types
of items that are surgically inserted or implanted and that may
sometimes substitute for one another is to evaluate all such devices,
both biological and nonbiological, only under the device pass-through
process. As a result, implantable biologicals would no longer be
eligible to submit biological pass-through applications and to receive
biological pass-through payment at ASP+6 percent. While we understand
that implantable biologicals have characteristics that result in their
meeting the definitions of both devices and biologicals, we believe
that biologicals are most similar to devices because of their required
surgical insertion or implantation and that it would be appropriate to
only evaluate them as devices because they share significant clinical
similarity with implantable nonbiological devices. We refer readers to
the CMS Web site specified previously in this section to view the
device pass-through application requirements and review criteria that
would apply to the evaluation of all implantable biologicals for pass-
through status when their pass-through payment would begin on or after
January 1, 2010.
However, those implantable biologicals that are surgically inserted
or implanted (through a surgical incision or natural orifice) and that
are receiving pass-through payment as biologicals prior to January 1,
2010, would continue

[[Page 35314]]

to be considered pass-through biologicals for the duration of their
period of pass-through payment. These products have already been
evaluated for pass-through status based on their application as
biologicals and have been approved for pass-through status based on the
established criteria for biological pass-through payment. We believe it
would be most appropriate for them to complete their 2- to 3-year
period of pass-through payment as biologicals in accordance with the
pass-through payment policies that were applicable at the time their
pass-through status was initially approved.
We note that, in conducting our pass-through review of implantable
biologicals as devices beginning for CY 2010 pass-through payment, we
would apply the portions of APC payment amounts associated with devices
(that is, the device APC offset amounts) to assess the cost
significance of the candidate implantable biologicals, as we do for
other devices. The CY 2009 device APC offset amounts are posted on the
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_
passthrough_payment.asp. The result of evaluating all implantable
biological items only for device pass-through payment is that payment
for implantable biologicals eligible for pass-through payment beginning
on or after January 1, 2010, would be based on hospital charges
adjusted to cost, rather than the ASP methodology that is applicable to
pass-through drugs and biologicals. Treating implantable biologicals as
devices for pass-through payment evaluation and payment would result in
their consistent treatment with respect to coding and payment during
their pass-through and nonpass-through periods of payment. This
proposed policy would allow us to appropriately offset the pass-through
payment for an implantable biological using the device APC offset
amounts, which would incorporate the costs of predecessor devices (both
biological and nonbiological) that are similar to the implantable
biological item with pass-through status. Finally, this proposed policy
would ensure that each implantable biological is eligible for OPPS
pass-through payment for only one 2- to 3-year time period (as a device
only, not as a biological), so that once OPPS claims data incorporate
cost information for the implantable biological, the product would not
be again eligible for OPPS pass-through payment in the future.
Further, because we are proposing that the pass-through evaluation
process for CY 2010 pass-through status approvals and pass-through
payment methodology for implantable biologicals that are surgically
inserted or implanted (through a surgical incision or a natural
orifice) beginning in CY 2010 be the device pass-through process and
payment methodology only, we also are proposing to revise our
regulations at Sec. Sec. 419.64 and 419.66 to conform to this new
policy. Specifically, we are proposing to amend Sec. 419.64 by adding
a new paragraph (a)(4)(iii) and language under a new paragraph (c)(3)
to exclude implantable biologicals from consideration for drug and
biological pass-through payment. Furthermore, proposed new paragraph
(a)(4)(iv) of Sec. 419.64 would specify the continued inclusion of
implantable biologicals for which pass-through payment as a biological
is made on or before December 31, 2009, as eligible for biological
pass-through payment, consistent with our proposal to allow these
products to complete their period of pass-through payment as
biologicals.
Moreover, in light of our CY 2010 proposal that implantable
biological applications approved for pass-through status beginning on
or after January 1, 2010, would be considered only for device pass-
through evaluation and payment, we believe it would also be appropriate
to clarify the current example in Sec. 419.66(b)(4)(iii) of the
regulations regarding the exclusion of materials, for example
biological or synthetic materials, that may be used to replace human
skin from device pass-through payment eligibility. While, by
definition, implantable biologicals that are surgically implanted or
inserted would not be biological materials that replace human skin, we
are proposing to more precisely state this in the regulations.
Therefore, we are proposing to revise Sec. 419.66(b)(4) (iii), which
currently states that a device is not a material that may be used to
replace human skin and provides an example of such a material as ``a
biological or synthetic material.'' We are proposing to revise Sec.
419.66(b)(4)(iii) to specify that the biological materials be a
``biological skin replacement material'' rather than a ``biological''
and the synthetic materials be a ``synthetic skin replacement
material'' rather than a ``synthetic material'' because we do not
believe this example should refer to biologicals or synthetic materials
that are used for purposes other than as a skin replacement material,
given that the regulatory provision in Sec. 419.66(b)(4)(iii) applies
only to a material that may be used to replace human skin.
5. Definition of Pass-Through Payment Eligibility Period for New Drugs
and Biologicals
Section 1833(t)(6) of the Act provides for transitional pass-
through payments for medical devices, drugs, and biologicals. Section
1833(t)(6)(A) of the Act generally describes two groups of services--
``current'' and ``new''--that are eligible for pass-through payments,
depending, in part, on when they were first paid. One of the criteria
for ``new'' drugs and biologicals to receive pass-through payments
under section 1833(t)(6)(A)(iv)(I) of the Act is that payment for the
item as an outpatient hospital service under Part B was not being made
as of December 31, 1996. For those ``new'' drugs and biologicals,
section 1833(t)(6)(C)(i)(II) of the Act specifies that there is a 2- to
3-year limitation on the pass-through period that begins on the first
date on which payment is made under Part B for the drug or biological
as an outpatient hospital service.
Section 419.64 of the regulations codifies the transitional pass-
through payment provisions for drugs and biologicals. Section 419.64(a)
describes the drugs and biologicals that are eligible for pass-through
payments, essentially capturing the distinction between ``new'' and
``current'' services. Section 419.64(c)(2) provides that the pass-
through payment eligibility period for drugs and biologicals that fall
into the ``new'' category begins on the date that CMS makes its first
pass-through payment for the drug or biological.
It has come to our attention that our pass-through payment
eligibility period for ``new'' drugs and biologicals in Sec.
419.64(c)(2) does not most accurately reflect the statutory
requirements of section1833(t)(6)(C)(i)(II) of the Act. Where our
regulations indicate that the pass-through payment eligibility period
for ``new'' drugs and biologicals begins on the first date on which
pass-through payment is made for the item, section 1833(t)(6)(c)(i)(II)
of the Act specifies that the pass-through period of 2 to 3 years for
``new'' drugs and biologicals begins on the first date on which payment
is made under Part B for the drug or biological as an outpatient
hospital service. In order to better reflect the statutory requirement
for the pass-through period for a ``new'' drug or biological, we are
proposing to revise paragraph (c)(2) of Sec. 419.64 and add a new
paragraph (c)(3) to Sec. 419.64 of the regulations.
In order to conform the regulations to the statutory provisions, we
are proposing to change the start date of the pass-through payment
eligibility period

[[Page 35315]]

for a drug or biological from the first date on which pass-through
payment is made to the date on which payment is first made for a drug
or biological as an outpatient hospital service under Part B. Under
this proposal, we would need to identify a first date of payment for a
drug or biological as an outpatient hospital service under Part B.
(Under our current policy, we have not needed to establish a first date
on which payment is made under Part B for the drug or biological as an
outpatient hospital service because the pass-through payment
eligibility period begins on the first date pass-through payment is
made for the item.) Due to the 2-year delay in the availability of
claims data, under our CY 2010 proposal we would not be able to
identify an exact date of first payment for a drug or biological as an
outpatient hospital service under Part B in order to determine the
start date of the pass-through payment eligibility period until years
after an application for pass-through payment for a ``new'' drug or
biological has been submitted. At that later point in time, the pass-
through payment eligibility period may be close to expiring, and the
result of relying upon our claims data to evaluate an item for its
eligibility for pass-through status could be a very short period of
pass-through payment for the new drug or biological. Consequently, we
believe it would be desirable to identify an appropriate and timely
proxy for the date of first payment for the drug or biological as an
outpatient hospital service under Part B. We believe the date of first
sale for a drug or biological in the U.S. following FDA approval is an
appropriate proxy, as explained below, and we are proposing this as the
date on which the pass-through payment eligibility period would begin.
We also note that, in light of our CY 2010 proposal, described in
section V.A.4. of this proposed rule, to treat implantable biologicals
as medical devices for purposes of pass-through eligibility and payment
under section 1833(t)(6) of the Act, these proposed revisions to the
pass-through payment eligibility period for a drug or biological
approved for pass-through payment beginning on or after January 1,
2010, would not apply to implantable biologicals, but rather only to
nonimplantable biologicals.
We believe that the date of first sale of the drug or
nonimplantable biological in the U.S. following FDA approval is an
appropriate proxy for the first date of payment for the drug or
nonimplantable biological as an outpatient hospital service under Part
B for several reasons. We anticipate that Medicare beneficiaries would
be among the first to use these drugs and nonimplantable biologicals
and that the date of first sale is the date upon which a drug or
nonimplantable biological would become available to those beneficiaries
and be paid under Part B as an outpatient hospital service. Further, we
already use the date of first sale of a drug or biological in the U.S.
following FDA approval under the ASP methodology and in the existing
OPPS pass-through payment eligibility determination. In determining the
ASP for a drug under the ASP payment methodology in section 1847A of
the Act, we use the date of first sale of a drug or biological in the
U.S. following FDA approval to identify ``single source drugs'' and
``biological products'' when determining a payment amount. We also use
the date of first sale of a drug or biological in the U.S. under our
current OPPS pass-through payment application process to determine if a
drug or biological is ``new,'' that is, whether the item was paid as an
outpatient hospital service on or after January 1, 1997. Finally, we do
not believe that there is a more accurate and readily available proxy
for the first date of payment for a drug or biological under Part B as
an outpatient hospital service. In summary, we believe that the date of
first sale of the drug or nonimplantable biological in the U.S.
following FDA approval is an appropriate proxy for the first date on
which payment is made under Part B for the item as an outpatient
hospital service because it is an accepted and available indicator of
initial payment for the Medicare program.
In proposed new Sec. 419.64(c)(3), we indicate that the date of
first sale of a drug or nonimplantable biological in the U.S. following
FDA approval would be the start date of the pass-through payment
eligibility period for drugs or nonimplantable biologicals approved for
pass-through payment beginning on or after January 1, 2010. We also are
proposing modifications to Sec. 419.64(c) (2) to specify that our
current policy--that the pass-through payment eligibility period of 2
to 3 years begins on the first date that pass-through payment is made
for the drug or biological--applies only to drugs and biologicals
approved for and receiving pass-through payment on or before December
31, 2009. Although we believe that we have the authority to stop pass-
through payments and to recover pass-through payments already made for
such drugs and biologicals, we are proposing in these specific limited
circumstances to permit pass-through status to continue.
We currently implement new approvals of pass-through status for
drugs and biologicals on a quarterly basis, and for CY 2010, we would
continue to implement these new approvals on a quarterly basis. We
describe our quarterly process for reviewing and approving applications
for drugs and biologicals to receive pass-through payment on the CMS
Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_
passthrough_payment.asp. Interested parties may submit a complete
application at any time. We typically review and make pass-through
status approval decisions about complete applications for initiation of
pass-through payment within 4 months of their submission and implement
new pass-through status approvals on a quarterly basis through the next
available OPPS quarterly update. The CMS Web site provides a timeline
showing the relationship between the date of submission of a complete
application and the earliest date of pass-through payment that would
result from approval of pass-through status for the drug or biological.
Under our current policy, the pass-through payment eligibility
period and period of pass-through payment are the same. However, the
pass-through payment eligibility period and the period of pass-through
payment would not be identical under our proposed policy. For our
proposed policy, we need to identify both the pass-through payment
eligibility period as well as the period during which pass-through
payments would be made, including the respective start and expiration
dates of the pass-through payment eligibility period and the period of
pass-through payment. The period of pass-through payment would coincide
with the time period during which the drug or biological is designated
as having pass-through status. (We note that being within the pass-
through payment eligibility period alone does not qualify a ``new''
drug or biological for pass-through payment; the drug or biological
must also meet the other requirements for pass-through payment,
including that CMS determines that the cost of a drug or biological is
not insignificant.) Under our proposal, the pass-through payment
eligibility period would run for at least 2 years but no more than 3
years. For example, for a drug with a first date of sale in the United
States after FDA approval of May 3, 2009, the pass-through payment
eligibility period would start on May 3, 2009. If the pass-through
payment eligibility period ran

[[Page 35316]]

for 3 years, it would expire on May 2, 2012. We are proposing to modify
Sec. 419.64 accordingly by adding new paragraph (c)(3) to state: ``For
a drug or nonimplantable biological described in paragraph (a)(4) of
this section and approved for pass-through payment beginning on or
after January 1, 2010--[the pass-through payment eligibility period
begins on] the date of first sale of the drug or nonimplantable
biological in the United States after FDA approval.'' Next, we are
proposing that pass-through payment would start on the first day of the
calendar quarter following the calendar quarter during which the
completed application was approved. We would reflect this in regulation
text, in proposed new Sec. 419.64(c)(3), as follows. ``Pass-through
payment for the drug or nonimplantable biological begins on the first
day of the hospital outpatient prospective payment system update (for
example, calendar quarter) following the update period during which the
drug or nonimplantable biological was approved for pass-through
status.'' The start date for the period of pass-through payment would
be specified in a letter to the applicant conveying pass-through status
approval for the new drug or biological and would be the first day of
the calendar quarter following the calendar quarter during which a
complete pass-through application is approved by CMS for pass-through
status.
We also are proposing to expire pass-through status on a quarterly
basis. We would use the pass-through payment eligibility period
expiration date to determine when the period of pass-through payment
would expire. The way we would operationalize this would be to make the
last date of the period of pass-through payment be the last day of the
calendar quarter that preceded the pass-through payment eligibility
period expiration date. This proposal to expire the pass-through status
of drugs and nonimplantable biologicals on a quarterly basis would be a
departure from our current policy for expiring the pass-through status
of drugs and biologicals. Presently, we expire the pass-through status
of drugs and biologicals at the end of the calendar year preceding the
year of the applicable annual OPPS update. (We discuss our CY 2010
proposal to expire the pass-through status of drugs and biologicals
currently receiving pass-through payment that will have already
received between 2 and 3 years of pass-through payment by January 1,
2010, in section V.A.2. of this proposed rule.) Because our current
pass-through payment eligibility period policy effectively aligns the
start of pass-through payment with the beginning of the 2- to 3-year
pass-through payment eligibility period, expiration of pass-through
status on a calendar year basis affords those drugs and biologicals at
least 2 but not more than 3 years of pass-through payment. This would
continue to be the case for drugs and biologicals that have been
approved for pass-through status and that are receiving pass-through
payment on or before December 31, 2009, as reflected in our proposed
revision to Sec. 419.64(c) (2). However, beginning in CY 2010, for
``new'' drugs and nonimplantable biologicals with a pass-through
payment eligibility period described by proposed new Sec.
419.64(c)(3), we would expire pass-through status on a quarterly basis.
Under the proposed revised definition of the pass-through payment
eligibility period, the pass-through payment eligibility period may
begin well before application is made for pass-through payment for the
drug or nonimplantable biological and pass-through status is approved,
which could have the effect of a shorter period of pass-through payment
for some drugs and biologicals than would be the case under our current
policy. Therefore, we are proposing to expire pass-through status on a
quarterly basis to ensure that drugs and nonimplantable biologicals for
which a pass-through payment application has been made after the pass-
through payment eligibility period has begun can most benefit from
pass-through payment. We provide the following examples to illustrate
how our proposed policies would work.
First, if CMS receives a complete pass-through payment application
on March 1, 2010, for a ``new'' drug with a date of first sale in the
United States after FDA approval of December 15, 2009, the pass-through
payment eligibility period would begin on December 15, 2009. If the
pass-through payment eligibility period ran for 3 years, it would
expire on December 14, 2012. If we process the application and approve
pass-through status within 4 months, the period of pass-through payment
for that drug would begin on July 1, 2010, because that would be the
first day of the calendar quarter following the calendar quarter during
which the completed application was approved for pass-through status.
The period of pass-through payment would expire no later than September
30, 2012, because that would be the last day of the calendar quarter
that preceded the pass-through eligibility period expiration date. We
would indicate the drug's change from pass-through to nonpass-through
status, as discussed below, in the October 2012 OPPS quarterly update.
In another example, if CMS receives a complete pass-through payment
application on December 1, 2009, for a ``new'' drug with a date of
first sale of the drug in the United States after FDA approval of May
3, 2009, the pass-through payment eligibility period for that drug
would begin on May 3, 2009, and would end no later than May 2, 2012. If
we process the application and approve pass-through status within 4
months, the period of pass-through payment would begin on April 1,
2010, because that would be the first day of the calendar quarter
following the calendar quarter during which the completed application
was approved for pass-through status, and would end no later than March
31, 2012, because that would be the last day of the calendar quarter
that preceded the pass-through payment eligibility period expiration
date. We would indicate the drug's change from pass-through to nonpass-
through status, as discussed below, in the April 2012 OPPS quarterly
update.
In another example, in the case of a complete application for a
``new'' drug, with a date of first sale of the drug in the United
States after FDA approval of November 16, 2006, that is received by
December 1, 2009, the pass-through payment eligibility period for that
drug would have begun on November 16, 2006. The pass-through payment
eligibility period would expire no later than November 15, 2009,
because that would be 3 years from the date on which the pass-through
payment eligibility period began. In this example, the drug would not
be approved for pass-through status because the pass-through payment
eligibility period would have already expired. The earliest date that
the period of pass-through payment for the drug could have begun would
have been April 1, 2010, which would be after the expiration of the
pass-through payment eligibility period.
As noted above, for those ``new'' drugs or biologicals approved for
pass-through status beginning in a calendar quarter prior to CY 2010
that are described by Sec. 419.64(c)(2), we would continue our current
policy. That means that we would expire pass-through status for the
drug or biological at the end of the calendar year after the drug or
biological has received at least 2 but not more than 3 years of pass-
through payment.
In addition to proposing to expire the pass-through status of
``new'' drugs and nonimplantable biologicals described by

[[Page 35317]]

proposed new Sec. 419.64(c)(3) on a quarterly basis, we also would
continue our established policy of determining whether a drug or
biological would receive separate payment or packaged payment, after
the expiration of the period of pass-through payment, on a calendar
year basis through the annual OPPS rulemaking process as described in
section V.B.2. of this proposed rule. Under our current drug payment
policies, we propose and finalize packaging determinations for drugs
and biologicals subject to the OPPS annual drug packaging threshold
only once a year based on the most updated claims data and ASP
information available for the annual rulemaking cycle. We are not
proposing to change this annual packaging determination process.
Therefore, after the expiration of pass-through status of a ``new''
drug or biological in a given year's calendar quarter, we would
continue to make separate payment through the end of that calendar year
for those drugs and nonimplantable biologicals that would be subject to
the drug packaging threshold when they did not have pass-through status
(therefore, excluding contrast agents and diagnostic
radiopharmaceuticals for CY 2010 which would always be packaged when
not on pass-through status) at the applicable OPPS payment rate for
separately payable drugs and biologicals without pass-through status
for that year, proposed to be ASP+4 percent for CY 2010. We would
change their status indicator from ``G'' (Pass-Through Drugs and
Biologicals) to ``K'' (Nonpass-Through Drugs and Nonimplantable
Biologicals) in the applicable quarterly OPPS update that immediately
followed the last day of the calendar quarter in which the pass-through
status of the drug or nonimplantable biological expired. In our
proposed rule for the upcoming prospective payment year that is after
the calendar year quarter in which the pass-through status of a drug or
nonimplantable biological expired, we would use ASP information and our
claims data to assess whether the drug or biological would be packaged
or separately payable in the upcoming calendar year. For those drugs
with expiring pass-through status that are always packaged when not on
pass-through status (``policy-packaged''), specifically diagnostic
radiopharmaceuticals and contrast agents for CY 2010 as discussed in
section V.B.2.d. of this proposed rule, we would make packaged payment
for them for the remainder of the calendar year after the expiration of
pass-through payment. We would change their status indicator from ``G''
to ``N'' (Items and Services Packaged into APC Rates) in the applicable
quarterly OPPS update that immediately followed the last day of the
calendar quarter in which the pass-through status of the drug or
nonimplantable biological expired. For example, for a drug (excluding
contrast agents and diagnostic radiopharmaceuticals) described by
proposed new Sec. 419.64(c)(3) with pass-through status expiring on
September 30, 2010, we would make separate pass-through payment for the
drug at ASP+6 percent until September 30, 2010, and we would then make
separate nonpass-through payment for the drug at ASP+4 percent between
October 1, 2010 and December 31, 2010. For CY2011, we would use ASP
information and our claims data to propose whether the drug would be
packaged or separately payable.
6. Proposed Provisions for Reducing Transitional Pass-Through Payments
for Diagnostic Radiopharmaceuticals and Contrast Agents to Offset Costs
Packaged Into APC Groups
a. Background
Prior to CY 2008, diagnostic radiopharmaceuticals and contrast
agents were paid separately under the OPPS if their mean per day costs
were greater than the applicable year's drug packaging threshold. In CY
2008 (72 FR 66768), we began a policy of packaging payment for all
nonpass-through diagnostic radiopharmaceuticals and contrast agents as
ancillary and supportive items and services into their associated
nuclear medicine procedures. Therefore, beginning in CY2008, nonpass-
through diagnostic radiopharmaceuticals and contrast agents were not
subject to the annual OPPS drug packaging threshold to determine their
packaged or separately payable payment status, and instead all nonpass-
through diagnostic radiopharmaceuticals and contrast agents were
packaged as a matter of policy. For CY 2010, we are proposing to
continue to package payment for all nonpass-through diagnostic
radiopharmaceuticals and contrast agents as discussed in section
V.B.2.d. of this proposed rule.
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
As previously noted, radiopharmaceuticals are considered to be
drugs for OPPS pass-through payment purposes. As described above,
section 1833(t)(6)(D)(i) of the Act specifies that the transitional
pass-through payment amount for pass-through drugs and biologicals is
the difference between the amount paid under section 1842(o) (or the
Part B drug CAP rate) and the otherwise applicable OPD fee schedule
amount. There is currently one radiopharmaceutical with pass-through
status under the OPPS, HCPCS code C9247 (Iobenguane, I-123, diagnostic,
per study dose, up to 10 millicuries). HCPCS code C9247 was granted
pass-through status beginning April 1, 2009, and will continue to
receive pass-through status in CY 2010. We currently apply the
established radiopharmaceutical payment offset policy to pass-through
payment for this product. As described earlier in section V.A.3. of
this proposed rule, new pass-through diagnostic radiopharmaceuticals
would be paid at ASP+6 percent, while those without ASP information
would be paid at WAC+6 percent or, if WAC is not available, based on 95
percent of the product's most recently published AWP.
As a payment offset is necessary in order to provide an appropriate
transitional pass-through payment, we deduct from the payment for pass-
through radiopharmaceuticals an amount that reflects the portion of the
APC payment associated with predecessor radiopharmaceuticals in order
to ensure no duplicate radiopharmaceutical payment. In CY 2009, we
established a policy to estimate the portion of each APC payment rate
that could reasonably be attributed to the cost of predecessor
diagnostic radiopharmaceuticals when considering a new diagnostic
radiopharmaceutical for pass-through payment (73 FR 68638 through
68641). Specifically, we utilize the ``policy-packaged'' drug offset
fraction for APCs containing nuclear medicine procedures, calculated as
1 minus (the cost from single procedure claims in the APC after
removing the cost for ``policy-packaged'' drugs divided by the cost
from single procedure claims in the APC). We have previously defined
``policy-packaged'' drugs and biologicals as nonpass-through diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals (73
FR 68639). We are proposing for CY 2010 to redefine ``policy-packaged''
drugs as only nonpass-through diagnostic radiopharmaceuticals and
contrast agents, as a result of the CY 2010 proposals discussed in
sections V.A.4. and V.B.2.d. of this proposed rule that would treat
nonpass-through implantable biologicals that are surgically inserted or
implanted (through a surgical incision or a natural

[[Page 35318]]

orifice) and implantable biologicals that are surgically inserted or
implanted (through a surgical incision or a natural orifice) with newly
approved pass-through status beginning in CY 2010 or later as devices,
rather than drugs. To determine the actual APC offset amount for pass-
through diagnostic radiopharmaceuticals that takes into consideration
the otherwise applicable OPPS payment amount, we multiply the ``policy-
packaged'' drug offset fraction by the APC payment amount for the
nuclear medicine procedure with which the pass-through diagnostic
radiopharmaceutical is used and, accordingly, reduce the separate OPPS
payment for the pass-through diagnostic radiopharmaceutical by this
amount.
We will continue to post annually on the CMS Web site at http://
www.cms.hhs.gov/HospitalOutpatientPPS, a file that contains the APC
offset amounts that would be used for that year for purposes of both
evaluating cost significance for candidate pass-through device
categories and drugs and biologicals, including diagnostic
radiopharmaceuticals, and establishing any appropriate APC offset
amounts. Specifically, the file will continue to provide, for every
OPPS clinical APC, the amounts and percentages of APC payment
associated with packaged implantable devices, ``policy-packaged''
drugs, and ``threshold-packaged'' drugs and biologicals.
Table 23 below displays the proposed APCs to which nuclear medicine
procedures would be assigned in CY 2010 and for which we expect that an
APC offset could be applicable in the case of new diagnostic
radiopharmaceuticals with pass-through status.

Table 23--Proposed APCs to Which Nuclear Medicine Procedures Would Be
Assigned for CY 2010
------------------------------------------------------------------------
Proposed CY 2010 APC Proposed CY 2010 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.
0404........................... Renal and Genitourinary Studies.
0406........................... Level I Tumor/Infection Imaging.
0408........................... Level III Tumor/Infection Imaging.
0414........................... Level II Tumor/Infection Imaging.
------------------------------------------------------------------------

c. Proposed Payment Offset Policy for Contrast Agents
As described above, section 1833(t)(6)(D)(i) of the Act specifies
that the transitional pass-through payment amount for pass-through
drugs and biologicals is the difference between the amount paid under
section 1842(o) (or the Part B drug CAP rate) and the otherwise
applicable OPD fee schedule amount. There is currently one contrast
agent with pass-through status under the OPPS, HCPCS code C9246
(Injection, gadoxetate disodium, per ml). HCPCS code C9246 was granted
pass-through status beginning January 1, 2009, and will continue to
receive pass-through status in CY 2010. As described earlier in section
V.A.3. of this proposed rule, new pass-through contrast agents would be
paid at ASP+6 percent, while those without ASP information would be
paid at WAC+6 percent or, if WAC is not available, paid based on 95
percent of the product's most recently published AWP.
We believe that a payment offset, similar to the offset currently
in place for pass-through devices and diagnostic radiopharmaceuticals,
is necessary in order to provide an appropriate transitional pass-
through payment for contrast agents because all of these items are
packaged when they do not have pass-through status. In accordance with
our standard offset methodology, we are proposing to deduct from the
payment for pass-through contrast agents an amount that reflects the
portion of the APC payment associated with predecessor contrast agents
in order to ensure no duplicate contrast agent payment is made.
In CY 2009, we established a policy to estimate the portion of each
APC payment rate that could reasonably be attributed to the cost of
predecessor diagnostic radiopharmaceuticals when considering a new
diagnostic radiopharmaceutical for pass-through payment (73 FR 68638
through 68641). For CY 2010, we are proposing to apply this same policy
to contrast agents. Specifically, we are proposing to utilize the
``policy-packaged'' drug offset fraction for clinical APCs calculated
as 1 minus (the cost from single procedure claims in the APC after
removing the cost for ``policy-packaged'' drugs divided by the cost
from single procedure claims in the APC). As discussed above, while we
have previously defined the ``policy-packaged'' drugs and biologicals
as nonpass-through diagnostic radiopharmaceuticals, contrast agents,
and implantable biologicals (73 FR 68639), we are proposing for CY 2010
to redefine ``policy-packaged'' drugs as only nonpass-through
diagnostic radiopharmaceuticals and contrast agents, as a result of the
CY 2010 proposal discussed in sections V.A.4. and V.B.2.d. of this
proposed rule that would treat all implantable biologicals as devices,
rather than drugs. To determine the actual APC offset amount for pass-
through contrast agents that takes into consideration the otherwise
applicable OPPS payment amount, we are proposing to multiply the
``policy-packaged'' drug offset fraction by the APC payment amount for
the procedure with which the pass-through contrast agent is used and,
accordingly, reduce the separate OPPS payment for the pass-through
contrast agent by this amount.
We are proposing to continue to post annually on the CMS Web site
at http://www.cms.hhs.gov/HospitalOutpatientPPS, a file that contains
the APC offset amounts that would be used for that year for purposes of
both evaluating cost significance for candidate pass-through device
categories and drugs and biologicals, including contrast agents, and
establishing any appropriate APC offset amounts. Specifically, the file
will continue to provide, for every OPPS clinical APC, the amounts and
percentages of APC payment associated with packaged implantable
devices, ``policy-packaged'' drugs, and ``threshold-packaged'' drugs
and biologicals.

B. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Status

1. Background
Under the CY 2009 OPPS, we currently pay for drugs, biologicals,
and

[[Page 35319]]

radiopharmaceuticals that do not have pass-through status in one of two
ways: packaged payment into the payment for the associated service; or
separate payment (individual APCs). We explained in the April 7, 2000
OPPS final rule with comment period (65 FR 18450) that we generally
package the cost of drugs and radiopharmaceuticals into the APC payment
rate for the procedure or treatment with which the products are usually
furnished. Hospitals do not receive separate payment for packaged items
and supplies, and hospitals may not bill beneficiaries separately for
any packaged items and supplies whose costs are recognized and paid
within the national OPPS payment rate for the associated procedure or
service. (Transmittal A-01-133, issued on November 20, 2001, explains
in greater detail the rules regarding separate payment for packaged
services.)
Packaging costs into a single aggregate payment for a service,
procedure, or episode-of-care is a fundamental principle that
distinguishes a prospective payment system from a fee schedule. In
general, packaging the costs of items and services into the payment for
the primary procedure or service with which they are associated
encourages hospital efficiencies and also enables hospitals to manage
their resources with maximum flexibility.
Section 1833(t)(16)(B) of the Act, as added by section 621(a)(2) of
Public Law 108-173, set the threshold for establishing separate APCs
for drugs and biologicals at $50 per administration for CYs 2005 and
2006. Therefore, for CYs 2005 and 2006, we paid separately for drugs,
biologicals, and radiopharmaceuticals whose per day cost exceeded $50
and packaged the costs of drugs, biologicals, and radiopharmaceuticals
whose per day cost was equal to or less than $50 into the procedures
with which they were billed. For CY 2007, the packaging threshold for
drugs, biologicals, and radiopharmaceuticals that were not new and did
not have pass-through status was established at $55. For CYs 2008 and
2009, the packaging threshold for drugs, biologicals, and
radiopharmaceuticals that are not new and do not have pass-through
status was established at $60. The methodology used to establish the
$55 threshold for CY 2007, the $60 threshold for CYs 2008 and 2009, and
our proposed approach for CY 2010 are discussed in more detail in
section V.B.2.b. of this proposed rule.
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
As indicated in section V.B.1. of this proposed rule, in accordance
with section 1833(t)(16)(B) of the Act, the threshold for establishing
separate APCs for payment of drugs and biologicals was set to $50 per
administration during CYs 2005 and 2006. In CY 2007, we used the fourth
quarter moving average Producer Price Index (PPI) levels for
prescription preparations to trend the $50 threshold forward from the
third quarter of CY 2005 (when the Pub. L. 108-173 mandated threshold
became effective) to the third quarter of CY 2007. We then rounded the
resulting dollar amount to the nearest $5 increment in order to
determine the CY 2007 threshold amount of $55. Using the same
methodology as that used in CY 2007 (which is discussed in more detail
in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085
through 68086)), we set the packaging threshold for establishing
separate APCs for drugs and biologicals at $60 for CYs 2008 and 2009.
Following the CY 2007 methodology, for CY 2010 we used updated
fourth quarter moving average PPI levels to trend the $50 threshold
forward from the third quarter of CY 2005 to the third quarter of CY
2009 and again rounded the resulting dollar amount ($65.07) to the
nearest $5 increment, which yielded a figure of $65. In performing this
calculation, we used the most up-to-date forecasted, quarterly PPI
estimates from CMS' Office of the Actuary (OACT). As actual inflation
for past quarters replaced forecasted amounts, the PPI estimates for
prior quarters have been revised (compared with those used in the CY
2007 OPPS/ASC final rule with comment period) and have been
incorporated into our calculation. Based on the calculations described
above, we are proposing a packaging threshold for CY 2010 of $65. (For
a more detailed discussion of the OPPS drug packaging threshold and the
use of the PPI for prescription drugs, we refer readers to the CY 2007
OPPS/ASC final rule with comment period (71 FR 68085 through 68086).)
b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes
That Describe Certain Drugs, Nonimplantable Biologicals, and
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
To determine their proposed CY 2010 packaging status, for this
proposed rule we calculated the per day cost of all drugs on a HCPCS
code-specific basis (with the exception of those drugs and biologicals
with multiple HCPCS codes that include different dosages as described
in section V.B.2.c. of this proposed rule and excluding diagnostic
radiopharmaceuticals and contrast agents that we are proposing to
continue to package in CY 2010 as discussed in section V.B.2.d. of this
proposed rule), nonimplantable biologicals, and therapeutic
radiopharmaceuticals (collectively called ``threshold-packaged'' drugs)
that had a HCPCS code in CY 2008 and were paid (via packaged or
separate payment) under the OPPS, using CY 2008 claims data processed
before January 1, 2009. In order to calculate the per day costs for
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals
to determine their proposed packaging status in CY 2010, we used the
methodology that was described in detail in the CY 2006 OPPS proposed
rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS
final rule with comment period (70 FR 68636 through 70 FR 68638).
To calculate the CY 2010 proposed rule per day costs, we used an
estimated payment rate for each drug and nonimplantable biological
HCPCS code of ASP+4 percent (which is the payment rate we are proposing
for separately payable drugs and nonimplantable biologicals in CY 2010,
as discussed in more detail in section V.B.3.b. of this proposed rule).
We used the manufacturer submitted ASP data from the fourth quarter of
CY 2008 (data that were used for payment purposes in the physician's
office setting, effective April 1, 2009) to determine the proposed rule
per day cost.
As is our standard methodology, for CY 2010, we are proposing to
use payment rates based on the ASP data from the fourth quarter of CY
2008 for budget neutrality estimates, packaging determinations, impact
analyses, and completion of Addenda A and B to this proposed rule
because these are the most recent data available for use at the time of
development of this proposed rule. These data are also the basis for
drug payments in the physician's office setting, effective April 1,
2009. For items that did not have an ASP-based payment rate, such as
therapeutic radiopharmaceuticals, we used their mean unit cost derived
from the CY 2008 hospital claims data to determine their proposed per
day cost. We packaged items with a per day cost less than or equal to
$65 and identified items with a per day cost greater than $65 as
separately payable. Consistent with our past practice, we crosswalked

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historical OPPS claims data from the CY 2008 HCPCS codes that were
reported to the CY 2009 HCPCS codes that we display in Addend